Shri Kulwantsingh Randhwa, V. The Income tax Officer,Ward-2(1), Baroda

ITA 2191/AHD/2008

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9055 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 13-07-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 09-06-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K MADHUSUDANDR
• Assessee Lawyers: SN SOPARKARAR
• Keywords: Depreciation; Business expenditure; Retrospective amendment; Initiation of penalty proceedings; Block assessment
• Section: 43B; 80HHC; 234B; 194C; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'B' [BEFORE SHRI MAHAVIR SINGH,JM & SHRI A N PAHUJA,AM] ITA NO.2191/AHD/2008 (ASSESSMENT YEAR:-2005-06) SHRI KULWANT SINGH RANDHAWA, PROP. RADIANT TANKERS, 214, GIDC, RANOLI, DIST. VADODARA [PAN: ADGPR 3309 E] V/S INCOME-TAX OFFICER, WARD- 2(1),BARODA [APPELLANT] [RESPONDENT] ASSESSEE BY :- SHRI S N SOPARKAR,AR REVENUE BY:- SHRI K MADHUSUDAN,DR O R D E R A N PAHUJA: THIS APPEAL BY THE ASSESSEE AGAINST AN ORDER DATED 12- 03-2008 OF THE LD.CIT(APPEALS)-II, BARODA, RAISES T HE FOLLOWING GROUNDS :- 1 LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING ADDITION OF RS.87,05,272/- MADE BY AO U/S 40(A)(IA) OF THE ACT. BY CONFIRMING THIS ADDITION THE LD. CIT(A) HAS FAILED TO INTERPRET PRO VISIONS OF THE NEWLY INTRODUCED SECTION IN ITS PROPER PERSPECTIVE AND FU RTHER NOT TAKING INTO CONSIDERATION VARIOUS SUBMISSIONS, ARGUMENTS AND JU DGMENTS RELIED UPON BY THE APPELLANT, THIS ACTION OF LD. CIT(A) BE ING WITHOUT ANY MERITS OR JUSTIFICATION REQUIRES TO BE QUASHED. 2 LEARNED CIT(A) HAS FURTHER ERRED IN DIRECTING AO TO ALLOW THE EXPENSES CLAIMED IN THE SUBSEQUENT YEAR BY HOLDING THAT THOU GH THE APPELLANT DEDUCTED THE TAX FROM THE TRANSPORTATION CHARGES IN THE RELEVANT YEAR BUT FAILED TO DEPOSIT THE SAME WITHIN TIME ALLOWED AS PER THE PROVISIONS OF SECTION 200(1) OF THE ACT. 3 LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN C ONFIRMING ADDITION OF RS.69,806/- MADE BY AO ON ACCOUNT OF EXCESS CLAIM O F DEPRECIATION. 4 LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN C ONFIRMING ADHOC DISALLOWANCE OF RS.50,000/- MADE BY AO OUT OF TOTAL TYRE EXPENSES CLAIMED BY THE APPELLANT INCURRED FOR THE PURPOSE O F CONDUCTING BUSINESS. ITA NO.2191/AHD/2008 2 5 INITIATION OF PENALTY U/S 271(1)(C) OF THE ACT IS NOT JUSTIFIED. 6 INITIATION OF LEVY OF INTEREST U/S 234B, 234C & 2 34D OF THE ACT IS NOT JUSTIFIED. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, ED IT, DELETE, MODIFY OR CHANGE ALL OR ANY OF THE GROUNDS OF APPEAL AT THE T IME OF OR BEFORE THE HEARING OF THE APPEAL. 2 ADVERTING FIRST TO GROUND NOS. 1 & 2 IN THE APPEA L, FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT THE RETURN DECLARING INCOME OF RS.8,35,470/- FILED ON 31-10-2005 BY THE ASSESSEE, ENGAGED IN THE BUSINESS OF TRANSPORTATION OF LIQUID CHEMICALS AND INDUSTRIAL LIQUID MATERIALS, WAS PROCESSED U/S 143(1)(A) OF THE INCOM E-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT].THEREAFTER. THE ASSESSING OFFICER[AO IN SHORT] REOPENED THE ASSESSEE AFTER RE CORDING THE REASONS IN WRITING AND A NOTICE U/S 148 WAS SERVED UPON THE ASSESSEE ON 15-03-2007.DURING THE COURSE OF ASSESSM ENT PROCEEDINGS, THE AO NOTICED THAT THOUGH THE ASSESS EE DEDUCTED TAX AT SOURCE U/S. 194C OF THE ACT WHILE PAYING/ CR EDITING FOLLOWING PAYMENTS ON ACCOUNT OF TRANSPORTATION CHARGES, THE SAME WAS DEPOSITED BEYOND THE TIME STIPULATED U/S. 200(1) OF THE ACT: SR. NO. NAME OF THE PARTY MONTH AMOUNT CREDITED (RS.) TDS DATE OF ACTUAL PAYMENT 1. BALBIR KAUR OCTOBER-04 252673 2575 30/04/2005 2. BALWANT SINGH OCTOBER-04 341171 3478 30/04/2005 3. GURPRIT SINGH OCTOBER-04 280068 2855 30/04/2005 4. PRATAP SINGH OCTOBER-04 91294 932 30/04/2005 5. JAGTAR SINGH OCTOBER-04 91427 932 30/04/2005 6. PARSHANSINGH OCTOBER-04 168089 1715 30/04/2005 7. DASHMESH ROAD OCTOBER-04 91273. 931 30/04/2005 8. BALBIR KAUR NOVEMBER-04 205546 2094 30/04/2005 ITA NO.2191/AHD/2008 3 9. BALWANT SINGH NOVEMBER-04 319325 3256 30/04/2005 10. GURPRIT SINGH NOVEMBER-04 268792 2741 30/04/2005 11. PRATAP SINGH NOVEMBER-04 66856 681 30/04/2005 12. JAGTAR SINGH NOVEMBER-04 92104 939 30/04/2005 13. PARSHANSINGH NOVEMBER-04 228947 2335 30/04/2005 14. BALBIR KAUR DECEMBER-04 236262 2412 29/06/2005 15. BALWANT SINGH DECEMBER-04 383844 3916 29/06/2005 16. GURPRIT SINGH DECEMBER-04 388582 3966 29/06/2005 17. PRATAP SINGH DECEMBER-04 64148 655 29/06/2005 18. JAGTAR SINGH DECEMBER-04 256480 2614 29/06/2005 19. PARSHANSINGH DECEMBER-04 202255 2064 29/06/2005 20. HIRA ROADLINES DECEMBER-04 79780 813 29/06/2005 21. INDO TRADING CO. DECEMBER-04 95399 972 29/06/2005 22. SAVINDER SINGH DECEMBER-04 218084 2223 29/06/2005 23. CHANAN SINGH DECEMBER-04 19181 !96 29/06/2005 24. GURDISH SIGNH DECEMBER-04 15986 163 29/06/2005 25. NAGRA ROADLINES DECEMBER-04 15980 163 29/06/2005 26. CAPITAL ROAD CARRIER DECEMBER-04 15541 158 29/06/2005 27. BALBIR KAUR JANUARY-05 175555 1790 29/06/2005 28. BALWANT SINGH JANUARY-05 293922 2997 29/06/2005 29. GURPRIT SINGH JANUARY-05 279210 2845 29/06/2005 30. PRATAP SINGH JANUARY-05 100819 1029 29/06/2005 31. JAGTAR SINGH JANUARY-05 285956 2917 29/06/2005 ITA NO.2191/AHD/2008 4 32. PARSHANSINGH JANUARY-05 200437 2045 29/06/2005 33. INDO TRADING CO. JANUARY-05 15798.1 1610 29/06/2005 34. SAVINDER SINGH JANUARY-05 200018 2042 29/06/2005 35. CHANAN SINGH JANUARY-05 38278 391 29/06/2005 36. GURDISH SIGNH JANUARY-05 15921 162 29/06/2005 37. NAGRA ROADLINES JANUARY-05 66965 683 29/06/2005 38. BALBIR KAUR FEBRUARY-05 151465 1543 29/06/2005 39. BALWANT SINGH FEBRUARY-05 280520 2858 29/06/2005 40. GURPRIT SINGH FEBRUARY-05 186590 1902 29/06/2005 41. PRATAP SINGH FEBRUARY-05 80235 817 29/06/2005 42. JAGTAR SINGH FEBRUARY-05 170385 1740 29/06/2005 43. PARSHANSINGH FEBRUARY-05 160699 1543 29/06/2005 44. SAVINDER SINGH FEBRUARY-05 242106 2472 29/06/2005 45. TERSEM SINGH FEBRUARY-05 93850 956 29/06/2005W 46. BALBIR KAUR / MARCH-05 120317 1226 29/06/2005 '\ 47. BALWANT SINGH MARCH-05 214951 9383 29/06/2005 48. GURPRIT SINGH MARCH-05 187264 1911 29/06/2005 49. PRATAP SINGH I MARCH-05 60396 616 29/06/2005 50. JAGTAR SINGH \ MARCH-05 148188 1510 29/06/2005 51. PARSHANSINGH \ MARCH-05 177429 1813 29/06/2005 52. SAVINDER SINGH MARCH-05 65562 669 29/06/2005 53. TERSEM SINGH MARCH-05 61166 624 29/06/2005 TOTAL 8705272 95873 ITA NO.2191/AHD/2008 5 2.1 SINCE THE TAX DEDUCTED AT SOURCE HAD NOT BEEN P AID DURING THE PREVIOUS YEAR, OR IN THE SUBSEQUENT YEAR BEFORE THE EXPIRY OF THE TIME PRESCRIBED UNDER SUB-SECTION (1) OF SEC. 200 O F THE ACT, THE AO DISALLOWED THE AFORESAID AMOUNT OF RS.87,05,272/-,H AVING RECOURSE TO THE EXTANT PROVISIONS OF SECTION 40(A)(IA) OF TH E ACT. 3. ON APPEAL THE LD. CIT(A) WHILE DISTINGUISHING T HE DECISIONS RELIED UPON ON BEHALF OF THE ASSESSEE, UPHELD THE F INDINGS OF THE AO, THE ASSESSEE HAVING NOT DEPOSITED THE TAX DEDUCTED AT SOURCE WITHIN THE TIME ALLOWED U/S.200(1) OF THE ACT. HOWEVER, TH E LD. CIT(A) DIRECTED THE AO TO ALLOW THE DEDUCTION IN THE AY 2006-07, TDS HAVING B EEN DEPOSITED IN APRIL AND JUNE 2005. 4. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A).THE LD. AR ON BEHALF OF THE ASSESSEE CONTENDED THAT THE AMENDMENT MADE IN THE PROVISION S OF SEC. 40A(IA) OF THE ACT BY THE FINANCE ACT,2010 W.E.F.1 .4.2010, BEING CLARIFICATORY IN NATURE ,WAS APPLICABLE WITH RETRO SPECTIVE EFFECT AND THEREFORE, THE LD. CIT(A) WAS NOT JUSTIFIED IN UPHO LDING THE FINDINGS OF THE AO. WHILE REFERRING TO THE DECISIONS IN THE CAS E OF CIT VS. PODDAR CEMENT (P) LTD. (1997) 226 ITR 625 (SC),CIT VS. ALOM EXTRUSIONS LTD. (2009) 319 ITR 306 (SC),ALLIED MOTO RS P. LTD. VS. CIT (1997) 224 ITR 677 (SC),CIT VS. RAJIV BHATARA ( 2009), 310 ITR 105 (SC),CIT VS. GOLD COIN HEALTH FOOD P LTD.,304 I TR 308(SC) AND CIT VS. SHELLY PRODUCTS AND ANOTHER (2003), 261 ITR 367 (SC), THE LD. AR POINTED OUT THAT IN SIMILAR CIRCUMSTANCES, A MENDMENTS TO PROVISIONS OF SEC. 43B,EXPLANATION 4 TO SEC. 271(1) (C), LEVY OF SURCHARGE IN BLOCK ASSESSMENTS AND PROVISIONS OF SEC. 240(B) OF THE ACT HAD RESPECTIVELY BEEN HELD TO BE CLARIFICA TORY AND CONSEQUENTLY, RETROSPECTIVE IN APPLICATION. THEREFO RE, THE ASSESSEE ITA NO.2191/AHD/2008 6 MAY NOT BE DENIED DEDUCTION U/S 40A(IA) OF THE ACT , THE LD. AR ARGUED. 5. ON THE OTHER HAND, THE LEARNED DR SUPPORTED THE ORDER OF THE LD. CIT(A) AND CONTENDED IN HIS WRITTEN SUBMISSION S AS UNDER: SECTION 40(A)(IA) STARTS WITH NON OBST ANTE CLAUSE AND IT OPERATES OVERRIDING THE DEDUCTIONS MENTIONED IN SECTIONS 30 TO 38. IT IS A SPECIFIC PROVISION BROUGHT ON THE STATUTE WITH A SPECIFIC PURPOSE OF ENFORCING THE COMPLIANCE TO TDS PROVISIONS AND ALSO TO GET THE TAX IN TO THE EX CHEQUER AT THE EARLIEST. THERE IS NO AMBIGUITY IN THE WORDING OF THE SECTION . THE HARDSHIP IF ANY CAUSED TO THE ASSESSES IN IMPLEMENTATION IS WELL 'THOUGHT OVE R' AND INTENDED AS A DETERRENT BY THE PARLIAMENT WHILE ENACTING THE SECTION. 2 SECTION 40(A)(IA) WAS AMENDED BY THE FINANCE ACT 2008, RELAXING THE CONDITION, TO THE EXTENT THAT THE DEDUCTION MADE IN THE LAST MONTH OF THE YEAR CAN BE DEPOSITED BEFORE FILING OF THE RETURN AND EXPEND ITURE RELEVANT MAY ALLOWED AS DEDUCTION. WHILE MAKING THE AMENDMENT IN 2008, THE PARLIAMENT WAS AWARE OF THE CONSEQUENCES AND IN ITS WISDOM, SPECIFICALLY PR OVIDED THAT THE TAX DEDUCTED DURING APRIL TO FEBRUARY OF THE YEAR HAS TO BE DEPO SITED BEFORE THE END OF THE PREVIOUS YEAR. THIS AMENDMENT WAS MADE APPLICABLE W ITH RETROSPECTIVELY FROM 1- 4-2005. AT THE COST OF REPETITION IT HAS TO BE STAT ED THAT THE PROVISION WITH REGARD TO DEPOSITING OF THE TAX DEDUCTED UP TO THE LAST DA Y OF FEBRUARY OF THE PREVIOUS YEAR, BEFORE THE END OF THE YEAR WAS WELL THOUGHT OVER MOVE AFTER CONSIDERING THE REPRESENTATIONS RECEIVED AT THAT TIME AND WAS ' INTENDED' FIRSTLY TO ENFORCE THE COMPLIANCE TO TDS PROVISIONS AND SECONDLY TO GET MA JOR PORTION OF TAX DEDUCTED DURING THE YEAR WITHIN THAT YEAR TO THE EXCHEQUER. 3 IN THE FINANCE ACT 2010 AGAIN THE ISSUE WAS RE-CO NSIDERED BY THE PARLIAMENT AND THE PROVISION WAS FURTHER RELAXED BY ALLOWING THE DEDUCTION OF EXPENDITURES, IF THE TAX WAS DEDUCTED DURING THE EN TIRE YEAR IS PAID BEFORE FILING OF THE RETURN. THIS AMENDMENT WAS MADE APPLICABLE FROM 1-4-2010. IT HAS TO BE SPECIFICALLY NOTED THAT THE PARLIAMENT HAS NOT MADE IT APPLICABLE FROM 1-4-2005 AS IT HAD DONE WHILE MAKING THE SIMILAR AMENDMENT TO THE SECTION IN 2008. THIS ASPECT CAN ALSO BE INFERRED FROM THE EXPLANATORY N OTES TO THE AMENDMENTS IN FINANCE ACT 2010 (321 ITR(ST) . THE BOARD HAVE CLAR IFIED THAT THE AMENDMENT IS WITH RETROSPECTIVE FROM 1-4-2010 MAKING IT CLEAR TH AT THE MENTIONED DATE FROM WHICH THE AMENDMENT TAKES EFFECT IS ONLY 1.4.2010. THEREFORE THE INCONVENIENCE OR HARDSHIP CAUSED TO THE ASSESSES FROM 1-5-2005 TO 31 -3-2010 WAS WELL THOUGHT OVER AND INTENDED. IT CANNOT BE SAID AT THIS STAGE THAT THE HARDSHIP CAUSED WAS NOT INTENDED. 4 THE ORDER OF THE SUPREME COURT IN THE CASE OF ALL IED MOTORS (P) LTD VS CIT REPORTED AT 224 ITR 677(SC) WILL NOT APPLY TO SECTI ON 40(A)(IA) AND THE SUBSEQUENT AMENDMENTS TO THIS SECTION. AFTER EXAMIN ING THE PROVISIONS OF THE SECTION 43B, THE FIRST AND SECOND PROVISOS OF THE S ECTION AND THE OMISSION OF THE ITA NO.2191/AHD/2008 7 SECOND PROVISO, THE APEX COURT FOUND THAT THERE WAS A DISCRIMINATION BETWEEN VARIOUS FUNDS MENTIONED IN THE FIRST PROVISO TO 43B AND THE WELFARE FUNDS OF THE SECOND PROVISO WHICH WAS NOT INTENDED. TO ALLEVIATE THIS HARDSHIP, THE HON'BLE COURT HELD THAT IN THE FACTS AND CIRCUMSTANCES OF T HAT SECTION THAT THE AMENDMENT BY WAY OF OMISSION OF SECOND PROVISO HAS TO BE READ RETROSPECTIVELY. HOWEVER IN THE CASE OF SECTION 40(A)(IA) THE HARDSHIP IS CONSC IOUS AND INTENDED. THEREFORE THE DECISION OF THE APEX COURT WHERE THE HARDSHIP W AS NOT INTENDED CANNOT BE APPLIED IN THE PRESENT CASE. 5 FURTHER IN THE CASE OF CIT VS ALOM EXTRUSIONS LTD 319 ITR 306(SC), ON THE ISSUE OF 43B, THE APEX COURT TOOK AN EXAMPLE (PARA 15) AND CAME TO THE CONCLUSION THAT DEDUCTION, IF THE AMOUNT WAS NOT AL LOWED BASED ON PAYMENT BEFORE THE DUE DATE OF FILING OF THE RETURN, THE DE DUCTION WILL BE DENIED TO THE ASSESSEE FOR ALL THE TIMES U/S 43B. IN OTHER WORDS, THE ASSESSEE WILL LOSE THE BENEFIT OF DEDUCTION EVEN IN THE YEAR OF ACCOUNT IN WHICH IT PAYS THE CONTRIBUTIONS TO THE WELFARE FUND. IN THE CIRCUMSTANCES THE APEX COURT SAID THE AMENDMENT TO SECTION 43B WAS CURATIVE IN NATURE AND APPLICABLE RETROSPECTIVELY. HERE IN THE CASE OF 40(A)(IA), THERE IS NO SUCH HARDSHIP OR LOSS OF DEDUCTION FOR ALL TIMES. THE SECTION ITSELF PROVIDES THAT THE EXPENDI TURE WILL BE ALLOWED AS DEDUCTION IN THE YEAR IN WHICH THE RELEVANT TAX DED UCTED IS PAID. THEREFORE THE DECISIONS OF THE SUPREME COURT IN THE CASE OF ALLIE D MOTORS(SUPRA) AND THAT OF IN ALOM EXTRUSIONS (SUPRA) ARE NOT APPLICABLE IN THE C ONTEXT OF SECTION 40(A)(IA) AND DO NOT HELP THE ASSESSEE. RELIANCE IS PLACED ON THA NTHI TRUST VS ACIT (MAD) 238 ITR 1 1 7 WHERE IN WAS HELD THAT THE INTERPRETATION OF THE ORDERS OF COURTS & TRIBUNALS MUST BE IN THE CONTEXT OF ACTUAL FINDINGS . 6 THE HON'BLE ITAT MUMBAI DEALING THE ISSUE IN THE CASE OF BANSAL PARIVAHAN (INDIA) LTD IN ITA NO 2355/MUM/10 HAS HEA VILY RELIED ON THE ABOVE CITED ORDERS OF THE APEX COURT AND HELD THAT THE AM ENDMENT TO SECTION 40(A)(IA) BY THE FINANCE ACT 2010 IS RETROSPECTIVE. THE HON'B LE ITAT MUMBAI HAD NOT CONSIDERED THE ABOVE ASPECTS OF THE TWO SITUATIONS AND MISLEAD ITSELF TO BELIEVE THE SITUATION IN BOTH THE SECTIONS IS SIMILAR. 7 FURTHER, THE PROVISIONS OF SECTION 40(A)(IA) HAVE TO BE INTERPRETED KEEPING IN VIEW THE INTENTION OF THE PARLIAMENT IN ENACTING THE SAME. RELIANCE IS PLACED ON THE FOLLOWING. WHEN THE MEANING OF THE WORDS IS CLEAR AND UNAMBIGU OUS, THE COURT HAS TO GIVE EFFECT TO IT WHATEVER BE THE CONSEQUENCES, AS THE C OURT HAS NO JURISDICTION TO MITIGATE HARSH CONSEQUENCES OF THE STATUTE IF ANY. SMT TARULATA SHYAM & OTHERS VS CIT(SC) 108 ITR 3 45 PATIL VIJAYA KUMAR & ORS VS UOI & ANR (KAR) 151 ITR 48 PLAIN LANGUAGE OF THE STATUTE IS BEST UNDERSTOOD AS THE DECLARATION OF THE INTENTION OF THE LEGISLATURE. THE COURT CANNOT SEEK TO SUPPLY OMISSIONS, AS SUCH AN ATTEMPT WOULD TANTAMOUNT TO POWER TO LEGISLATE, WHICH IT DOES NOT HAVE. THE PLAIN INFERENCE CANNOT BE DISMISSED ON THE GROUND T HAT IT WOULD BE UNREASONABLE OR THAT THE LANGUAGE IS CONTRARY TO THE OBVIOUS INT ENTION OF THE LEGISLATURE. ITA NO.2191/AHD/2008 8 PADMASUNDRARAO(DECD) VS STATE OF TAMIL NADU (BENCH OF FIVE JUDGES) 255 ITR 147(SC) THE INTERPRETATION SHOULD AVOID THE 'DANGER OF PRIO R DETERMINATION OF THE MEANING WITH ONE'S OWN PRECONCEIVED NOTIONS' AND THAT COURT INTERPRET THE LAW AND NOT LEGISLATE. PRAKASHNATH KHANNA VS CIT 266 ITR 1 (SC) THE RETROSPECTIVITY CANNOT BE ATTRIBUTED TO AN AMEN DMENT, UNLESS IT IS SO SPELT OUT CIT VS ZAM ZAM TANNERS 279 ITR 197 (ALL) RETROSPECTIVITY IS NOT BE LIGHTLY INFERRED UNLESS I T IS SPECIFICALLY SATED TO BE RETROSPECTIVE. SECTION 145A OF THE ACT RELATING TO VALUATION OF INVENTORIES IN THE LIGHT OF UNPAID CENTRAL EXCISE INTRODUCED IN 1999 T O HAVE EFFECT FROM THE AY 1999- 2000 COULD NOT BE TREATED AS DECLARATORY OF THE EXI STING LAW, SO AS TO APPLY FOR AN EARLIER YEAR. IT RARELY HAPPENS THAT A PROVISION OF THE IT ACT IS DECLARATORY OF THE LAW. THIS ACT IS ONE OF THE MOST CATEGORIC BRANCHES OF LAW AND ITS INTENT IS MOSTLY TO BE GATHERED FROM THE EXPRESS WORDS EMPLOYED TO F URTHER THE CURRENT FISCAL POLICY OF THE GOVERNMENT. CIT VS BERGER PAINTS (INDIA) LTD(NO. 2) 254 ITR 503 (CAL) NO AMBIGUITY IN THE PROVISIONS OF THE STATUTE - PRO VISIONS CANNOT BE INTERPRETED TO CONFER BENEFIT TO THE ASSESSEE IPCA LABORATORY LTD VS DCIT (SC) 266 ITR 521 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE AS ALSO THE DECISIONS RELIED UPON ON BY TH E RESPECTIVE PARTIES. THE ONLY DISPUTE BEFORE US IS AS TO WHETHE R THE AMENDMENTS MADE IN THE PROVISIONS OF SEC. 40A(IA) OF THE ACT ARE APPLICABLE W.E.F 1.4.2010 OR WITH RETROSPECTIVE EFFECT FROM 1. 4.2005. INDISPUTABLY, THE ASSESSEE DEPOSITED TAX DEDUCTED AT SOURCE FROM THE PAYMENTS ON ACCOUNT OF TRANSPORTATION CHARGES F OR THE MONTHS OF OCTOBER,2004 & NOVEMBER,2004 ONLY ON 30.4.2005 WHIL E FOR THE MONTHS OF DECEMBER,2004 TO MARCH,2005 ON 29.6.2005. THE AO DISALLOWED THE CLAIM, HAVING RECOURSE TO THE FOLLOW ING EXTANT PROVISIONS OF SEC. 40A(IA) OF THE ACT , INSERTED BY THE FINANCE (NO. 2) ACT, 2004 W.E.F. 1ST APRIL, 2005: ITA NO.2191/AHD/2008 9 40. AMOUNTS NOT DEDUCTIBLE. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTION S 30 TO 38, THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTING THE INCO ME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION', (IA.) ANY INTEREST, COMMISSION OR BROKERAGE, FEES F OR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB-CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR F OR CARRYING OUT ANY WORK), ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER C HAPTER XVII-B AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION, HAS NOT BEEN PAID DURING THE PREVIOUS YEAR, OR IN THE SUBSEQUENT YEAR BEFORE THE EXPIRY OF THE TIME PRESCRIBED UNDER SUB-SECTION (1) OF SECTIO N 200 : PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TAX HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR OR, HAS BEEN DEDUCT ED IN THE PREVIOUS YEAR BUT PAID IN ANY SUBSEQUENT YEAR AFTER THE EXPIRY OF THE TIME PRESCRIBED UNDER SUB-SECTION (I) OF SECTION 20 0, SUCH SUM SHALL BE ALLOWED AS A DEDUCTION IN COMPUTING THE. INCOME OF THE PREVIOUS YEAR IN WHICH SUCH TAX HAS BEEN PAID. 6.1 . THE MEMORANDUM EXPLAINING THE AFORESAID PRO VISIONS IN THE FINANCE (NO. 2) BILL ,2004 READ AS UNDER: 'UNDER THE EXISTING PROVISIONS OF SUB-CLAUSE (I) OF CLAUSE (A) OF SECTION 40, FAILURE TO MAKE DEDUCTION AT SOURCE FRO M PAYMENT OF INTEREST, ROYALTY, FEES FOR TECHNICAL SERVICES OR A NY OTHER SUM WHICH IS PAYABLE OUTSIDE INDIA, OR IN INDIA TO A NON-RESI DENT OR TO A FOREIGN COMPANY OR FAILURE TO MAKE PAYMENT TO THE A CCOUNT OF THE CENTRAL GOVERNMENT, ATTRACTS DISALLOWANCE OF SUCH P AYMENTS IN THE HANDS OF THE PAYER. DEDUCTION OF SUCH SUM, IS HOWEV ER, ALLOWED IN THE COMPUTATION OF INCOME IF TAX IS DEDUCTED, OR AF TER DEDUCTION, PAID IN ANY SUBSEQUENT YEAR IN COMPUTING THE INCOME OF THAT YEAR. WITH A VIEW TO AUGMENT COMPLIANCE OF TDS PROVISIONS , IT IS PROPOSED TO EXTEND THE PROVISIONS OF SECTION 40A(I) TO PAYMENTS OF INTEREST, COMMISSION OR BROKERAGE, FEES FOR PROFESS IONAL SERVICES OR FEES FOR TECHNICAL SERVICES TO RESIDENTS AND PAYMEN TS TO A RESIDENT CONTRACTOR OR SUB-CONTRACTOR FOR CARRYING OUT ANY W ORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK), ON WHI CH TAX HAS NOT ITA NO.2191/AHD/2008 10 BEEN DEDUCTED OR AFTER DEDUCTION, HAS NOT BEEN PAID BEFORE THE EXPIRY OF THE TIME PRESCRIBED UNDER SUB-SECTION (1) OF SECTION 200 AND IN ACCORDANCE WITH THE OTHER PROVISIONS OF CHAP TER XVII-B. IT IS ALSO PROPOSED TO PROVIDE THAT WHERE IN RESPECT O F PAYMENT OF ANY SUM, TAX HAS BEEN DEDUCTED UNDER CHAPTER XVII-B OR PAID IN ANY SUBSEQUENT YEAR, THE SUM OF PAYMENT SHALL BE ALLOWE D IN COMPUTING THE INCOME OF THE PREVIOUS YEAR IN WHICH SUCH TAX H AS BEEN PAID. THE PROPOSED AMENDMENT WILL TAKE EFFECT FROM 1ST DA Y OF APRIL 2005 AND WILL, ACCORDINGLY, APPLY IN RELATION TO TH E ASSESSMENT YEAR 2005-2006 AND SUBSEQUENT YEARS.'. 6.2 ON APPEAL, THE LD. CIT(A) WHILE UPHOLDING THE FINDINGS OF THE AO DIRECTED THE AO TO ALLOW THE CLAIM IN THE AY 2006-07 IN TERM S OF THE AFORESAID PROVISO TO SEC. 40A(IA) OF THE ACT, THE TAX HAVING BEEN DEPOSI TED IN THE SUBSEQUENT YEAR. 6.3 SINCE IT IS NECESSARY TO SPELL OUT THE DE GREE OF RETROSPECTIVITY FROM THE LANGUAGE OF THE RELEVANT PROVISIONS ITSELF, CLOSE A TTENTION HAS TO BE PAID TO THE PROVISIONS OF THE SAID SECTION. AS IS APPARENT FROM THE AFORESAID MEMORANDUM EXPLAINING THE PROVISIONS, SECTION 40(A)(IA) WAS B ROUGHT ON THE STATUTE BOOK WITH A VIEW TO AUGMENT THE COMPLIANCE OF TDS PROVISIONS SO AS TO DISALLOW THE EXPENSES FOR WHICH TAX WAS NOT DEDUCTED AT SOURCE A ND/OR THE TAX HAVING BEEN DEDUCTED AT SOURCE WAS NOT PAID TO THE CREDIT OF TH E CENTRAL GOVERNMENT WITHIN THE TIME STIPULATED IN SECTION 200(1) OF THE ACT I N ACCORDANCE WITH PROVISIONS OF CHAPTER XVII-B OF THE ACT. THE PROVISO TO THE SEC .40A(IA) STIPULATED THAT IF TAX IS DEDUCTED IN SUBSEQUENT YEAR OR HAVING BEEN DEDUCTE D IN THE RELEVANT PREVIOUS YEAR, PAID AFTER THE STIPULATED TIME LIMITS, THE AS SESSEE WOULD BE ENTITLED TO CLAIM DEDUCTION IN THE YEAR IN WHICH PAYMENT IS ACTUALLY MADE. HOWEVER, CERTAIN ASSESSEES EXPRESSED DIFFICULTIES IN RESPECT OF TAX DEDUCTED AT SOURCE IN THE LAST MONTH OF THE PREVIOUS YEAR, THE DUE DATE FOR PAYMEN T OF WHICH, AS PER THE TIME SPECIFIED IN SECTION 200(1) OF THE ACT, WAS 7TH OF APRIL IN THE SUBSEQUENT YEAR. SINCE TIME OF ONLY SEVEN DAYS WAS AVAILABLE FOR PAY MENT OF THE TAX DEDUCTED AT SOURCE FROM THE EXPENDITURE INCURRED IN THE MONTH O F MARCH, IN ORDER TO AVAIL DEDUCTION OF THE SAID EXPENDITURE IN TERMS OF THE PROVISIONS OF SEC. 40(A)(IA) OF THE ACT, SECTION 40(A)(IA) WAS AMENDED BY THE FINA NCE ACT, 2008 IN THE FOLLOWING TERMS IN ORDER MITIGATE THE DIFFICULTIES EXPERIENCED BY THE ASSESSEES : ITA NO.2191/AHD/2008 11 NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTIO NS 30 TO 38, THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTIN G THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUS INESS OR PROFESSION', (IA) ANY INTEREST, COMMISSION OR BROKERAGE, RENT, R OYALTY, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICE S PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB -CON TRACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WORK (INCLUDING SUPP LY OF LABOUR FOR CARRYING OUT ANY WORK), ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B AND SUCH TAX HAS NOT BEEN DEDUCTED O R, AFTER DEDUCTION, HAS NOT BEEN PAID, (A) IN A CASE WHERE THE TAX WAS DEDUCTIBLE AND WAS SO DEDUCTED DURING THE LAST MONTH OF THE PREVIOUS YEAR , ON OR BEFORE THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139; OR (B) IN ANY OTHER CASE, ON OR BEFORE THE LAST DAY OF THE PREVIOUS YEAR [PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TAX HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR, OR HAS BEEN DEDUCTED (A) DURING THE LAST MONTH OF THE PREVIOUS YEAR BUT PAID AFTER THE SAID DUE DATE; OR (B) DURING ANY OTHER MONTH OF THE PREVIOUS YEAR BUT PAID AFTER THE END OF THE SAID PREVIOUS YEAR, SUCH SUM SHALL BE ALLOWED AS A DEDUCTION IN COMPUTI NG THE INCOME OF THE PREVIOUS YEAR IN WHICH SUCH TAX HAS B EEN PAID.] 6.4 . IN TERMS OF THE AFORESAID AMENDED PROVISI ONS, NO DISALLOWANCE U/S 40(A)(IA) COULD BE MADE IN RESPECT OF THE EXPENDITU RE INCURRED IN THE MONTH OF MARCH IF THE TAX DEDUCTED AT SOURCE FROM SUCH EXPEN DITURE HAD BEEN PAID BEFORE THE DUE DATE OF FILING OF THE RETURN. WHILE PROPOSI NG THIS AMENDMENT, IT WAS EXPLAINED BY THE HONBLE FINANCE MINISTER THAT THE TAXPAYERS WILL NOW GET A TIME PERIOD OF SIX MONTHS FOR DEPOSITING THE TAX DEDUCTE D AT SOURCE IN RESPECT OF EXPENDITURE INCURRED IN THE MONTH OF MARCH SO AS TO ESCAPE THE DISALLOWANCE OF ITA NO.2191/AHD/2008 12 THE SAID EXPENDITURE U/S 40(A)(IA) OF THE ACT. IT W AS CLARIFIED THAT THE SAID AMENDMENT WOULD BE APPLICABLE WITH RETROSPECTIVE EF FECT FROM 1.4.2005. IN NUTSHELL, THE ASSESSEES DEDUCTING THE TAX DURING TH E LAST MONTH OF THE PREVIOUS YEAR WERE PERMITTED TO DEPOSIT TDS ON OR BEFORE TH E DUE DATE OF FILING OF THE RETURN SPECIFIED UNDER SECTION 139(1) OF THE ACT WH ILE THOSE DEDUCTING TAX IN THE FIRST ELEVEN MONTHS OF THE PREVIOUS YEAR WERE PERM ITTED TO DEPOSIT TDS ON OR BEFORE THE LAST DAY OF THE SAID PREVIOUS YEAR, SO A S TO AVOID DISALLOWANCE U/S 40(A)(IA) OF THE ACT . THEREFORE, THE DIFFICULTIE S EXPERIENCED BY THE ASSESSEES IN DEPOSIT OF TAX DEDUCTED AT SOURCE FROM THE PAYMENT S IN THE LAST MONTH OF THE FINANCIAL YEAR WERE REDRESSED. 6.5 HOWEVER, THE ASSESSEES STILL EXPERIENCED DIFFICULTIES EVEN AFTER THE AMENDMENTS BY THE FINANCE ACT 2008, AS IS EVIDENT FROM THE FOLLOWING PRE- BUDGET REPRESENTATION FOR THE FY ENDING 2010 SUBM ITTED BY THE CHAMBER OF TAX CONSULTANTS : 'TOTAL DISALLOWANCE OF THE EXPENSES IN THE PREVIOUS YEAR IN WHICH THEY ARE INCURRED IF TDS IS NOT DEDUCTED OR DEDUCTE D BUT NOT DEPOSITED WITHIN THE DUE DATE IS VERY HARSH AND CAU SES UNDUE HARDSHIP. THE DEDUCTOR DISCHARGES HIS VICARIOUS LIA BILITY BY COLLECTING TAX AND DEPOSITING ON BEHALF OF THE GOVE RNMENT. IF ANY GENUINE BUSINESS EXPENDITURE IS DISALLOWED ON ACCOU NT OF SHORT DEDUCTION OF TDS, IT CAUSES INJUSTICE AND SUBJECTS THE DEDUCTOR TO UNFAIR AND ARBITRARY TREATMENT. THE PROVISION OF SE CTION 40(A)(IA) PENALIZES THE DEDUCTOR OVER AND ABOVE THE PROVISION S OF PENALTY AND PROSECUTION UNDER RELEVANT SECTIONS OF THE INCO ME TAX ACT, 1961. SUGGESTIONS SCRAP SECTION 40(A)(IA). IF NOT, ONCE TAX IS DEDUCT ED AND ACCORDINGLY DEPOSITED TO THE CREDIT OF THE CENTRAL GOVERNMENT, THEN NO DISALLOWANCE SHOULD BE MADE. ALTERNATIVELY, EXPENSES TO BE DISALLOWED ONLY IF TH E TAX IS NOT DEPOSITED TILL THE DUE DATE OF FILING OF THE RETURN OF INCOME (IE. IN LINES WITH SECTION 43B). ITA NO.2191/AHD/2008 13 6.51. SIMILARLY, THE CONFEDERATION OF INDIAN INDUS TRY HIGHLIGHTED THE GENERAL HARDSHIPS CAUSED TO THE ASSESSEES IN THE FOLLOWING TERMS: 'SECTION 40(A)(IA) PROVIDES FOR DISALLOWANCE OF THE EXPENSES INCURRED IN THE NATURE OF INTEREST, COMMISSION, BRO KERAGE, FEES FOR PROFESSIONAL SERVICES AS WELL AS PAYMENT TO CONTRAC TORS IF THE TAX HAS EITHER NOT BEEN DEDUCTED OR IF DEDUCTED NOT PAI D WITHIN THE DUE DATE. THIS HARSH PROVISION BROUGHT ON THE STATUTE B OOK BY THE FINANCE ACT, 2004 WITH EFFECT FROM ASSESSMENT YEAR 2005-06. FOR A SMALL DEFAULT OF NOT PAYING 1% OF THE TDS TO THE GOVERNMENT THE INTENTION OF THE LEGISLATURE TO DISALLOW THE WH OLE OF THE EXPENDITURE WHICH IN TURN WILL LEAD TO LEVY OF TAX @ 33.99% PLUS INTEREST AND PENALTY IS UNHEARD OF IN THE WORLD. THE PROVISION IS A CONFISCATORY IN AS MUCH AS THAT AT TIMES WHEN THE AMOUNT OF TDS INVOLVED IS ONLY 1% OF THE EXPENS E THE ADDITIONAL TAX LIABILITY COMES TO 33.99% OF THE SUM WHICH IS FURTHER INCREASED BY LEVY OF INTEREST UNDER SECTION 234B AN D 234C. IN MOST OF THE CASES THE TOTAL TAX AND INTEREST LIABILITY C OMES TO SOMEWHERE BETWEEN 44% TO 46% OF THE AMOUNT IN QUESTION. IT WI LL BE APPRECIATED THAT SUCH DISPROPORTIONATE BURDEN ON TH E ASSESSEES FOR NOT COLLECTING THE TAX FROM A THIRD PARTY (WHICH IS ESSENTIALLY A JOB OF THE GOVERNMENT) IS UNDOUBTEDLY UNREASONABLE. IT IS MORE SO IN ALMOST ALL SUCH CASES PAYMENTS ARE THROUGH BANKING CHANNELS AND ARE FULLY AMENABLE TO VERIFICATION AND THERE ARE HA RDLY ANY REASON TO DOUBT THAT THOSE RECEIPTS ARE NOT DISCLOSED BY T HE RECIPIENTS. THE ARGUMENT IS ALSO NO CONSOLATION TO THE BUSINESS MAN WHOSE BUSINESS IN SUBSEQUENT YEAR IS NOT GOOD ENOUGH TO A BSORB THE DEDUCTION OF EXPENSES DISALLOWED IN EARLIER YEAR UN DER SECTION 40A(IA). TRUE THE DEDUCTION CAN BE ALLOWED BUT IF T HE COMPUTATION OF INCOME RESULTS IN LOSS IN SUBSEQUENT YEAR, HE DO ES NOT BENEFIT FROM SUCH DEDUCTION. TO SUM UP THIS ASPECT, IT IS CLEAR THAT ALLOWANCES OF THE DEDUCTION IN SUBSEQUENT YEAR MAY NOT IN ALL CASES GIVE FULL R ELIEF IN SUBSEQUENT YEAR AND SECONDLY, THERE WILL BE NO RELI EF WHATSOEVER IN RESPECT OF INTEREST CHARGED UNDER SECTION 234B AND 234C IN THE ITA NO.2191/AHD/2008 14 YEAR OF ITS DISALLOWANCE. THE RATIO OF THE ADDITION AL TAX BURDEN ON THE ASSESSEE TO THE ALLEGED LOSS OF TAX, OR ITS DEL AY IS PREPOSTEROUS. THERE ARE REMEDIAL PROVISIONS CONTAINED UNDER CHAPT ER XVII OF THE INCOME TAX ACT FOR RECOVERING OF TDS AMOUNT INTERES T AND PENALTY THEREON AND THEREFORE HAVING PROVISIONS U/S 40A(IA) IS NOT ONLY EXTREMELY HARSH BUT TANTAMOUNT TO DOUBLE TAXATION. FIRSTLY HE IS PENALIZED BY AMOUNT EQUIVALENT TO TDS ALONG WITH A PENAL INTEREST UNDER SECTION 201 (A) AND UNDER SECTION 220(2) SECO NDLY, HE IS AGAIN PENALIZED BY THE PROVISIONS OF SECTION 40A(IA ). RECOMMENDATION. SECTION 40A(IA) SHOULD DRAWN/DELETED AND/OR BRING S UITABLE AMENDMENTS IN THE SAID ACT, TO HELP ASSESSEE IN LOS ING GENUINE DEDUCTION ON THIS ACCOUNT.' 6.52 THE FIEO ALSO SUBMITTED A DETAILED MEMORANDU M BEFORE THE BUDGET 2010-11 IN THE FOLLOWING TERMS: 14. SECTION 40(A)(IA) IT IS NOTICED THAT DEPARTMENT HAS APPLIE D SECTION 40(A)(IA) TO RAISE HUGE TAX DEMANDS ON ASSESSES, FOR DENIAL AND TECHNICAL DEFAULT OF LATE PAYMENT OF TDS. THE TIME LIMIT FOR PAYMENT OF TDS LINKED WITH DISALLOWING EXPENSES UNDER SECTION 40(A)(IA) SHOULD BE REVIEWED AND BE ENHANCE D TO THE DATE OF FILING OF RETURN. THIS PROVISION IS VERY HARSH AND SO IF MAY PLEASE BE DELETED. 6.6. IN THE LIGHT OF DIFFICULTIES EXPRESSED BY VARIOUS ASSESSEES AS APPARENT FROM SOME OF THE AFORESAID REPRESENTATIONS BY THE V ARIOUS ORGANISATIONS, THE PROVISIONS OF SECTION 40(A)(IA) WERE AMENDED BY THE FINANCE ACT, 2010 BUT W.E.F. 1.4.2010 IN THE FOLLOWING TERMS: 'NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTIO N 30 TO [38], THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTIN G THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUS INESS OR PROFESSION'. (IA) ANY INTEREST, COMMISSION OR BROKERAGE, [RENT, ROYALTY] FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICE S PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WORK (INCLUDIN G SUPPLY OF ITA NO.2191/AHD/2008 15 LABOUR FOR CARRYING OUT ANY WORK) ON WHICH TAX IS D EDUCTIBLE AT SOURCE UNDER CHAPTER XVII AND SUCH AS HAS NOT BEEN DEDUCTED OR AFTER DEDUCTIONS, [HAS NOT BEEN PAID ON OR BEFORE T HE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139] [PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TA X HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR, OR HAS BEEN DEDUCT ED DURING THE PREVIOUS YEAR BUT PAID AFTER THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139, SUCH SUM SHALL BE ALLOWED AS A DEDUCTION IN COMPUTING THE INCOME OF THE PREVIOUS YEAR IN WHICH SUCH TAX HAS BEEN PAID.' 6.7. IN HIS BUDGET SPEECH, WHILE PROPOSING THE AF ORESAID AMENDMENTS TO SECTION 40(A)(IA) OF THE ACT, HONBLE FINANCE MINISTER IN P ARA 137 OBSERVED AS UNDER: 'RELAXING THE CURRENT PROVISIONS ON DISALLOWANCE OF EXPENDITURE, I PROPOSE TO ALLOW DEDUCTION OF SUCH EXPENDITURE, IF TAX HAS BEEN DEDUCTED AT ANY TIME DURING THE FINANCIAL YEAR AND PAID BEFORE THE DUE DATE OF FILING THE RETURN. THIS WILL ALLOW MOST DEDUCTORS ADDITIONAL TIME UP TO SEPTEMBER OF THE NEXT FINANCI AL YEAR. AT THE SAME TIME, I PROPOSE TO INCREASE THE INTEREST CHARG ED ON TAX DEDUCTED BUT NOT DEPOSITED BY THE SPECIFIED DATE FR OM 12 PER CENT TO 18 PER CENT PER ANNUM' 6.8 . AS IS EVIDENT FROM THE VARIOUS REPRESENT ATIONS BY THE INDUSTRY IN THEIR PRE-BUDGET MEMORANDA AND THE BUDGET SPEECH OF THE H ONBLE FINANCE MINISTER WHILE PRESENTING THE BUDGET FOR THE FY 2010-11, THE RIGOUR OF THE EXTANT PROVISIONS OF SECTION 40(A)(IA) OF THE ACT WAS REL AXED AND CONSEQUENTLY AMENDMENTS WERE MADE TO REMOVE THE HARDSHIPS AND AV OID UNNECESSARY FINANCIAL IMPLICATIONS IMPOSED ON THE ASSESSEES DUE TO DISALLOWANCE OF GENUINE EXPENDITURE ONLY BECAUSE VICARIOUS LIABILITY OF TA X TO BE DEDUCTED AT SOURCE OR TO BE PAID WITHIN THE STIPULATED TIME UNDER THE RELEVA NT PROVISIONS OF CHAPTER XVII-B OF THE ACT, WAS NOT BEING FULFILLED . FOR A TECHNI CAL DEFAULT OF NON-DEDUCTION OR NON-PAYMENT OF 1% OF THE TDS TO THE CREDIT OF THE GOVERNMENT WITHIN THE STIPULATED TIME , THE PROVISIONS OF SEC. 40A(IA) OF THE ACT MANDATED DISALLOWANCE OF ENTIRE EXPENDITURE, RESULTING IN LEVY OF TAX @ 33.99% BESIDES INTEREST AND PENALTY. IN THESE CIRCUMSTANCES, WE ARE OF THE OPIN ION THAT THE PROVISIONS ACTED TOO HARSH AND WERE CONFISCATORY IN NATURE IN RELA TION TO CLAIM FOR DEDUCTION OF A ITA NO.2191/AHD/2008 16 GENUINE EXPENDITURE, EVEN WHEN SUFFICIENT REMEDY WA S AVAILABLE UNDER CHAPTER XVII-B OF THE ACT FOR ENFORCING RECOVERY OF TDS AM OUNT, INTEREST OR PENALTY THEREON. 6.9 IT IS WELL SETTLED THAT R ETROSPECTIVITY CAN BE INFERRED FROM THE WORDING OF THE STATUTE (MST. RAFIQUENESSA V. LAL BAHADUR CHETR I [1964] AIR 1964 (SC) 1511). ORDINARILY, A STATUTE WILL NOT AFFECT THE RI GHTS WHICH HAD ACCRUED BEFORE THE STATUTE CAME INTO FORCE, UNLESS THERE ARE EXPRESS W ORDS IN THE STATUTE AFFECTING SUCH RIGHTS OR WHERE A RETROSPECTIVE EFFECT TO THE STATUTE IS INEVITABLE BY NECESSARY INTENDMENT OR IMPLICATION VIDE STATE V. P . M. L. SRIVASTAVA [1953] ALJ 339, ETC.. AS OBSERVED BY THE HONBLE APEX COURT IN CIT V. PODAR CEMENT P. LTD. [1997] 5 SCC 482, THE CIRCUMSTANCES UNDER WHICH THE AMENDMENT WAS BROUGHT IN EXISTENCE AND THE CONSEQUENCES OF THE AMENDMENT WILL HAVE TO BE TAKEN CARE OF WHILE DECIDING THE ISSUE AS TO WHETHER THE AMEND MENT WAS CLARIFICATORY OR SUBSTANTIVE IN NATURE AND, WHETHER IT WILL HAVE RET ROSPECTIVE EFFECT OR IT WAS NOT SO. IN PRINCIPLES OF STATUTORY INTERPRETATION, 11TH EDN. 2008, JUSTICE G.P. SINGH HAS STATED THE POSITION REGARDING RETROSPECTIVE OPE RATION OF STATUTES AS FOLLOWS : 'THE PRESUMPTION AGAINST RETROSPECTIVE OPERATION IS NOT APPLICABLE TO DECLARATORY STATUTES. AS STATED IN CRAIES AND APPROVED BY THE S UPREME COURT: FOR MODERN PURPOSES A DECLARATORY ACT MAY BE DEFINED AS AN ACT TO REMOVE DOUBTS EXISTING AS TO THE COMMON LAW, OR THE MEANING OR EFFECT OF A NY STATUTE. SUCH ACTS ARE USUALLY HELD TO BE RETROSPECTIVE. THE USUAL REASON FOR PASSING A DECLARATORY ACT IS TO SET ASIDE WHAT PARLIAMENT DEEMS TO HAVE BEEN A J UDICIAL ERROR, WHETHER IN THE STATEMENT OF THE COMMON LAW OR IN THE INTERPRETATIO N OF STATUTES. USUALLY, IF NOT INVARIABLY, SUCH AN ACT CONTAINS A PREAMBLE, AND AL SO THE WORD 'DECLARED' AS WELL AS THE WORD 'ENACTED'. BUT THE USE OF THE WORDS 'IT IS DECLARED' IS NOT CONCLUSIVE THAT THE ACT IS DECLARATORY FOR THESE WORDS MAY, AT TIMES, BE USED TO INTRODUCE NEW RULES OF LAW AND THE ACT IN THE LATTER CASE WIL L ONLY BE AMENDING THE LAW AND WILL NOT NECESSARILY BE RETROSPECTIVE. IN DETERMINI NG, THEREFORE, THE NATURE OF THE ACT, REGARD MUST BE HAD TO THE SUBSTANCE RATHER THA N TO THE FORM. IF A NEW ACT IS 'TO EXPLAIN' AN EARLIER ACT, IT WOULD BE WITHOUT OB JECT UNLESS CONSTRUED RETROSPECTIVE. AN EXPLANATORY ACT IS GENERALLY PASS ED TO SUPPLY AN OBVIOUS OMISSION OR TO CLEAR UP DOUBTS AS TO THE MEANING OF THE PREVIOUS ACT. IT IS WELL- SETTLED THAT IF A STATUTE IS CURATIVE OR MERELY DEC LARATORY OF THE PREVIOUS LAW RETROSPECTIVE OPERATION IS GENERALLY INTENDED. THE LANGUAGE 'SHALL BE DEEMED ALWAYS TO HAVE MEANT' OR 'SHALL BE DEEMED NEVER TO HAVE INCLUDED' IS DECLARATORY, AND IS IN PLAIN TERMS RETROSPECTIVE. IN THE ABSENCE OF CLEAR WORDS INDICATING THAT THE AMENDING ACT IS DECLARATORY, IT WOULD NOT BE SO CONSTRUED WHEN THE AMENDED PROVISION WAS CLEAR AND UNAMBIGUOUS. AN AMENDING ACT MAY BE PURELY CLARIFICATORY TO CLEAR A MEANING OF A PROVISION OF THE PRINCIPAL ACT WHICH ITA NO.2191/AHD/2008 17 WAS ALREADY IMPLICIT. A CLARIFICATORY AMENDMENT OF THIS NATURE WILL HAVE RETROSPECTIVE EFFECT AND, THEREFORE, IF THE PRINCIP AL ACT WAS EXISTING LAW WHEN THE CONSTITUTION CAME INTO FORCE, THE AMENDING ACT ALSO WILL BE PART OF THE EXISTING LAW .' 6.10 IN ZILE SINGH V. STATE OF HARYANA [20 04] 8 SCC 1, IT WAS OBSERVED BY THE HONBLE APEX COURT AS FOLLOWS: '13. IT IS A CARDINAL PRINCIPLE OF CONSTRUCTION THA T EVERY STATUTE IS PRIMA FACIE PROSPECTIVE UNLESS IT IS EXPRESSLY OR BY NECESSARY IMPLICATION MADE TO HAVE RETROSPECTIVE OPERATION. BUT THE RULE IN GENERAL IS APPLICABLE WHERE THE OBJECT OF THE STATUTE IS TO AFFECT VESTED RIGHTS OR TO IMPOSE NEW BURDENS OR TO IMPAIR EXISTING OBLIGATIONS. UNLESS THERE ARE WORDS IN THE STATUTE SUFFICIENT TO SHOW THE INTENTION OF THE LEGISLATURE TO AFFECT EXISTING RIG HTS, IT IS DEEMED TO BE PROSPECTIVE ONLY-'NOVA CONSTITUTIO FUTURIS FORMAM IMPONERE DEBE T NON PRAETERITIS'-A NEW LAW OUGHT TO REGULATE WHAT IS TO FOLLOW, NOT THE PAST. IT IS NOT NECESSARY THAT AN EXPRESS PROVISION BE MADE TO MAKE A STATUTE RETROSP ECTIVE AND THE PRESUMPTION AGAINST RETROSPECTIVITY MAY BE REBUTTED BY NECESSARY IMPLICATION ESPECIALLY IN A CASE WHERE THE NEW LAW IS MADE TO CURE AN ACKNOWLEDGED EVIL FOR THE BENEFIT OF THE COMMUNITY AS A WHOLE. 14. THE PRESUMPTION AGAINST RETROSPECTIVE OPERATION IS NOT APPLICABLE TO DECLARATORY STATUTES... IN DETERMINING, THEREFORE, THE NATURE OF THE ACT, REGARD, MUST BE HAD TO THE SUBSTANCE RATHER THAN TO THE FOR M. IF A NEW ACT IS 'TO EXPLAIN' AN EARLIER ACT, IT WOULD BE WITHOUT OBJECT UNLESS C ONSTRUED RETROSPECTIVELY. AN EXPLANATORY ACT IS GENERALLY PASSED TO SUPPLY AN OB VIOUS OMISSION OR TO CLEAR UP DOUBTS AS TO THE MEANING OF THE PREVIOUS ACT. IT IS WELL-SETTLED THAT IF A STATUTE IS CURATIVE OR MERELY DECLARATORY OF THE PREVIOUS LAW RETROSPECTIVE OPERATION IS GENERALLY INTENDED .... AN AMENDING ACT MAY BE PURELY DECLARATORY TO C LEAR A MEANING OF A PROVISION OF THE PRINCIPAL ACT WHICH W AS ALREADY IMPLICIT. A CLARIFICATORY AMENDMENT OF THIS NATURE WILL HAVE RE TROSPECTIVE EFFECT. 15. THOUGH RETROSPECTIVITY IS NOT TO BE PRESUMED AND RATHER THERE IS PRESUMPTION AGAINST RETROSPECTIVITY , ACCORDING TO CRAIES (STATUTE LAW, 7TH EDN.), IT IS OPEN FOR THE LEGISLATURE TO ENACT LAWS HAVING RETROSPECTIVE OPERATION. THIS CAN BE ACHIEVED BY EXPRESS ENACTMENT OR BY NECESSAR Y IMPLICATION FROM THE LANGUAGE EMPLOYED. IF IT IS A NECESSARY IMPLICATION FROM THE LANGUAGE EMPLOYED THAT THE LEGISLATURE INTENDED A PARTICULAR SECTION TO HAVE A RETROSPECTIVE OPERATION, THE COURTS WILL GIVE IT SUCH AN OPERATIO N. IN THE ABSENCE OF A RETROSPECTIVE OPERATION HAVING BEEN EXPRESSLY GIVEN , THE COURTS MAY BE CALLED UPON TO CONSTRUE THE PROVISIONS AND ANSWER THE QUES TION WHETHER THE LEGISLATURE HAD SUFFICIENTLY EXPRESSED THAT INTENTION GIVING TH E STATUTE RETROSPECTIVITY . FOUR FACTORS ARE SUGGESTED AS RELEVANT: (I) GENERAL SCOP E AND PURVIEW OF THE STATUTE; (II) THE REMEDY SOUGHT TO BE APPLIED; (III) THE FOR MER STATE OF THE LAW; AND (IV) WHAT IT WAS THE LEGISLATURE CONTEMPLATED. THE RULE AGAIN ST RETROSPECTIVITY DOES NOT EXTEND TO PROTECT FROM THE EFFECT OF A REPEAL, A PR IVILEGE WHICH DID NOT AMOUNT TO ACCRUED RIGHT.' ITA NO.2191/AHD/2008 18 6.11 HONBLE JAMMU AND KASHMIR HIGH COURT IN T HE CASE OF FAIRDEAL MOTORS VS. CIT,101 ITR 687 HELD THAT THOUGH SECTION 271(4 A) OF THE ACT CAME INTO FORCE IN 1965 AFTER THE CLOSE OF THE ASSESSMENT YEAR 1964 -65, THE SECTION WOULD APPLY TO THE ASSESSMENT YEAR 1964-65 ALSO BECAUSE THE AME NDMENT BEING A BENEFICIAL PROVISION IN A PROCEDURAL LAW WOULD APPLY TO PROCEE DINGS PENDING AT THE TIME THE SECTION CAME INTO FORCE. IT IS CLEAR, THEREFORE, TH AT IT IS ONLY A BENEFICIAL PROCEDURAL SECTION THAT COULD BE ATTRIBUTED RETROSPECTIVITY WITHOUT THE LEGISLATURE ITSELF GIVING RETROSPECTIVE OPERATION TO SUCH BENEFICIAL P ROCEDURAL SECTION. IN CHANNAN SINGH, AIR 1970 SC 349, HONBLE SUPREME COURT LAI D DOWN WAS AS FOLLOWS : 'IT IS WELL SETTLED THAT IF A STATUTE IS CURATIVE O R MERELY DECLARES THE PREVIOUS LAW RETROACTIVE OPERATION WOULD BE MORE RIGHTLY ASCRIBE D TO IT THAN THE LEGISLATION WHICH MAY PREJUDICIALLY AFFECT PAST RIGHTS AND TRAN SACTIONS .......' IN THIS CONNECTION, THE FOLLOWING OBSERVATIONS OF THE SUPREME COURT IN THE CASE OF CHETTIAM VEETTIL AMMAD V. TALUK LAND BOARD [1980 ] 1 SCC PAGE 499, AT PAGE 523 ; AIR 1979 SC 1573, 1582, MAY ALSO BE REFERRED TO 'IT HAS ALWAYS BEEN CONSIDERED PERMISSIBLE, A ND EVEN DESIRABLE, FOR COURT, WHILE INTERPRETING A STATUTE, TO TAKE NOTE OF THE H ISTORY OF THE STATUTE AND THE CIRCUMSTANCES IN WHICH IT WAS PASSED OR THE MISCHIE F AT WHICH IF WAS DIRECTED. THE REASON IS THAT THE MEANING WHICH IS TO BE GIVEN TO A STATUTE SHOULD BE SUCH AS WILL CARRY OUT ITS OBJECT . . . . 6.12 IN FACT, AS HAS BEEN STATED IN CRAIES ON ST ATUTE LAW, SEVENTH EDITION, AT PAGE 395, TO EXPLAIN A FORMER STATUTE, THE SUBSEQUE NT STATUTE HAS RELATION BACK TO THE TIME WHEN THE EARLIER ACT WAS PASSED. IN SUCH A CASE, AS THE ACT IS 'DECLARATORY', THE PRESUMPTION AGAINST CONSTRUING I T RETROSPECTIVELY SO AS TO RESPECT VESTED RIGHTS, IS NOT APPLICABLE. IT IS NOT ONLY THAT DECLARATORY OR CLARIFICATORY STATUTES CAN BE GIVEN RETROSPECTIVE E FFECT, IN THEIR DECISION IN THE CASE OF BHARAT SINGH V. MANAGEMENT OF NEW DELHI TUB ERCULOSIS CENTRE (AIR 1986 SC 482), THE HONBLE SUPREME COURT HAS GONE FU RTHER EVEN TO HOLD THAT IN APPROPRIATE CASES, RETROSPECTIVE EFFECT CAN BE GIVE N EVEN TO PROSPECTIVE STATUTE IN CASE THERE ARE NO WORDS IN THE SECTION TO COMPEL THE COURTS TO HOLD THAT IT CANNOT OPERATE RETROSPECTIVELY. THIS WAS SO DONE BY THE HONBLE APEX COURT ON THE BASIS THAT ONCE THE INTENTION OF THE LEGISLATUR E IS DISCERNED IN THE CONTEXT OF THE BACKGROUND IN WHICH A PARTICULAR SECTION IS ENA CTED, THE COURTS HAVE ITA NO.2191/AHD/2008 19 NECESSARILY TO GIVE A PURPOSEFUL OR FUNCTIONAL INTE RPRETATION. A CONSTRUCTION THAT PROMOTES THE PURPOSE OF THE LEGISLATION SHOULD BE P REFERRED TO A LITERAL CONSTRUCTION. IN THE INSTANT CASE, WE FIND THAT TH E INTENTION OF THE LEGISLATURE IN ENACTING SECTION 40(A)(IA) WAS TO AUGMENT COMPLIAN CE OF PROVISIONS RELATING TO TDS UNDER CHAPTER XVII-B OF THE ACT AND NO MORE. HENCE , WE ARE OF THE OPINION THAT THE AMENDMENT BY THE FINANCE ACT,2010 IN T HE PROVISIONS OF SEC. 40A(IA), BEING ADMITTEDLY BENEFICIAL AND ONLY IN RELAXATION OF THE PROVISIONS ORIGINALLY ENACTED, AS WAS THE CASE WITH THE EARLIER AMENDMEN T BY THE FINANCE ACT, 2008 , IS CURATIVE IN NATURE AND THUS, HAS ALSO TO BE GI VEN RETROSPECTIVE EFFECT W.E.F 1.4.2005. WHERE A SECTION OF A STATUTE IS AMENDED, THE ORIGINAL CEASES TO EXIST AND THE NEW SECTION SUPERSEDES IT AND BECOMES PART OF THE LAW JUST AS IF THE AMENDMENT HAS ALWAYS BEEN THERE. (VIDE CRAWFORD ON STATUTORY CONSTRUCTION- INTERPRETATION OF LAWS, PAGES 110-111). 'AN AMENDING ACT IS NOT REGARDED AS AN INDEPENDENT STATUTE. THE STATUTE IN ITS OLD FORM IS SUPERSEDED BY THE STATUTE IN ITS AMENDE D FORM, THE AMENDED SECTION OF THE STATUTE TAKING THE PLACE OF THE ORIGINAL SEC TION FOR ALL INTENTS AND PURPOSES AS IF THE AMENDMENT HAD ALWAYS BEEN THERE. THE AMEN DMENT SHOULD BE CONSIDERED AS IF EMBODIED IN THE WHOLE STATUTE OF W HICH IT HAS BECOME A PART. UNLESS A CONTRARY INTENT IS CLEARLY INDICATED, THE AMENDED STATUTE IS REGARDED AS IF THE ORIGINAL STATUTE HAD BEEN REPEALED AND THE WHOL E STATUTE RE-ENACTED WITH THE AMENDMENT. ' 6.13 IN THIS CONTEXT, HONBLE BOSE J. HAS STATED IN THE DECISION (P. 326 OF AIR 1952 SC) OF THE SUPREME COURT IN SHAMRAO V. DI STRICT MAGISTRATE, THANA THAT THE CONSTRUCTION OF AN ACT WHICH HAS BEEN AMENDED IS NOW GOVERNED BY TECHNICAL RULES AND WE MUST FIRST BE CLEAR REGARDIN G THE PROPER CANONS OF CONSTRUCTION. THE RULE IS THAT WHEN A SUBSEQUENT AC T AMENDS AN EARLIER ONE IN SUCH A WAY AS TO INCORPORATE ITSELF, OR A PART OF I TSELF, INTO THE EARLIER ACT, THEN THE EARLIER ACT MUST THEREAFTER BE READ AND CONSTRU ED (EXCEPT WHERE THAT WOULD LEAD TO A REPUGNANCY, INCONSISTENCY OR ABSURD ITY) AS IF THE ALTERED WORDS HAD BEEN WRITTEN INTO THE EARLIER ACT WITH PE N AND INK AND THE OLD WORDS SCORED OUT SO THAT THEREAFTER THERE IS NO NEED TO R EFER TO THE AMENDING ACT AT ALL. 6.14 THE AMENDMENTS MADE IN THE EXISTING PROVISIONS OF A SECTION JUSTLY AND FOR THE BENEFIT OF ASSESSEES AND THE COMMUNITY AS A WHOLE, AS IN THE INSTANT CASE, MAY RELATE TO A TIME ANTECEDENT TO THEIR COMM ENCEMENT. THE PRESUMPTION ITA NO.2191/AHD/2008 20 AGAINST RETROSPECTIVITY MAY IN SUCH CASES BE REBUTT ED BY NECESSARY IMPLICATION FROM THE LANGUAGE EMPLOYED IN THE STATUTE. IT CANNO T BE SAID TO BE AN INVARIABLE RULE THAT A STATUTE COULD NOT BE RETROSPECTIVE UNLE SS SO EXPRESSED IN THE VERY TERMS OF THE SECTION WHICH HAD TO BE CONSTRUED. THE QUESTION IS WHETHER, ON A PROPER CONSTRUCTION, THE LEGISLATURE MAY BE SAID TO HAVE SO EXPRESSED ITS INTENTION . EVEN THOUGH THE AMENDMENT TO THE PROVISIONS OF SECT ION 40(A)(IA) BY THE FINANCE ACT, 2008 IN ORDER TO MITIGATE THE HARD SHIPS CAUSED TO THE ASSESSEES, WERE APPLICABLE RETROSPECTIVELY FROM 1.4.2005, THE SUBSEQUENT AMENDMENTS BY THE FINANCE ACT 2010 , THOUGH STATED TO BE IN REL AXATION OF THE CURRENT PROVISIONS AND THUS, BENEFICIAL TO THE ASSESSEES , WERE MADE APPLICABLE W.E.F. 1.4.2010. WE FIND THAT IN THE CASE OF ALOM EXTRUSIO NS LTD. (SUPRA), A SIMILAR ISSUE OF RETROSPECTIVITY HAD COME UP FOR CONSIDERATION BE FORE THE HON'BLE SUPREME COURT IN THE CONTEXT OF PROVISIONS OF SECTION 43B O F THE ACT , WHICH WAS AMENDED BY THE FINANCE ACT, 2003 W.E.F. 1.4.2004 AND THE AS SESSEES SOUGHT RELIEF RELYING ON THE SAID AMENDMENTS BY CONTENDING THAT THE SAME OPERATED RETROSPECTIVELY W.E.F 1.4.1988. HON'BLE SUPREME COURT IN THIS CONT EXT TOOK NOTE OF THEIR EARLIER DECISION IN THE CASE OF ALLIED MOTORS (P) LTD., 224 ITR 677 WHEREIN IT WAS HELD THAT WHEN A PROVISO IN A SECTION IS INSERTED TO REM EDY UNINTENDED CONSEQUENCES AND TO MAKE THE SECTION WORKABLE, THE PROVISO SUPPL YING AN OBVIOUS OMISSION THEREIN IS REQUIRED TO BE READ RETROSPECTIVELY IN O RDER TO GIVE EFFECT TO THE SECTION AS A WHOLE. THE FIRST PROVISO TO SECTION 43B OF THE ACT HAVING BEEN HELD TO BE CURATIVE IN NATURE AND HENCE RETROSPECTIVE IN OPERA TION W.E.F. 1ST APRIL, 1988 , THE HON'BLE SUPREME COURT OBSERVED THAT THE JUDGMENT I N THE CASE OF ALLIED MOTORS (P) LTD. (SUPRA) BEING A BINDING PRECEDENT, AMENDME NT TO SECTION 43B OF THE FINANCE ACT 2003 W.E.F. 1.4.2004 WAS RETROSPECTIVE IN OPERATION. THE LD. DR REPEATEDLY MENTIONED IN THEIR WRITTEN SUBMISSIONS THAT THE SAID DECISIONS IN ALOM EXTRUSIONS LTD. (SUPRA) AND ALLIED MOTORS (P) LTD. (SUPRA), HAVING BEEN RENDERED IN THE CONTEXT OF PROVISIONS OF SEC. 43B OF THE ACT ARE NOT APPLICABLE TO THE FACTS OF THE INSTANT CASE, SINCE THERE IS NO SU CH HARDSHIP OR LOSS OF DEDUCTION FOR ALL TIMES IN TERMS OF PROVISIONS OF SEC. 40A(IA ) OF THE ACT. WE ARE NOT IMPRESSED BY THIS PLEA SINCE EACH DECISION IS RENDE RED ON FACTS OF ITS OWN. THE HISTORY OF LEGISLATION AND MANNER IN WHICH THE AME NDMENTS WERE MADE TO THE PROVISIONS OF SEC. 43B OF THE ACT IN THE FACE OF DI FFICULTIES EXPRESSED BY THE ITA NO.2191/AHD/2008 21 ASSESSEES ,IS PARALLEL TO THE HISTORY OF LEGISLATI ON OF THE PROVISIONS OF SEC. 40A(IA) OF THE ACT, AS IS APPARENT FROM THE AFORES AID AMENDMENTS. ACCORDINGLY, PRECEDENTS RELATING TO PROVISIONS OF SEC. 43B OF TH E ACT WERE CITED BY THE ASSESSEE IN SUPPORT. IN ALLIED MOTORS P LTD.(SUPRA) , IT WAS HELD THAT WHEN A PROVISO INSERTED TO REMEDY UNINTENDED CONSEQUENCES AND TO MAKE SECTION WORKABLE , A PROVISO WHICH SUPPLIES OMISSION IN TH E SECTION AND WHICH PROVISO IS REQUIRED TO BE READ IN TO THE SECTION TO GIVE THE S ECTION A REASONABLE INTERPRETATION, IT COULD BE READ AS RETROSPECTIVE I N OPERATION ,PARTICULARLY TO GIVE EFFECT TO THE SECTION AS A WHOLE. LIKEWISE, IN ALOM EXTRUSIONS LTD.(SUPRA) THE OMISSION OF THE SECOND PROVISO TO SECTION 43B OF TH E ACT BY THE FINANCE AC,2003 WAS HELD TO OPERATE RETROSPECTIVELY W.E.F 1.4.1988 , THE AMENDMENT BEING CURATIVE IN NATURE. IN THE INSTANT CASE ALSO, AS OBSERVED BY THE HONBLE FM IN HIS BUDGET SPEECH WHILE PRESENTING THE BUDGET FOR T HE FY 2010-11, THE EXTANT PROVISIONS OF SEC. 40A(IA) WERE RELAXED WITH THE AM ENDMENT IN THE SECTION BY PERMITTING DEDUCTION OF THE STIPULATED EXPENDITURE IN THE EVENT TAX DEDUCTED AT SOURCE WAS PAID ON OR BEFORE THE DUE DATE OF FILI NG OF RETURN. IN TERMS OF THE TESTS LAID DOWN BY THE HONBLE APEX COURT IN THE CASE OF ZILE SINGH(SUPRA), CONSIDERING THE SCOPE OF THE EXTANT PROVISIONS OF T HE SEC. 40A(IA) OF THE ACT IN ORDER TO AUGMENT COMPLIANCE OF TDS PROVISIONS FALL ING IN CHAPTER XVII-B OF THE ACT AND THE EFFECT OF SUBSEQUENT AMENDMENT MADE T HERE TO BY THE FINANCE ACT,2008 RETROSPECTIVELY, WE ARE OF THE OPINION TH AT AMENDMENT MADE BY THE FINANCE ACT,2010 IN ORDER TO REMOVE HARDSHIPS AND TO RELAX THE PROVISIONS IS APPLICABLE RETROSPECTIVELY W.E.F 1.4.2005. WE ARE NOT DISPUTING THE BROAD PROPOSITIONS OF LAW IN VARIOUS DECISIONS RELIED U PON BY THE LD. DR, WHICH NOW WE CONSIDER. IN THE CASE OF SMT. TAULATA SHYAM & OTH ERS(SUPRA), THE ISSUE OF INTERPRETATION OF PROVISIONS OF SEC. 2(6A)(E) OF 1922 ACT WAS INVOLVED . IN PATIL VIJAY KUMAR & OTHERS(SUPRA),THE QUESTION OF INTERPR ETATION OF PROVISIONS OF SEC. . 10(13) &S. 17(3)(II) OF THE ACT WAS CONSIDERED WHIL E IN PADMASUNDRARAO(DECD.) (SUPRA) THE PROVISIONS OF S. 4(1) , S. 6(1) PROV. (I) EXPLN. 1 OF THE LAND A CQUISITION ACT, 1894 WERE REQUIRED TO BE INTERPRETED. LIKEWIS E IN PRAKASHNATH KHANNA(SUPRA), THE ISSUE RELATING TO INTERPRETATION OF PROVISIONS OF S . 80 , S. 139(1) , S. 139(2) , S. 139(4) , S. 276CC WAS CONS IDERED WHILE IN IPCA LABORATORY(SUPRA) THE QUESTION OF INTERPRETATION O F PROVISIONS OF SEC. 80HHC ITA NO.2191/AHD/2008 22 WAS INVOLVED. IN NONE OF THESE DECISIONS, THE QUES TION OF RETROSPECTIVE APPLICABILITY OF THE RELEVANT PROVISIONS WAS CONSID ERED. THE LD. DR HAS NOT EXPLAINED AS TO HOW THESE DECISIONS COME TO THE RES CUE OF THE REVENUE IN THE INSTANT CASE. 6.141 AS REGARDS DECISION IN ZAM ZAM TANNERS(SUP RA) RELIED ON BY THE LD. DR , THE VIEW TAKEN IN THE SAID DECISION REGARDING APPLI CABILITY OF EXPLANATION 4 TO SEC. 271(1)(C) OF THE ACT WITH PROSPECTIVE EFFECT HAS B EEN REVERSED BY THE HONBLE APEX COURT IN CIT VS. GOLD COIN HEALTH FOOD P LTD. , HOLDING THAT EVEN DURING THE PERIOD BETWEEN APRIL 1, 1976 AND APRIL 1, 2003, THE POSITION WAS THAT THE PENALTY WAS LEVIABLE IN A CASE WHERE ADDITION OF C ONCEALED INCOME REDUCED THE RETURNED LOSS. 6.142 IN CASE OF BERGER PAINTS INDIA LTD.(SUP RA), THE QUESTION OF VALUATION OF CLOSING STOCK IN THE AY 1988-89 WAS REFERRED TO THE HONBLE HIGH COURT. THE REVENUE TRIED TO ARGUE BEFORE THE HONBLE HIGH COU RT THAT THIS QUESTION SHOULD BE ANSWERED IN FAVOUR OF THE REVENUE BECAUSE OF THE DECLARATORY PROVISIONS OF SECTION 145A OF THE ACT . HONBLE HIGH COURT WHILE OBSERVING THAT THIS NEW ARGUMENT WAS NOT ADVANCED BEFORE THE TRIBUNAL , DID NOT AGREE WITH THE ARGUMENTS OF THE REVENUE ON THAT GROUND IT RAREL Y HAPPENS THAT A PROVISION OF THE INCOME-TAX ACT IS DECLARATORY OF THE LAW. THIS ACT IS ONE OF THE MOST CATEGORIC BRANCHES OF LAW AND ITS CHANGES ARE MOSTLY TO BE GA THERED FROM THE EXPRESS WORDS EMPLOYED TO FURTHER THE CURRENT FISCAL POLICY OF THE GOVERNMENT. AS IS EVIDENT ,IN THIS CASE ,THE REVENUE SOUGHT TO APPL Y A NEW PROVISION INTRODUCED IN THE ACT MORE THAN TEN YEARS AFTER THE END OF THE R ELEVANT ASSESSMENT YEAR WITH RETROSPECTIVE EFFECT. NO WHERE THE ISSUE OF APPLIC ABILITY OF AN AMENDMENT TO AN EXISTING PROVISION WAS INVOLVED. THE LD. DR HAS NOT EXPLAINED AS TO HOW THIS CASE ASSISTS THE REVENUE. 6.15 IN NUTSHELL, NONE OF THE AFORESAID DECISIONS RELIED UPON BY THE LD. DR SUPPORT THE CASE OF THE REVENUE THAT AMENDMENTS MA DE BY THE FINANCE ACT,2010 TO SEC. 40A(IA) OF THE ACT W.E.F 1.4.2010 ARE APPLICABLE PROSPECTIVELY ALONE. ITA NO.2191/AHD/2008 23 7. IN VIEW OF THE FOREGOING, ESPECIALLY WHEN TH E PURPOSE BEHIND ENACTMENT OF PROVISIONS OF SEC. 40A(IA) OF THE ACT WAS MERELY TO AUGMENT COMPLIANCE OF PROVISIONS RELATING TO TDS IN CHAPTER XVII-B OF THE ACT AND NO MORE , WE REITERATE THAT AMENDMENTS MADE TO THE PROVISIONS O F SECTION 40A(IA) OF THE ACT BY THE FINANCE ACT,2010, AS WAS THE CASE WITH THE AMEN DMENTS MADE BY THE FINANCE ACT,2008 , HAVING BEEN BROUGHT IN TO RELAX THE PROVISIONS OF THE EXTANT SECTION SO AS TO GIVE A REASONABLE INTERPRETATION T O THE SECTION AS A WHOLE, BEING CURATIVE IN NATURE, WOULD APPLY WITH RETROSPECTIVE EFFECT FROM 1.4.2005. AS , WE HAVE ALREADY STATED, RETROSPECTIVITY MAY RESULT NOT ONLY FROM THE EXPRESS LANGUAGE EMPLOYED IN A STATUTE, BUT ALSO BY NECESSA RY IMPLICATION. THIS QUESTION HAS TO BE ANSWERED IN EACH CASE HAVING REGARD TO TH E LANGUAGE USED, THE NATURE OF THE ENACTMENT, VIZ., WHETHER IT IS PROCEDURAL, D ECLARATORY, REMEDIAL, OR OTHERWISE, AND ALSO KEEPING IN VIEW THE OBJECT SOUG HT TO BE ACHIEVED AND THE MISCHIEF SOUGHT TO BE ERADICATED BY THE ENACTMENT. AFTER ALL, THE GOAL OF EVERY RULE OF INTERPRETATION IS TO ASCERTAIN AND GIVE EFF ECT TO THE INTENTION OF THE LEGISLATURE. THE AMENDMENT CONCERNED HEREIN TO PRO VISIONS OF SEC. 40A(IA) OF THE ACT IS REMEDIAL AND CURATIVE IN NATURE. EVEN OTHERWISE, THE AFORESAID VIEW WHICH WE HAVE TAKEN, IS SUPPORTED BY TWO RECENT DEC ISIONS OF CO-ORDINATE BENCHES OF THE ITAT . FIRST SUCH DECISION DATED 22. 9.2010 IS IN THE CASE OF BANSAL PARIVAHAN (INDIA) P LTD. VS. ITO IN ITA NO. 2355/MUM/2010 FOR THE AY 2006-07AND THE OTHER DATED 3.12.2010 IN THE CASE O F SHRI KANUBHAI RAMJIBHAI MAKWANA IN ITA NO.3983/AHD./2008 FOR THE AY 2005-06 . IT MAY BE POINTED OUT THAT REVENUE HAVE NOT PLACED BEFORE US ANY CONTRARY DECISION. IN THE LIGHT OF AFORESAID DISCUSSION , PARTICULARLY WHEN IN THE CA SE BEFORE US, INDISPUTABLY TAX DEDUCTED AT SOURCE FROM THE PAYMENTS ON ACCOUNT OF TRANSPORTATION CHARGES FOR THE FY ENDING 31.3.2005 HAS BEEN PAID TO THE CREDIT OF GOVERNMENT BEFORE THE DUE DATE OF FILING OF RETURN, DISALLOWANCE UPHELD BY THE LD. CIT(A) IS DELETED. THAT BEING THE POSITION, GROUND NOS. 1 & 2 IN THE APPEAL ARE ALLOWED. 8. GROUND NO.3 RELATES TO DISALLOWANCE ON ACCOUNT O F DEPRECIATION. ON VERIFICATION OF DEPRECIATION CHART FURNISHED BY THE ASSESSEE ALONG WITH RETURN OF INCOME, THE AO NOTICE D THAT THOUGH THE ASSESSEE PURCHASED ONE SAFARI CAR FOR A CONSID ERATION OF ITA NO.2191/AHD/2008 24 RS.7,45,267/- AFTER SEPTEMBER 2004, CLAIM FOR DEPRE CIATION WAS NOT REDUCED BY 50% OF THE RATES PRESCRIBED, THE ASSET H AVING BEEN PUT TO USE FOR LESS THAN 180 DAYS. SINCE THE ASSESSEE C LAIMED DEPRECIATION OF RS.1,39,612/- FOR THE ENTIRE YEAR AND DESPITE SHOWCAUSE, THE ASSESSEE DID NOT FURNISH ANY REPLY, THE AO DISALLOWED THE CLAIM FOR EXCESS DEPRECIATION OF RS. 69,806/-. 9. ON APPEAL, THE LD. CIT(A ) UPHELD THE FINDINGS O F THE AO, THE ASSESSEE HAVING NOT PRESSED THEIR GROUND BEFORE HIM . 10. THE ASSESSEE IS NOW IN APPEAL BEFORE US. THE L D. AR ON BEHALF OF THE ASSESSEE DID NOT MAKE ANY SUBMISSIONS BEFORE US ON THIS GROUND NOR POINTED OUT ANY INFIRMITY IN THE FI NDINGS OF THE LD. CIT(A) WHILE THE ISSUE RAISED BEFORE THE LD. CIT(A) HAVING NOT BEEN PRESSED, WE HAVE NO HESITATION IN REJECTING THE GRO UND RAISED BY THE ASSESSEE. THEREFORE, GROUND NO.3 IN THE APPEAL IS D ISMISSED. 11. GROUND NO.4 RELATES CONFIRMATION OF ADHOC DISA LLOWANCE OF RS.50,000/- MADE BY AO OUT OF TYRE EXPENSES. THE A O NOTICED ON VERIFICATION OF DETAILS OF OF RS,8,14,435/- TOWARDS TYRE EXPENSES THAT CERTAIN VOUCHERS WERE NOT SUPPORTED BY THE VALID BI LLS OR INVOICE. DESPITE SHOWCAUSE, PROPOSING A DISALLOWANCE OF RS.5 0,000/- OUT OF THESE EXPENSES, THE ASSESSEE DID NOT FURNISH ANY RE PLY. ACCORDINGLY, THE AO DISALLOWED AN AMOUNT OF RS. 50,000/-. 12. ON APPEAL, THE ASSESSEE DID NOT POINT OUT ANY I NFIRMITY IN THE FINDINGS OF THE AO. THEREFORE, THE LEARNED CIT(A) S USTAINED THE DISALLOWANCE. 13. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINS T THE AFORESAID FINDINGS OF THE LD. CIT(A).THE LEARNED AR ON BEHALF OF THE ASSESSEE MERELY REITERATED THEIR SUBMISSIONS BEFORE THE AO WHILE THE LEARNED DR SUPPORTED THE ORDERS OF THE AO AND THE C IT(A). ITA NO.2191/AHD/2008 25 14. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. SINCE THE LD. AR ON BEHALF OF THE ASSESS EE DID NOT PLACE ANY MATERIAL BEFORE US SO AS TO ENABLE US TO INTERF ERE WITH THE FINDINGS OF THE LD. CIT(A), WE HAVE NO HESITATION IN UPHOLDING HIS FINDINGS. THEREFORE, GROUND NO. 4 IN THE APPEAL IS DISMISSED. 15. GROUND NO.5 RELATES TO INITIATION OF PENALTY PR OCEEDINGS U/S 271(1)(C) OF THE ACT. SINCE NO APPEAL IS PROVIDED A GAINST MERE INITIATION OF PENALTY PROCEEDINGS, ACCORDINGLY, THIS GROUND IS DISMISSED. 16. GROUND NO.6 RELATES TO LEVY OF INTEREST U/S 234 B, 234C AND 234D OF THE ACT. THE LD. AR ON BEHALF OF THE ASSESS EE DID NOT MAKE ANY SUBMISSIONS ON THIS GROUND. THE LEVY OF INTEREST U /S 234B & 234C OF THE ACT BEING MANDATORY [COMMISSIONER OF INCOME TAX. VS ANJ UM M. H. GHASWALA AND OTHERS,252 ITR 1(SC), AFFIRMED BY HON'BLE APEX COUR T IN THE CASE OF CIT V. HINDUSTAN BULK CARRIERS [2003] 259 ITR 449 (SC) AND IN THE CASE OF CIT V. SANT RAM MANGAT RAM JEWELLERS [2003] 264 ITR 564 (SC) ], THESE GROUNDS ARE DISMISSED. HOWEVER, THE AO MAY ALLOW CONSEQUENTIAL RELIEF ,IF ANY, WHILE GIVING EFFECT TO THIS ORDER. AS REGARDS THE ISSUE OF CHARG ING OF INTEREST U/S 234D OF THE ACT, WE FIND THAT THIS ISSUE IS SQUARE LY COVERED BY THE DECISION OF THE ITAT SPECIAL BENCH IN THE CASE OF ITO V EKTA PROMOTERS (P) LTD. (2008) 113 ITD 719 (DELHI) (SB) , IN WHICH THE SPECIAL BENCH OF THIS TRIBUNAL HAS CLEARLY HELD THA T SECTION 234D WHICH HAS BEEN BROUGHT ON THE STATUTE FROM 01-06-20 03 CANNOT BE APPLIED TO THE ASSESSMENT YEAR 2003-04 AND EARLIER YEARS BUT IT WILL HAVE APPLICATION ONLY WITH EFFECT FROM ASSESSMENT Y EAR 2004-05. IN THE LIGHT OF VIEW TAKEN THE AFORESAID DECISION OF T HE SPECIAL BENCH OF ITAT AND NO CONTRARY DECISION HAVING BEEN BROUGHT T O OUR NOTICE, WE HAVE NO ALTERNATIVE BUT TO REJECT THE GROUND NO.6 IN THE APPEAL. 17. NO ADDITIONAL GROUND HAVING BEEN RAISED IN TERM S OF THE RESIDUARY GROUND, ACCORDINGLY, THIS GROUND IS DISMI SSED. ITA NO.2191/AHD/2008 26 18. IN THE RESULT, APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT TODAY ON 16-12-2010 SD/- SD/- (MAHAVIR SINGH) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATE : 16-12-2010 COPY OF THE ORDER FORWARDED TO: 1. SHRI KULWANTSINGH RANDHAWA, PROP. RADIANT TANKER S, 214, GIDC, RANOLI, DIST. VADODARA 2. ITO, WARD-2(1), BARODA 3. CIT CONCERNED 4. CIT(A)-II, BARODA 5. DR, BENCH-B, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD