M/s. Shree Sai Traders, Beed V. Income-tax Officer,

ITA 2184/PUN/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 0492 (ITAT-PUNE)
• Duration Of Justice: 1 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-11-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 20-09-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: HITENDRA NINAWE
• Keywords: Depreciation; Retrospective amendment; Non-deduction of tax
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 40(a)(ia); 201(1); 194A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, PUNE . . , BEFORE SHRI R.K. PANDA, AM . / ITA NO.2184/PN/2016 / ASSESSMENT YEAR : 2009-10 M/S. SHREE SAI TRADERS, OPP. S.T. STAND, PARLI VAIJNATH, DIST. BEED 431 515 PAN : AATFS6273L . / APPELLANT V/S ITO, WARD-2, BEED . / RESPONDENT / APPELLANT BY : SHRI M.K. KULKARNI / RESPONDENT BY : SHRI HITENDRA NINAWE / ORDER PER R.K.PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE O RDER DATED 05-07-2016 OF THE CIT(A)-2, AURANGABAD RELATING T O ASSESSMENT YEAR 2009-10. 2. GROUNDS OF APPEAL NO.1 AND 2 BY THE ASSESSEE READ AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION MADE BY THE A.O . OF RS . 6,66,189/- INVOKING THE PROVISIONS OF S. 40(A)(IA) OF THE ACT AND THE INSERTION OF 2ND PROVISO INTERPRETED WITH RETROSPECTIVE EFFECT FROM 01-4-2005. SINCE THE DEDUCTEE HAS ALREADY INCLUDED T HIS TRANSACTION IN THEIR RETURN AND PAID THE TAXES THEREON THE DISALLOWA NCE IS NOT CALLED FOR . THE DISALLOWANCE BE DELETED. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LA W THE LD. CIT(A) ALSO WAS NOT JUSTIFIED IN CONFIRMING THE ADDITI ON OF RS. 6,66,189/- MADE BY THE A . O. INVOKING THE PROVISIONS OF S. 40(A)(IA) OF THE ACT WITHOUT APPRECIATING THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF HINDUSTAN COCA COLA BEVERAGES (P ) LTD. V. CIT (2007) 293 ITR 226 (SC) WHICH IS DEEMED TO BE AVAILA BLE TO A. O. AND THE LD. CIT(A) WHEN THE RESPECTIVE ORDER WERE AUTHOR ED. THE ADDITION / DATE OF HEARING :07.11.2016 / DATE OF PRONOUNCEMENT:11.11.2016 2 ITA NO.2184/PN/2016 MADE BY THE A.O. AND CONFIRMED BY LD. CIT(A) IS WITH OUT JURISDICTION. THE ADDITION BE DELETED. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF STOCKIST/DISTRIB UTOR OF NIRMA PRODUCTS. IT FILED ITS RETURN OF INCOME ON 10-08-200 9 DECLARING TOTAL INCOME OF RS.3,85,770/-. THE ORIGINAL ASSESSME NT ORDER WAS PASSED U/S.143(3) ON 16-08-2011 ASSESSING THE TOTAL INCOME AT RS.4,25,770/-. SUBSEQUENTLY, THE LD.CIT PASSED ORDER U/S.263 ON 20-03-2014 SETTING ASIDE THE ORDER ORIGINALLY PASSED U/S.143(3) FOR THE FOLLOWING REASONS WHICH HAS BEEN REPRODU CED BY THE CIT(A) AT PAGE 2 OF HIS ORDER AND WHICH READS AS UNDER : 1. IT WAS NOTICED THAT THE ASSESSEE HAD PAID/CREDITED I NTEREST OF RS.6,66,189/- TO NIRMA PRIVATE LIMITED, AHMADABAD WI THOUT DEDUCTION OF TAX AT SOURCE. SINCE, IN TERMS OF SECTION 194A TAX IS REQUIRED TO BE DEDUCTED AT SOURCE ON INTEREST PAYABLE AT THE TIME OF CREDIT OF PAYMENT WHICHEVER IS EARLIER WHEN THE AGGREGATE SUM IS PAYABLE DURING THE FINANCIAL YEAR EXCEEDS RS.5,000/-, IT WAS APPARENT TH AT THE ASSESSEE WAS REQUIRED TO DEDUCT TAX AT SOURCE ON THE PAYM E NTS OF INT E R E ST MADE TO THE ABOVE PARTY. SINCE THE ASSESSEE HAD FAILED TO D E DUCT TA X AT SOURC E ON THE ABOVE PAYMENTS, THE INTER E ST PAID TO THIS PARTY WAS R E QUIR E D TO B E DISALLOWED IN TERMS OF SECTION 40(A)(IA) OF THE ACT . , 2. DURING THE R E LEVANT PRE V IOUS YEAR THE OPENING WDV AS ON 01/04/2008 WAS NIL . T HE ASS E SSEE HAD PURCHASED A NEW VEHICLE ON 23/07/2008. IN THE DEPR E CIATION CHA R T THE ASSESSEE HAD SHOWN AN AMOUNT OF RS.1,60,000/- AS HAVING BEEN REC E IVED FROM THE SALE OF TEMPO AND DEPRECIATION @ 15% O F RS.64,064/ - WAS CLAIMED ON THE BALANCE AMOUNT OF RS . 4,27,095/-. THE ASS E SSE E HAD ALSO CLAIMED EXPENSES IN RESPECT OF TEMPO MAINTENANCE WHICH WAS CLA IMED AS A REV E NUE EXPENSES. THESE EXPENSES WERE IN RESPECT OF INSURANC E (RS.19,080 / -), NEW SUSPENSION (RS.16,000/-) AND RTO PASSING E XP E NS E S (RS . 40, 3 40 / -). APPARENTLY THESE EXPENSES WERE DESERVED TO B E C APITALI SE D B E CAUS E TH E R E W E RE INCURRED FOR DERIVING BENEFITS OF ENDURING NATUR E. 3. SINCE THE DEPRECIATION STATEMENT AS ON 31-03-2008 SHOWED THAT THERE WAS NIL OPENING WDV, THE TEMPO EXPENSES DEBITED FOR DIESEL AND OIL EXPENSES FOR THE PERIOD 01-04-2008 TO 23-07-2008 AGGREGATING TO RS.48,052/- DESERVED TO BE DISALLOWED. 4. SUBSEQUENTLY, THE ASSESSING OFFICER ISSUED NOTICE U/S.14 3(2) R.W.S. 263 TO THE ASSESSEE. DURING THE COURSE OF ASSESS MENT 3 ITA NO.2184/PN/2016 PROCEEDINGS, THE AO OBSERVED THAT ASSESSEE HAD PAID/CR EDITED INTEREST OF RS.6,66,189/- NIRMA PRIVATE LIMITED WHICH HAS BEE N DEBITED TO THE PROFIT AND LOSS ACCOUNT. HOWEVER, HE NOTE D THAT ASSESSEE HAS NOT DEDUCTED ANY TAX AT SOURCE FROM SUC H INTEREST PAYMENT. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY TH E ASSESSEE THE ASSESSING OFFICER INVOKING THE PROVISIONS OF SECTION 40(A)(IA ) R.W.S.194A DISALLOWED THE INTEREST OF RS.6,69,189/- WHICH WAS DEBITED TO THE PROFIT AND LOSS ACCOUNT ON ACCOUNT OF INTEREST. 5. BEFORE CIT(A) IT WAS SUBMITTED THAT THE ASSESSEE FIRM HAS CLOSED ITS BUSINESS ON 31-03-2011 DUE TO DISPUT E S WITH NIRMA LTD. IT WAS STATED THAT THE ASSESSEE HAD NOT MADE ANY INT ER E ST PAYMENT TO THIS ENTITY WHICH ATTRACTS THE PROVISIONS OF SECTION 19 4A OF TH E A CT AND HENC E TH E PRO V ISIONS OF SECTION 40(A)(IA) ARE NOT APPLICABLE TO THE FACTS OF TH E CAS E . IT WAS STATED THAT DURING THE YEAR UNDER CONSIDERATION THE SAID C OMPANY HAD GIVEN CREDIT NOTES AMOUNTING TO RS.12,27 , 402/- FOR DIFFERENT R EA SON S LIK E IN 71 SCHEMES, RATE DIFFERENCE AND DIFFERENT SCHEMES INTRODUCED WHICH WERE DUL Y RECORDED IN THE BOOKS OF ACCOUNTS BY THE ASSESSEE IN I NTEREST ACCOUNT . SIMIL A RLY, TH E SAID COMPANY HAD ALSO ISSUED DEBIT NOTES AMOUNTING TO R S .6,6 6 ,190 / - FO R NON - FULFILLMENT OF THEIR TARGET AND FOR LATE PAYMENT OF PURCHAS E /SAL E CONSID E RATION WHICH HAS ALSO BEEN RECORDED IN THE BOOKS OF AC COUNTS IN THE INT E R E ST A C COUNT . IT WAS ACCORDINGLY STATED THAT THE IMPUGNED PAYMENTS HAD A DIRECT LINK AND IMMEDIATE NEXUS WITH THE TRADING LIABILITY AND HENCE IT DOES NOT FALL WITHIN THE CATEGORY OF 'INTEREST' AS DEFINED IN SECTION 2(28A) OF THE ACT FOR THE PURPOSE OF DEDUCTION OF TAX AT SOURCE AS PRESCRIBED U/S.194A OF THE ACT . HENCE IT WAS STATED THAT THE ASSESSEE CANNOT BE HELD TO BE IN DEFAULT FOR THE NON-DEDUCTION OF TAX AT SOURCE U/S.19 4A 4 ITA NO.2184/PN/2016 OF THE ACT. AS THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT IS NOT APPLICABLE ON THE FACTS OF THE CASE. IT WAS ACCORDINGLY ARGUED THAT THE ADDITION IS UNJUSTIFIED SINCE THE ASSESSEE HAD NOT MAD E ANY PAYMENT TO THE SAID COMPANY AND THE SAID DEBITS WERE M ADE BY THE COMPANY UNILATERALLY WHICH WAS ACCOUNTED FOR BY THE ASSE SSEE. THE ASSESSEE REQUESTED THAT THE ADDITION OF RS.6,66,189/- MAY BE DELETED. THE ASSESSEE ALSO SUBMITTED THE DETAILS OF INCENTIV E DEPOSIT ACCOUNT AND SOME CREDIT AND DEBIT NOTES. 6. HOWEVER, THE CIT(A) WAS NOT SATISFIED WITH THE EXPLANATIO N GIVEN BY THE ASSESSEE AND UPHELD THE ACTION OF THE ASSE SSING OFFICER BY OBSERVING AS UNDER : 8. I HAVE GIVEN A CAREFUL CONSIDERATION TO THE SUBMI SSIONS MADE BY THE ASSESSEE. FROM THE DEBIT NOTES ISSUED BY NIRMA LTD . PRESENTED BEFORE ME TOTALING 4 IN NUMBER, IT IS OBSERVED THAT T HEY ARE FOR AN AMOUNT OF RS.500/- EACH, BEING THE INCONVENIENCE CHA RGES ON RETURN OF CHEQUE ISSUED BY THE ASSESSEE. ONE DEBIT NOTICE IS FOR A SUM OF RS.L,500/- ON ACCOUNT OF FREIGHT CHARGES. THUS THE TOT AL DEBIT NOTES PRESENTED BEFORE ME IS FOR RS.3,500/- ONLY AND THEY AL L APPEAR TO BE ON TRADING ACCOUNT AND NOT ON ACCOUNT OF INTEREST CHARG ED BY NIRMA LTD. HOWEVER THE ASSESSEE HAS HIMSELF ACCEPTED BEFORE THE ASSESSIN G OFFICER AND BEFORE THE LEARNED CIT, AURANGABAD THAT THE DEB IT NOTES HAVE BEEN ISSUED BY THE COMPANY FOR MAKING LATE PAYMENT ON ACCO UNT OF OUTSTANDING DUES OF THE ASSESSEE TO NIRMA LTD. IT IS OBVI OUS THEREFORE THAT THE SAID PAYMENTS WHICH HAVE BEEN DEBITED IN THE INTEREST ACCOUNT IN THE PROFIT AND LOSS ACCOUNT IS FOR AN AMOUNT DUE TO NIRMA LTD. 9. THE EXPRESSION 'INTEREST' IS DEFINED U/S.2(28A) OF THE ACT, WHICH 'INTEREST' MEANS INTEREST PAYABLE IN ANY MANNER IN RESP ECT OF ANY MONEYS BORROWED OR DEBT INCURRED (INCLUDING A DEPOSIT , CLAIM OR OTHER SIMILAR RIGHT OR OBLIGATION) AND INCLUDES ANY SERVICE FEE OR OTHER CHARGE IN RESPECT OF THE MONEYS BORROWED OR DEBT INCURRED OR IN RESPECT OF ANY CREDIT FACILITY WHICH HAS NOT BEEN UTILISED;' 10. IN TH E CIRCULAR ISSUED BY THE BOARD OF DIRECT TAXES, THE CONC EPT ... OF 'INTEREST' DEFINED U/S. 2(28A) HAS BEEN EXPLAINED WITH THE ADDED EXPLANATION UNDER: 'THE TERM 'INTEREST' HAS BEEN DEFINED IN NEW CLAUSE (2 8A) INSERTED IN SECTION 2 OF THE INCOME-TAX ACT WITH A VIEW TO REMOV ING DOUBTS ABOUT THE TRUE CHARACTER OF FEES OR OTHER CHARGES PAID IN R ESPECT OF MONEYS BORROWED OR IN RESPECT OF THE CREDIT FACILITIES WHICH HAVE NOT BEEN UTILISED. THE DEFINITION IS VERY WIDE AND COVERS INTER EST PAYABL E IN ANY MANNER IN RESPECT OF LOANS, DEBTS, DEPOSITS, CLAIMS AND OTHER SIMILAR RIGHTS OR OBLIGATIONS. IT ALSO INCLUDES ANY SERVICE FEES OR OTHER CHARGES IN RESPECT OF SUCH LOANS, DEBTS, DEPOSITS, ETC., AS ALSO FEES IN THE NATURE OF 5 ITA NO.2184/PN/2016 COMMITMENT CHARGES ON UNUTILISED PORTION OF CREDIT FA CILITIES. THIS DEFINITION WILL BE APPLICABLE FOR ALL PURPOSES OF THE INCOME-TAX ACT . ' 11. IT IS CLEAR FROM THE ABOVE THAT BEFORE ANY AMOU NT PAID IS CONSTRUED AS INTEREST, IT HAS TO BE ESTABLISHED THAT THE SAME IS PAYABLE IN RESPECT OF ARTY MONEY BORROWED OR DEBT INCURRED. THE SCHEME OF THE ACT AND THE EXPRESS PROVISIONS THEREOF ESTABLISH THAT THE INTEREST PAYABLE IS FOR THE DEPRIVATION OF THE USE OF TH E MONEY REPRESENTING THE COMPENSATION FOR THE DEBT OWED TO A PERSON. INTEREST C ONSTITUTES THAT PART OF THE COMPENSATION WHICH IS ATTRIBUTABLE TO THE FACT THAT THE CLAIMANT HAS BEEN KEPT OUT OF HIS DUE FOR A LONG PERI OD OF TIME. THE LIABILITY TO PAY INTEREST ARISES BECAUSE THE CLAIMANT I S KEPT OUT OF HIS MONEY. A DEBT IS A SUM OF MONEY WHICH IS NOW PAYABLE O R WILL BECOME PAYABLE IN FUTURE BY REASON OF A PRESENT OBLIGATION. IN THE EXPRESSION 'DEBT OWED', THE VERB 'OWE' MEANS 'TO BE UNDER AN OB LIGATION TO PAY'. INTEREST IS A PAYMENT WHICH BECOMES DUE BECAUSE THE CRE DITOR HAS NOT HAD HIS MONEY AT THE DUE DATE. THIS STATUTORY DEFINITI ON REGARDS AMOUNTS WHICH MAY NOT OTHERWISE BE REGARDED AS INTEREST AS INTEREST FOR THE PURPOSE OF THE STATUTE. EVEN AMOUNTS PAYABLE IN TRANSACTIONS WHERE MONEY HAS NOT BEEN BORROWED AND DEBT HAS NOT BE EN INCURRED ARE BROUGHT WITHIN THE SCOPE OF THE DEFINITION AS IN THE CASE OF A SERVICE FEE PAID IN RESPECT OF A CREDIT FACILITY WHICH HAS NO T BEEN UTILISED. EVEN IN CASES WHERE THERE IS NO RELATIONSHIP OF DEBTOR AND C REDITOR OR BORROWER AND LENDER, IF PAYMENT IS MADE IN ANY MANNE R IN RESPECT OF ANY MONEYS RECEIVED AS DEPOSITS OR ON MONEY CLAIMS OR RI GHTS OR OBLIGATIONS INCURRED IN RELATION TO MONEY, SUCH PAYME NT IS, BY THIS STATUTORY DEFINITION, REGARDED AS INTEREST . IT IS SEEN THAT THE WORD 'INTEREST' FOR THE PURPOSE OF THE ACT IS AN INCLUSIVE D EFINITION. A LITERAL CONSTRUCTION MAY LEAD TO THE CONCLUSION THAT THE INTE REST RECEIVED OR PAYABLE . IN ANY MANNER IN RESPECT OF ANY MONEYS BORROWED OR A DEBT INCURRED OR ENUMERATED ' ANALOGOUS TRANSACTION WOULD BE DEEMED INTEREST. THAT WAS EXPLAINED BY THE BOARD IN THE CIRC ULAR REFERRED TO HEREINBEFORE. IT IS CLEARLY UNDERSTANDABLE THAT TO C ALL AN AMOUNT PAID AS INTEREST, AT LEAST ONE OF THE CONDITIONS SHOULD BE SATISF IED, NAMELY, THE SAME SHOULD HAVE BEEN PAID AS A DUE ON ACCOUNT OF ANY MONEY EITHER BORROWED OR DEBT INCURRED. THE HON'BLE SUPREME COUR T IN DR.SHAMLAL NARULA V. CIT [1964] 53 ITR 151 (SC) OBSERVED THAT INTEREST IS A CONSIDERATION PAID EITHER FOR THE USE OF MONEY OR FOR FORBEARANCE FROM DEMANDING IT AFTER IT HAS FALLEN DUE. THE COURT APPR OVINGLY CITED THE OBSERVATIONS OF LORD WRIGHT IN WESTMINSTER BANK LTD.'S CASE WHICH INDICATE THAT INTEREST, WHETHER IT IS STATUTORY OR CO NTRACTUAL, REPRESENTS THE PROFIT THE CREDITOR MIGHT HAVE MADE IF HE HAD T HE USE OF THE MONEY OR THE LOSS IS SUFFERED BECAUSE HE HAD NOT USED THAT . THE HON'BLE SUPREME COURT HELD THAT IT IS SOMETHING IN ADDITION T O THE CAPITAL AMOUNT, THOUGH IT ARISES OUT OF IT . IN THE INSTANT CASE THE AMOUNTS WERE PAID, BY WAY OF CREDIT IN INTEREST ACCOUNT, IN RESPEC T OF AN OBLIGATION IN RESPECT OF MONIES PAYABLE TO NIRMA LTD. THIS IS A FACT WHICH IS NOT DISPUTED BY THE ASSESSEE. IN VIEW OF THE ABOVE DISCUSSION, I DO NOT FIND ANY M E RIT IN THE ARGUMENT OF THE ASSESSEE AND HOLD THAT THE A MOUNT CREDITED/PAYMENT SHOULD BE TREATED AS INTEREST U/S.2(28 A) OF THE ACT AND IT IS LIABLE FOR DEDUCTION AT SOURCE U/S.194A OF T HE ACT . HENCE THE DISALLOWANCE OF THE IMPUGNED AMOUNT IS SUSTAINED. HOWEV ER, THE ASSESSING OFFICER IS DIRECTED TO REDUCE THE AMOUNT BY RS. 3,500/-, WHICH IS NOT IN THE NATURE OF INTEREST AS MENTIONED SUPRA. 6 ITA NO.2184/PN/2016 7. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 8. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE A SSESSEE HAS NOT PAID ANY INTEREST AND IT IS ON ACCOUNT OF CERTAIN DEBIT NOTES ISSUED BY NIRMA PRIVATE LIMITED. REFERRING TO THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF SHRI RADHESHAM BHERULAL BHANDARI VS. ADDL.CIT AND VICE VERSA VIDE ITA NO.954/PN/20 11 AND BATCH OF OTHER APPEALS ORDER DATED 29-02-2016 FOR A.YRS . 2007-08 & 2008-09 HE SUBMITTED THAT THE TRIBUNAL IN THE SAID DECISI ON HAS HELD THAT AS PER THE AMENDMENT MADE BY THE FINANCE AC T, 2012 W.E.F. 01-04-2013 THE ASSESSEE SHOULD NOT BE TREATED AS ASSESSEE IN DEFAULT WHEN THE PAYEE HAS OTHERWISE DISCHARGED ITS OBLIGA TION TOWARDS TAX LIABILITY ON THE CORRESPONDING INCOME AS PER T HE PROVISION OF THE ACT. REFERRING TO THE DECISION OF THE PUNE SMC BENCH OF THE TRIBUNAL IN THE CASE OF PHALTAN SECURITIES PVT . LTD. VS. ITO VIDE ITA NOS. 1225 AND 1226/PN/2016 FOR A.YRS 2006 -07 & 2007-08 ORDER DATED 29-07-2016 HE SUBMITTED THAT THE TRIBUNAL IN THE SAID DECISION WHILE HOLDING THAT THE AMENDMENT MADE BY THE FINANCE ACT, 2012 BY WAY OF INSERTION OF SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT IS CLARIFICATORY AND THEREFORE RETROSPECTIV E IN NATURE. HE ACCORDINGLY SUBMITTED THAT THE MATTER MAY BE RESTORED TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO GIVE A N OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIATE WITH EVIDEN CE THAT THE PAYEE HAS DECLARED SUCH INCOME IN ITS HANDS AND PAID TAX ES ON THE SAME. 9. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER H AND WHILE SUPPORTING THE ORDER OF THE CIT(A) SUBMITTED THAT IN VIEW OF THE 7 ITA NO.2184/PN/2016 DECISION OF THE TRIBUNAL HE HAS NO OBJECTION IF THE MATTER IS RESTORED TO THE FILE OF THE ASSESSING OFFICER. 10. I HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE PA PER BOOK FILED ON BEHALF OF THE ASSESSEE. I FIND THE ASSESSING OFFICER ON TH E BASIS OF THE DIRECTION GIVEN BY THE CIT IN THE ORDER PASSED U/S.2 63 CALLED FOR CERTAIN DETAILS FROM THE ASSESSEE AND THEREAFTER MADE AD DITION OF RS.6,66,189/- U/S.40(A)(IA) OF THE ACT ON THE GROUND THAT THE ASSESSEE HAS NOT DEDUCTED ANY TAX FROM THE PAYMENT O F INTEREST. THE LD.CIT(A) PARTLY UPHELD THE ACTION OF THE ASSESSING O FFICER WHICH HAS ALREADY BEEN REPRODUCED IN PRECEDING PARAGRAPHS. I T IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT IN VIEW OF THE INSERTION OF THE SECOND PROVISO TO PROVISIONS OF SECTION 40 (A)(IA) OF THE ACT BY THE FINANCE ACT, 2012 W.E.F. 01-04-2013, DISALLO WANCE U/S.40(A)(IA) OF THE ACT WOULD NOT BE MADE IF THE ASSESSEE IS NOT DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER THE FIRST PROV ISO TO SECTION 201(1) OF THE I.T. ACT. IT IS ALSO HIS SUBMISSION THA T GIVEN AN OPPORTUNITY THE ASSESSEE IS IN A POSITION TO PROVE THAT THE PAYEE HAD ALREADY DECLARED SUCH INCOME IN ITS HANDS AND PAID TAXES THEREON AND THEREFORE NO DISALLOWANCE U/S.40(A)(IA) CAN BE MADE IN THE HANDS OF THE ASSESSEE. IT IS ALSO HIS SUBMITTED THAT SUC H AMENDMENT TO PROVISIONS OF SECTION 40(A)(IA) IS RETROSPECTIVE IN NATURE. 11. I FIND MERIT IN THE ABOVE ARGUMENTS OF THE LD. COUNSE L FOR THE ASSESSEE. I FIND THE PUNE BENCH OF THE TRIBUNAL IN THE CA SE OF RADHESHAM BHERULAL BHANDARI (SUPRA) WHILE DECIDING AN IDENTICA L ISSUE HAS HELD THAT THE SECOND PROVISO TO PROVISIONS OF SECTION 40(A)(IA) IS CLARIFICATORY AND THEREFORE RETROSPECTIVE IN OPERAT ION AND 8 ITA NO.2184/PN/2016 AS A CONSEQUENCE ONCE THE PAYEE HAS DISCHARGED ITS TA X OBLIGATION IN ACCORDANCE WITH LAW, OPERATION OF SECTION 40(A)(IA) STANDS DIS PENSED WITH. THE VARIOUS OTHER DECISIONS RELIED ON BY THE LD. COU NSEL FOR THE ASSESSEE ALSO SUPPORT HIS CASE. UNDER THESE CIRCUM STANCES, I DEEM IT FIT AND PROPER TO RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO GIVE AN OPPORTUNITY TO THE ASSE SSEE TO SUBSTANTIATE WITH EVIDENCE TO HIS SATISFACTION THAT THE PA YEE HAS ALREADY INCLUDED THIS INCOME IN ITS RETURN AND PAID THE TAX ES THEREON. THE GROUNDS RAISED BY THE ASSESSEE ARE ACCO RDINGLY ALLOWED FOR STATISTICAL PURPOSES. 12. GROUND OF APPEAL NO.3 BY THE ASSESSEE READS AS UNDER : 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD.CIT(A) AURANGABAD WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFICER OF RS.75,420/- LESS BY DEPRE CIATION OF RS.11,313/-. THE RESULTANT ADDITION BE DELETED. 13. THE LD. COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARIN G DID NOT PRESS THIS GROUND FOR WHICH THE LD. DEPARTMENTAL REPRE SENTATIVE HAS NO OBJECTION. ACCORDINGLY, THIS GROUND BY THE ASSES SEE IS DISMISSED AS NOT PRESSED. 14. GROUND OF APPEAL NO.4 BEING GENERAL IN NATURE IS DISMISSED. 15. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 11-11-2016. SD/- ( R.K. PANDA ) ACCOUNTANT MEMBER PUNE ; DATED : 11 TH NOVEMBER, 2016. 9 ITA NO.2184/PN/2016 '# $# / COPY OF THE ORDER FORWARDED TO : / BY ORDER , // $ % / TRUE COPY // // TRUE COPY // &' % * / SR. PRIVATE SECRETARY *, / ITAT, PUNE 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT (A) - 2 PUNE 4. THE PR.CIT-2, PUNE 5. $ %%* , * , SMC BENCH / DR, ITAT, SMC BENCH PUNE; 6. 2 / GUARD FILE.