M/s. Bharat Vijay Construction Pvt.Ltd., Surat V. The Dy.CIT.,Circle-1, Surat

ITA 2185/AHD/2010

• Counselvise Citation: 218520514 RSA 2010
• Duration Of Justice: 1 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 25-08-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 28-06-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Assessee Lawyers: M K PATEL
• Keywords: Proportionate interest; Retrospective amendment
• Section: 43B; 143(3)

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, D BENCH . .. . . .. . , , , , !' !' !' !', , , , #$ #$ #$ #$ %% % & %% % & %% % & %% % &, , , , ' ' ' ' ( ' ( ' ( ' ( ' BEFORE S/SHRI G.D. AGARWAL, VICE-PRESIDENT AND MUKUL KR. SHRAWAT, JUDICIAL MEMBER) ITA NO.2185/AHD/2010 [ASSTT.YEAR : 2007-2008] M/S.BHARAT VIJAY CONSTRUCTION P. LTD. 204, NIRMAN BHAVAN, MAJURA GATE, SURAT. /VS. DCIT, CIR.1 SURAT. ( (( (*+ *+ *+ *+ / APPELLANT) ( (( (,-*+ ,-*+ ,-*+ ,-*+ / RESPONDENT) .& / 0 (/ ASSESSEE BY : SHRI M.K. PATEL ' / 0 (/ REVENUE BY : SHRI B.L. YADAV DATE OF HEARING : 25 TH AUGUST, 2011 DATE OF PRONOUNCEMENT : 30 TH AUGUST, 2011 (2 / O R D E R PER G.D. AGARWAL , VICE-PRESIDENT : THIS IS ASSESSEES APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEAL S)-I, SURAT DATED 15.6.2010 ARISING OUT OF THE ORDER OF THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961. 2. GROUND NO.1 OF THE ASSESSEES APPEAL READS AS UN DER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AS WELL AS LAW ON THE SUBJECT, THE LD.CIT(A) HAS ERRED IN CONFIRMI NG THE ACTION OF THE AO DISALLOWING THE PAYMENT OF RS.11,88,520/- ON ACC OUNT OF LATE PAYMENT OF TDS INTO GOVERNMENT ACCOUNT WITHIN THE D UE DATE U/S.40(A)(IA) OF THE ACT. 3. AT THE TIME OF HEARING BEFORE US, IT IS STATED B Y THE LEARNED COUNSEL THAT SECTION 40(A)(IA) IS AMENDED BY THE FINANCE ACT, 20 10 BY WHICH IF THE AMOUNT OF TDS IS PAID BEFORE THE DUE DATE FOR FILING OF TH E RETURN UNDER SECTION 139(1) NO DISALLOWANCE WOULD BE MADE UNDER SECTION 40(A)(I A) OF THE ACT. THAT THE ITAT, AHMEDABAD BENCH IN THE CASE OF SHRI KANUBHAI RAMJIBHAI MAKWANA ITA NO.2185/AHD/2010 -2- VS. ITO, ITA NO.3983/AHD/2008 HAS HELD SUCH AMENDME NT TO BE CLARIFICATORY AND THEREFORE RETROSPECTIVE IN NATURE. THAT ADMITT EDLY, THE ASSESSEE HAS MADE PAYMENT BEFORE THE DUE DATE FOR FILING OF THE RETUR N. THE AO IN THE ASSESSMENT ORDER HAS MENTIONED THAT THE TDS WAS PAID BY THE AS SESSEE ON 12-4-2007 WHILE DUE DATE FOR FILING OF THE RETURN WAS 30-9-20 07. THUS, THE TDS WAS DEPOSITED MUCH BEFORE THE DUE DATE FOR FILING OF TH E RETURN UNDER SECTION 139(1). HE THEREFORE SUBMITTED THAT NO DISALLOWANC E UNDER SECTION 40(A)(IA) IS REQUIRED TO BE MADE. THE LEARNED DR RELIED UPON TH E ORDERS OF THE AUTHORITIES BELOW: 2. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BO TH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. THE ITAT, A HMEDABAD BENCH IN THE CASE OF SHRI KANUBHAI RAMJIBHAI MAKWANA (SUPRA) CON SIDERED THE EFFECT OF AMENDMENT IN SECTION 40(A)(IA) BY THE FINANCE ACT, 2010 BY WHICH IF THE PAYMENT IS MADE BEFORE THE DUE DATE FOR FILING OF T HE RETURN, NO DISALLOWANCE IS REQUIRED TO BE MADE UNDER SECTION 40(A)(IA). THAT THE ITAT HELD THE AMENDMENT TO BE CLARIFICATORY AND THEREFORE RETROSP ECTIVE IN NATURE. THE RELEVANT FINDING OF THE ITAT READS AS UNDER: 12. ACCORDINGLY, WE ARE OF THE VIEW THAT THE AMEND MENTS BROUGHT OUT IN SECTION 40(A)(IA) OF THE ACT FROM TIME-TO-TIME W AS CLARIFICATORY AND WHEN AN AMENDMENT IS DECLARATORY AND CLARIFICATORY IN NATURE, THE PRESUMPTION AGAINST ITS RETROSPECTIVITY IS NOT APPL ICABLE AND AMENDMENTS OF THIS KIND ONLY DECLARE. IT IS NO DOUB T TRUE THAT, ORDINARILY, A STATUTE, AND PARTICULARLY WHEN THE SA ME HAS BEEN MADE APPLICABLE WITH EFFECT FROM A PARTICULAR DATE SHOUL D BE CONSTRUED PROSPECTIVELY AND NOT RETROSPECTIVELY. BUT THIS PRI NCIPLE WILL NOT BE APPLICABLE IN A CASE WHERE THE PROVISION CONSTRUED IS MERELY EXPLANATORY, CLARIFICATORY OR DECLARATORY IT CANNOT BE DISPUTED THAT THE OBJECT OF THE EXPLANATION IS TO EXPLAIN THE MEANING AND INTENDMENT OF THE ACT ITSELF AND THIS VIEW HAS BEEN HOLD BY HONB LE CALCUTTA HIGH COURT IN THE CASE OF CIT V. INDIA STEAMSHIP CO. LTD . (1 992) 196 ITR 917, 936 (CAL)]. IN THAT CASE, EXPLANATION 8, WHICH HAS NEWLY BEEN INSERTED BY THE FINANCE ACT, 1986, WITH RETROSPECTI VE EFFECT FROM 1ST APRIL, 1974, TO SECTION 43(1), HAS BEEN HELD TO BE CLARIFICATORY IN NATURE AND THE SAME HAS BEEN HELD TO BE DEEMED TO BE ALWAY S IN EXISTENCE EVEN BEFORE 1-4- 1974. SIMILARLY, IN THE CASE OF ALLIED MOTORS (P) LTD (SUPRA), ITA NO.2185/AHD/2010 -3- IT HAS BEEN HELD THAT THE PROVISIONS OF THE FIRST P ROVISO, WHICH HAS NEWLY BEEN INSERTED BY THE FINANCE ACT, 1987, WITH EFFECT FROM 1 ST APRIL, 1988 TO SECTION 43B IS REMEDIAL IN NATURE, DESIGNED TO E LIMINATE UNINTENDED CONSEQUENCES WHICH MAY CAUSE UNDUE HARDSHIP TO THE ASSESSEE AND WHICH MADE THE PROVISION UNWORKABLE OR UNJUST IN A SPECIFIC SITUATION, AND IS OF CLARIFICATORY NATURE AND, THEREFORE, HAS TO BE TREATED AS RETROSPECTIVE WITH EFFECT FROM 1ST APRIL, 1984, THE DATE ON WHICH SECTION 43B HAS NEWLY BEEN INSERTED BY THE FINANCE ACT, 198 3. IN TAKING THIS VIEW, THE SUPREME COURT HAS APPROVED JAMSHEDPUR MOT OR ACCESSORIES STORES V. UNION OF INDIA [(1991) 189 ITR 70 (PAT), SPECIAL LEAVE PETITION DISMISSED B THE SUPREME COURT : (1991) 191 ITR (ST. ) 8 (SC)], CIT V. SRI JAGANNATH STEEL CORPORATION [(1991) 191 ITR 676 (CA L)], AND CIT V. CHANDULAL VENICHAND [(1992) 197 ITR 718, 720 (CAL)] AND CIT V. PYARILAL KASAM MANJI & CO. [(1992) 1 98 IGTR 110 (O N)]. 13. IN VIEW OF THE ABOVE DISCUSSION, FOLLOWING THE CASE LAWS OF HONBLE APEX COURT AND OF HONBLE HIGH COURTS CITED ABOVE, WE ARE OF THE VIEW THAT THE PROVISIONS OF SECTION 40(A)(IA) AS AMENDED BY THE FINANCE ACT, 2010 W.E.F 1-4-2010, WHICH HAS NEWLY BEEN INSERTED BY THE FINANCE (NO.2) ACT, 2004, WITH EFFECT FROM 1ST APRIL, 2005 TO SECTION 40 OF THE ACT IS REMEDIAL IN NATURE, DESIGNED TO ELIMINATE UNINTE NDED CONSEQUENCES WHICH MAY CAUSE UNDUE HARDSHIP TO THE TAXPAYERS AND WHICH MADE THE PROVISION UNWORKABLE OR UNJUST IN A SPECIFIC SITUAT ION, AND IS OF CLARIFICATORY NATURE AND, THEREFORE, HAS TO BE TREA TED AS RETROSPECTIVE WITH EFFECT FROM 1ST APRIL, 2005, THE DATE ON WHICH SECTION 40(A)(IA) HAS BEEN INSERTED BY THE FINANCE (NO.2) ACT, 2004. ACCO RDINGLY, THIS ISSUE OF THE ASSESSEES APPEAL IS ALLOWED. NO CONTRARY DECISION IS BROUGHT TO OUR KNOWLEDGE. WE THEREFORE RESPECTFULLY FOLLOWING THE SAME HOLD THAT THE AMENDMENT TO SECTI ON 40A(IA) BY FINANCE ACT, 2010 W.E.F. 1-4-2010 IS CLARIFICATORY IN NATUR E AND THEREFORE WILL HAVE RETROSPECTIVE EFFECT. THEREFORE, WE ARE OF THE OPI NION THAT THIS AMENDMENT WOULD BE APPLICABLE TO THE ASSESSMENT YEAR UNDER AP PEAL. IT IS NOT IN DISPUTE THAT THE ASSESSEE MADE PAYMENT OF TDS MUCH BEFORE T HE DUE DATE FOR FILING OF THE RETURN. WE THEREFORE RESPECTFULLY FOLLOWING TH E DECISION OF THE ITAT IN THE CASE OF SHRI KANUBHAI RAMJIBHAI MAKWANA (SUPRA) DEL ETE THE DISALLOWANCE MADE UNDER SECTION 40(A)(IA). ACCORDINGLY, GROUND NO.1 OF THE ASSESSEES APPEAL IS ALLOWED. 4. GROUND NO.2 OF THE ASSESSEES APPEAL READS AS UN DER: ITA NO.2185/AHD/2010 -4- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE AO IN MAKING ADDITION OF RS.7,823/- BEING 9.55% OF RS. 81,120/- ON INVESTMENT IN NSC AS ALLEGED UNACCOUNTED NSC INTERE ST. 5. THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT PRE SSED THIS GROUND FOR ADJUDICATION ACCORDINGLY, THE SAME IS REJECTED. 6. GROUND NO.3 OF THE ASSESSEES APPEAL READS AS UN DER: 3. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AS WELL AS ON THE SUBJECT, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE AO IN MAKING ADDITION OF RS.30,000/- ON ACCOUNT OF 12% INTEREST CHARGED ON LOANS AND ADVANCES. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL PLACED BEFORE US. THE RELEVANT FACTS IN THIS REGARD AS NOTED AT PAGE NO.5 OF THE ASSESSMENT ORDER READS AS UNDER: SHRI SHAMJIBHAI S. LAKHANI WAS A MANAGING DIRECTOR OF THE COMPANY SINCE THE STARTING OF THE COMPANY. HE WAS EXPIRED B EFORE FEW YEARS. AT THE TIME OF HIS DEATH, SOME OUTSTANDING LIABILITY O F INCOME TAX WAS PAID BY THE ASSESSEE COMPANY ON BEHALF OF SHRI SHAMJIBHA I S. LAKHANI. HOWEVER, CONSIDERING LIFE TIME SERVICE OF SHRI SHAM JIBHAI S. LAKHANI AND OTHER RELEVANT THINGS, IT WAS DECIDED BY THE BO ARD OF DIRECTORS OF THE COMPANY NOT TO CLAIM THE AMOUNT FROM THE DECEASED E X-EMPLOYEE OF THE COMPANY AND TO ADJUST THE AMOUNT OF HIS RETIREMENT BENEFITS FROM THE AMOUNT DUE FROM HIM. HOWEVER, THE DECISION OF RETIR EMENT BENEFITS TO BE GIVEN TO THE EMPLOYEE WAS NOT FINALIZED, HENCE, THE NECESSARY ENTRIES IN THIS REGARD WAS NOT PASSED BY THE ASSESSEE COMPA NY. IN SHORT, THE AMOUNT CANNOT BE TREATED AS INTEREST FREE LOAN SO A S TO ATTRACT DISALLOWANCE OF ANY PROPORTIONATE INTEREST ON THE E XPENSES ON THIS ACCOUNT. ITA NO.2185/AHD/2010 -5- FROM THE ABOVE, IT IS EVIDENT THAT THE ADVANCE WAS GIVEN TO EX-MANAGING DIRECTOR OF THE COMPANY, WHO HAS SINCE EXPIRED. TH E ADVANCE WAS GIVEN AT A TIME WHEN HE WAS THE MANAGING DIRECTOR OF THE COMPA NY. IT WAS ALSO DECIDED BY THE BOARD OF DIRECTORS OF THE COMPANY TO ADJUST THE ABOVE ADVANCE AGAINST THE RETIREMENT BENEFIT TO BE GIVEN TO THE DECEASED MANAGING DIRECTOR OF THE COMPANY. SINCE THE DECISION OF THE RETIREMENT BENE FIT TO BE GIVEN TO HIM WAS NOT FINALISED, THEREFORE, ENTRY IN THIS REGARD WAS NOT POSTED IN THE ASSESSEES BOOKS OF ACCOUNTS. ON THESE FACTS, IN OUR OPINION, THERE WAS NO JUSTIFICATION FOR MAKING THE ADDITION OF RS.30,000/- PRESUMING THE SA ME TO BE INTEREST RECEIVABLE FROM LATE SHRI SHAMJIBHAI S. LAKHANI. W E THEREFORE DELETE THE ADDITION OF RS.30,000/- AND ALLOW GROUND NO.3 OF TH E ASSESSEES APPEAL. 7. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED. ORDER PRONOUNCED IN OPEN COURT THE DATE MENTIONED O N THE FIRST PAGE OF THIS ORDER. SD/- SD/- ( %% % & %% % & %% % & %% % & /MUKUL KR. SHRAWAT ) ' ' ' ' /JUDICIAL MEMBER ( . .. . . .. . G.D. AGARWAL) !' !' !' !' /VICE-PRESIDENT PLACE : AHMEDABAD C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD