M/s. Navnirman Infrastructure, Ahmedabad V. The Dy.CIT.,(OSD) Circle-9, Ahmedabad

ITA 2941/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6619 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 12-05-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 29-10-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: BHAVNESH KULSHRESTHA
• Assessee Lawyers: TUSHAR HIMANI
• Keywords: Opportunity of being heard; Retrospective amendment; Non-deduction of tax; TDS; Set aside
• Section: 43B; 40(a)(ia); 201; 191; 139(1); 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND A. K. GARODIA , AM) ITA NO.2941/AHD/2009 A. Y.: 2005-06 M/S. NAVNIRMAN INFRASTRUCTURE, 105 NIRMAN HOUSE, OPP. GUJARAT VIDHYAPITH GROUND, USMANPURA, AHMEDABAD VS THE D. C. I. T., (OSD), CIRCLE-9, AAYAKAR BHAVAN, AHMEDABAD PA NO. AACFN 8023A (APPELLANT) (RESPONDENT) APPELLANT BY SHRI TUSHAR HIMANI, AR RESPONDENT BY SHRI BHAVNESH KULSHRESTHA, SR. DR O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-XV , AHMEDABAD DATED 30-07-2009 FOR ASSESSMENT YEAR 2005-06. 2. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES AND PERUSED THE FINDINGS OF THE AUTHORITIES BELOW. 3. ON GROUNDS NO.1 TO 6 OF THE APPEAL, THE ASSESSEE CHALLENGED THE DISALLOWANCE OF THE EXPENDITURE OF RS.96,78,672 /- U/S 40 (A) (IA) OF THE IT ACT. THIS ADDITION HAS BEEN MADE AS PER T HE DETAILS GIVEN IN PARA 4 OF THE ASSESSMENT ORDER. ACCORDING TO THE AO THE ASSESSEE HAD MADE PAYMENTS TO THE SUB CONTRACTORS THROUGHOUT THE YEAR RIGHT ITA NO.2941AHD/2009 M/S. NAVNIRMAN INFRASTRUCTURE VS DCIT (OSD), CIR-9, AHMEDABAD 2 FROM APRIL, 2004 TO FEBRUARY, 2005, THAT AFTER CONS IDERING AMENDMENT BROUGHT IN SECTION 40 (A) (IA) OF THE IT ACT , THE ASSESSEE WAS LIABLE TO DEDUCT TAX AND PAY THE SAME TO THE GOVERNMENT ACCOU NT BEFORE THE END OF THE FINANCIAL YEAR I.E. 31-03-2005, BUT TDS WAS DEPOSITED IN THE GOVERNMENT ACCOUNT ONLY ON 30-06-2005 AND THERE FORE, THE ADDITION WAS MADE BY THE AO. DURING THE APPELLATE P ROCEEDINGS BEFORE THE LEARNED CIT(A), THE ASSESSEE FURNISHED R ELEVANT INFORMATION IN THE FORMAT DESIRED FROM IT, GIVING A MOUNTS, NAMES OF THE PARTIES, DATE OF CREDIT OR PAYMENT WHICHEVER IS EARLIER, DATE OF TDS AND DATE OF DEPOSIT OF TDS IN GOVERNMENT ACCOUN T WHICH IS ANNEXED AS ANNEXURE -1 ALONG WITH THE APPELLATE ORD ER. THE LEARNED CIT(A) CONSIDERING THE SUBMISSIONS OF THE PARTIES F OUND THAT WHERE THE PAYMENTS/CREDITS HAVE BEEN MADE IN THE PERIOD FROM APRIL TO FEBRUARY BY THE ASSESSEE, TDS SHOULD HAVE BEEN D EDUCTED AND DEPOSITED TO THE GOVERNMENT ACCOUNT BY MARCH, 2005, BUT IT HAS NOT BEEN DONE SO, THEREFORE, ADDITION OF THE AMOUNT OF RS. 96,78,672/- WAS UPHELD IN RESPECT OF THE DATE OF CREDIT OR PAYM ENT IN BETWEEN APRIL TO FEBRUARY. THE ASSESSEE WAS GRANTED BENEFIT OF RS.21,32,195/- WHICH WERE CREDITED IN THE LAST MONT H I.E. MARCH AND THE PAYMENT IS MADE BEFORE THE DUE DATE OF FILING O F THE RETURN. THE AO WAS ACCORDINGLY DIRECTED TO DELETE THE ADDITION OF RS.21,32,195/- OUT OF TOTAL ADDITION MADE BY THE AO IN A SUM OF RS .1,18,10,867/- WHICH WAS AS PER ANNEXURE 1 WITH THE APPELLATE ORD ER WITH REGARD TO PAYMENT OR THE CREDITS MADE BY THE ASSESSEE IN THE MONTH OF MARCH,2005. THE LEARNED CIT(A) ALSO NOTED THAT AS P ER THE AMENDED PROVISIONS OF SECTION 40(A) (IA) OF THE IT ACT TDS ON THE SAME SHOULD BE DEPOSITED IN THE GOVERNMENT ACCOUNT BEFORE THE D UE DATE OF FILING ITA NO.2941AHD/2009 M/S. NAVNIRMAN INFRASTRUCTURE VS DCIT (OSD), CIR-9, AHMEDABAD 3 OF THE RETURN. IN THIS CASE TDS WAS DEPOSITED IN TH E GOVERNMENT ACCOUNT ON 30-06-2005 I.E. MUCH BEFORE FILING OF TH E RETURN, THEREFORE, SUCH DEDUCTION WAS ALLOWED. THE AO WAS DIRECTED TO DELETE THE ADDITION OF RS.21,32,195/- OUT OF TOTAL ADDITION OF RS.1,18,10,867/- MADE U/S 40(A) (IA) OF THE IT ACT. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE PROVISIONS OF SECTION 40(A) (IA) OF THE IT ACT HAVE BEEN FURTHER AMENDED BY FINANCE ACT, 2010 AND THAT DEDUCTION SHA LL NOT BE ALLOWED TO THE ASSESSEE IF THE AMOUNT SO DEDUCTED H AS NOT BEEN PAID ON OR BEFORE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139 OF THE IT ACT. HE HAS SUBMITTED THAT ITAT AHMEDABAD BE NCH IN THE CASE OF SHRI KANUBHAI RAMJIBHAI MAKWANA VS ITO IN I TA NO.3983/AHD/2008 VIDE ORDER DATED 03-12-2010 HELD T HAT THE ABOVE AMENDMENT SHALL HAVE TO BE TREATED AS RETROSPECTIVE WITH EFFECT FROM 01-04-2005. COPY OF THE ORDER IS PLACED ON RECORD A ND GIVEN TO THE LEARNED DR. HE HAS, THEREFORE, SUBMITTED THAT ADDIT ION IS LIABLE TO BE DELETED. THE LEARNED DR RELIED UPON THE ORDERS OF T HE AUTHORITIES BELOW. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. ITAT A HMEDABAD BENCH IN THE CASE OF SHRI KANUBHAI RAMJIBHAI MAKWAN A VS ITO IN ITA NO.3983/AHD/2008 VIDE ORDER DATED 03-12-2010 CO NSIDERING THE AMENDMENT IN THE PROVISIONS OF SECTION 40(A) (IA) O F THE IT ACT HELD IN PARA 8 TO 13 AS UNDER: 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND ITA NO.2941AHD/2009 M/S. NAVNIRMAN INFRASTRUCTURE VS DCIT (OSD), CIR-9, AHMEDABAD 4 THAT THE CIT(A) HAS DELETED THE ADDITION TO THE EXT ENT OF RS.53,02,227/- AS THE PAYMENTS RELATES TO THE MONTH OF MAR AND THE TDS WAS DEDUCTED IN MAR, 04 AND PAID I N 19-07-2005 I.E. BEFORE THE DUE DATE OF FILING OF RE TURN OF INCOME U/S.139(1) OF THE ACT. BALANCE, THE CIT(A) CONFIRMED AS PAYMENTS RELATES TO APRL04 TO FEB05 ON WHICH THE TDS WAS DEDUCTED FROM NOV04 TO FEB05 AN D TDS WAS PAID ON 19-07-2005. THE LD. COUNSEL FOR THE ASSESSEE, SHRI M.G. PATEL STATED THAT THE PROVISION S AS SUBSTITUTED BY THE FINANCE ACT, 2010 THAT THE TDS DEDUCTED IS PAID ON OR BEFORE THE DUE DATE OF FILIN G OF RETURN OF INCOME AS SPECIFIED IN SECTION 139(1) OF THE ACT, THE EXPENSES RELATING TO SUCH TDS ARE ELIGIBLE FOR DEDUCTION AND NO DISALLOWANCE CAN BE MADE BY INVOKI NG THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. THE LD COUNSEL FOR THE ASSESSEE ARGUED THAT THIS PROVISION AS AMENDED BY FINANCE ACT, 2010 IS CURATIVE IN NATURE AND RETROSPECTIVE IN OPERATION. HE RELIED ON THE DECISI ON OF THE HONBLE APEX COURT IN THE CASE OF ALLIED MOTORS (P) LTD. V. CIT (1997) 201 ITR 677 (SC) AND ALSO ON CIT V. ALO M EXTRUSIONS LTD. (2009) 319 ITR 306 (SC). ON THE OTH ER HAND, LD. SR-DR, SHRI K. M. MADHUSUDAN ARGUED THAT THE AMENDMENT BROUGHT OUT BY THE FINANCE ACT, 2010 IS N OT CURATIVE IN NATURE AND HENCE NOT RETROSPECTIVE. HE STATED THAT THE LEGISLATURE IN ITS WISDOM HAS GIVEN A DATE REGARDING THE APPLICABILITY OF THIS PROVISION. HE S TATED THAT THE SUBSTITUTION HAS BEEN DONE BY THE FINANCE ACT, 2010 W.E.F. 1-4-2010, THIS MEANS THAT THIS AMENDED PROVI SION WILL APPLY FOR AND FROM ASSESSMENT YEAR 2010-11 AND NOT TO EARLIER ASSESSMENT YEARS. ACCORDINGLY, HE URGED THE BENCH TO CONFIRM THE ORDERS OF THE LOWER AUTHORITIE S. 9. NOW THE QUESTION ARISES IS, WHETHER THE AMENDMEN T BROUGHT OUT BY THE FINANCE ACT, 2010 W.E.F 1-4-2010 IN SECTION 40(A)(IA) OF THE ACT IS CLARIFICATORY IN NA TURE OR NOT. TO DECIDE THIS ISSUE, NOW WE HAVE TO GO TO THE HISTORY OF THE PROVISIONS OF SECTION 40(A)(IA), WHICH WAS SUBSTITUTED FOR SUB-CLAUSE-1 BY FINANCE (NO. 2) ACT , 2004 W.E.F. 1-4-2005 AS UNDER:- ITA NO.2941AHD/2009 M/S. NAVNIRMAN INFRASTRUCTURE VS DCIT (OSD), CIR-9, AHMEDABAD 5 AMOUNT NOT DEDUCTIBLE. 40. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SEC TIONS 30 TO 38, THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCT ED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PRO FITS AND GAINS OF BUSINESS OR PROFESSIONS,- (A) (IA) ANY INTEREST, COMMISSION OR BROKERAGE, FEES FO R PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICE S PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONT RACTOR OR SUB-CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT A NY WORK), ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION, HAS NOT BEEN PAID DURING THE PREVIOUS YE AR, OR IN THE SUBSEQUENT YEAR BEFORE THE EXPIRY OF THE TIM E PRESCRIBED UNDER SUB-SECTION (1) OF SECTION 200: PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TAX HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR OR, HAS BEEN DEDUCTED IN THE PREVIOUS YEAR BUT PAID IN ANY SUBSE QUENT YEAR AFTER THE EXPIRY OF THE TIME PRESCRIBED UNDER SUB- SECTION (1) OF SECTION 200, SUCH SUM SHALL BE ALLOW ED AS A DEDUCTION IN COMPUTING THE INCOME OF THE PREVIOUS Y EAR IN WHICH SUCH TAX HAS BEEN PAID. EXPLANATION:- FOR THE PURPOSES OF THIS SUB-CLAUSE:- (I) COMMISSION OR BROKERAGE SHALL HAVE THE SAME MEANING AS IN CLAUSE (I) OF THE EXPLANATION TO SECTION 194H; (II) FEES FOR TECHNICAL SERVICES SHALL HAVE THE SAME MEANING AS IN EXPLANATION 2 TO CLAUSE (VII) OF SUB-SECTION (11) OF SECTION 9; (III) PROFESSIONAL SERVICES SHALL HAVE THE SAME MEANING AS IN CLAUSE (A) OF THE EXPLANATION TO SECTION 194J; (IV) WORK SHALL HAVE THE SAME MEANING AS IN EXPLANATION-III TO SECTION 194C; ITA NO.2941AHD/2009 M/S. NAVNIRMAN INFRASTRUCTURE VS DCIT (OSD), CIR-9, AHMEDABAD 6 SUBSEQUENTLY, IN SUB-CLAUSE (IA) THE WORDS, (RENT AND ROYALTY) HAS BEEN INSERTED BY THE TAXATION LAWS (AMENDMENT) ACT, 2006 W.R.E.F. 1-4-2006 AND SIMILAR LY IN EXPLANATION SUB-CLAUSE (V) & (VI) WERE INSERTED AS UNDER:- (V) RENT SHALL HAVE THE SAME MEANING AS IN CLAUS E (I) TO THE EXPLANATION TO SECTION 194-1; (VI) ROYALTY SHALL HAVE THE SAME MEANING AS IN EXPLANATION 2 TO CLAUSE (VI) OF SUB-SECTION (1) OF SECTION 9; FURTHER, BY THE FINANCE ACT, 2008, THE QUOTED WORDS WERE SUBSTITUTED IN SUB-CLAUSE (IA) W.R.E.F. 1-4-2005 AS UNDER:- 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 LAT DAY OF THE PREVIOUS YEAR AND FINALLY BY THE FINANCE ACT, 2010 W.E.F. 1-4-201 0 SUB- CLAUSE (IA) IS AS UNDER:- (IA) ANY INTEREST, COMMISSION OR BROKERAGE, RENT ROYALTY, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES PAYABLE TO A RESIDENT, OR AMOUNT S PAYABLE TO A CONTRACTOR OR SUB-CONTRACTOR, 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 OR, AFTER DEDUCTION, HAS NOT BEEN PAID ON OR BEFORE THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139: ITA NO.2941AHD/2009 M/S. NAVNIRMAN INFRASTRUCTURE VS DCIT (OSD), CIR-9, AHMEDABAD 7 10. WE FIND FROM THE ABOVE PROVISION OF SECTION 40(A)(IA) OF THE ACT, AMENDED BY FINANCE ACT, 2010, THAT THE PAYMENT OF EXPENSES AS SPECIFIED IN THIS PROVIS ION, ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVI I-B OF THE ACT AND THE ASSESSEE HAS NOT DEDUCTED THE TAX O R AFTER DEDUCTION HAS NOT BEEN PAID ON OR BEFORE THE DUE DATE SPECIFIED IN SECTION 139(1) OF THE ACT, WILL BE DISALLOWED WHILE COMPUTING THE INCOME CHARGEABLE UN DER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSI ON. IT MEANS THAT THE TAX SO DEDUCTIBLE AT SOURCE HAS BEEN DEDUCTED AND PAID ON OR BEFORE THE DUE DATE SPECIFI ED IN SECTION 139(1) OF THE ACT, THE EXPENSES RELATED TO THE SAME WILL BE ALLOWED WHILE COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUS INESS OR PROFESSION. PRIOR TO ITS AMENDMENT, THIS SECTIO N WAS AMENDED BY THE FINANCE ACT, 2008, W.R.E.F. 1-4-2005 WHERE THE PROVISION WAS MADE TO DISALLOW THE PAYMEN TS ON WHICH TAX IS DEDUCTIBLE AT SOURCE AND SUCH TAX H AS NOT BEEN DEDUCTED OR 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 YEARS. FROM THE ABOVE AMENDMENTS IN THIS PROVISION OF SECT ION 40(A)(IA) OF THE ACT IT IS CLEAR THAT THE INTENTION OF THE LEGISLATURE IS TO OPERATES RETROSPECTIVELY TO SERVE ITS OBJECT OF REMOVING HARDSHIP FACED BY THE TAXPAYERS. WHILE BRINGING THIS AMENDMENT BY FINANCE BILL, 2010, THE OBJECT WAS EXPLAINED IN NOTES ON CLAUSES AND THE RELEVANT CLAUSE-12 WAS EXPLAINED AS UNDER:- CLAUSE 12 OF THE BILL SEEKS TO AMEND SECTION 40 OF THE INCOME-TAX ACT RELATING TO AMOUNTS NOT DEDUCTIBLE. ITA NO.2941AHD/2009 M/S. NAVNIRMAN INFRASTRUCTURE VS DCIT (OSD), CIR-9, AHMEDABAD 8 UNDER THE EXISTING PROVISIONS CONTAINED IN SUB- CLAUSE (IA) OF CLAUSE (A) OF THE AFORESAID SECTION, NON-DEDUCTION OF TAX OR NON-PAYMENT OF TAX AFTER DEDUCTION ON PAYMENT OF ANY SUM BY WAY OF INTEREST, COMMISSION OR BROKERAGE, RENT, ROYALTY, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICA L SERVICES PAYABLE TO A RESIDENT OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB-CONTRACTOR, BEING RESIDENT, RESULTS IN THE DISALLOWANCE OF THE SAID SUM, IN THE COMPUTATION OF INCOME OF THE PAYER, ON WHICH TAX IS REQUIRED TO BE DEDUCTED UNDER CHAPTER XVII-B. THE PROVISO TO THE SAID SUB-CLAUSE PROVIDES THAT WHERE IN RESPECT OF ANY SUCH SUM, TAX HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR, OR HAS BEEN DEDUCTED DURING THE LAST MONTH OF THE PREVIOUS YEAR BUT PAID AFTER THE DUE DATE OF FILING OF RETURN OR DEDUCTED DURING ANY OTHER MONTH OF THE PREVIOUS YEAR BUT PAID AFTER THE END OF THE SAID PREVIOUS YE AR, SUCH SUM SHALL BE ALLOWED AS A DEDUCTION IN COMPUTING THE INCOME OF THE PREVIOUS YEAR IN WHICH SUCH TAX HAS BEEN PAID. FURTHER THE AMENDMENT WAS EXPLAINED IN MEMORANDUM EXPLAINING THE PROVISION IN FINANCE BILL, 2010 AS U NDER:- DISALLOWANCE EXPENDITURE ON ACCOUNT OF NON-COMPLIAN CE WITH TDS PROVISIONS, THE EXISTING PROVISIONS OF SECTION 40(A)(IA) OF TH E INCOME-TAX ACT PROVIDE FOR THE DISALLOWANCE OF EXPENDITURE LIKE INTEREST, COMMISSION,, BROKERAGE, PROFESSIONAL FEES, ETC. IF TAX ON SUCH EXPENDITURE WAS NOT DEDUCTED, OR AFTER DEDUCTION WAS NOT PAID DURING THE PREVIOUS YEAR. HOWEVER, IN CASE THE DEDUCTION OF TAX IS MADE DURING THE LAST MONTH OF THE PREVIOUS YEAR, NO DISALLOWANCE IS MADE IF THE TAX IS DEPOSITED ON OR BEFORE THE DUE DATE OF FILIN G OF RETURN. ITA NO.2941AHD/2009 M/S. NAVNIRMAN INFRASTRUCTURE VS DCIT (OSD), CIR-9, AHMEDABAD 9 IT IS PROPOSED TO AMEND THE SAID SECTION TO PROVIDE THAT NO DISALLOWANCE WILL BE MADE IF AFTER DEDUCTIO N OF TAX DURING THE PREVIOUS YEAR, THE SAME HAS BEEN PAID ON OR BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME SPECIFIED IN SUB-SECTION(1) OF SECTION 139. THIS AMENDMENT IS PROPOSED TO TAKE EFFECT RETROSPECTIVELY FROM 1 ST APRIL, 2010 AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASSESSMENT YEAR 2010-11 AND SUBSEQUENT YEARS. 11. IN VIEW OF THE ABOVE AMENDMENTS BROUGHT OUT IN SECTION 40(A)(IA) ON DIFFERENT TIMES TO REMOVE THE DIFFICULTIES OF TAXPAYERS A REMEDIAL STEPS WERE TAK EN BY THE LEGISLATURE. WE ARE OF THE VIEW THAT FOR MODER N PURPOSES A DECLARATORY AMENDMENT IN SECTION OF THE ACT MAY BE DEFINED AS AN AMENDMENT TO REMOVE DOUBTS EXISTING AS TO THE MEANING OR EFFECT OF ANY STATUTE AND SUCH AMENDMENTS ARE USUALLY HELD TO BE RETROSPECTIV E. AN EXPLANATORY ACT IS GENERALLY PASSED TO SUPPLY AN OBVIOUS OMISSION OR TO CLEAR UP DOUBTS AS TO THE ME ANING OF THE PREVIOUS ACT AND THIS VIEW HAS BEEN HELD IN KESHAVLAL JETHALAL SHAH V. MOHANALAL BHAGWANDAS, AI R 1968 SC 1336, 1339]. FURTHER HONBLE APEX COURT IN THE CASE OF CIT V. PODAR CEMENT PVT. LTD., (1997) 226 I TR 625, 652 (SC) SETTLED THAT IF A STATUTE IS CURATIVE OR MERELY DECLARATORY OF THE PREVIOUS LAW RETROSPECTIVE OPERA TION IS GENERALLY INTENDED. FURTHER MORE IN SIMILAR CIRCUMS TANCES, HONBLE APEX COURT IN THE CASE OF ALLIED MOTORS (P) . LTD. V CIT (1977) 224 ITR 677,687 (SC) HELD THAT THE AMENDMENT WILL NOT SERVE ITS OBJECT IN SUCH A SITUA TION UNLESS IT IS CONSTRUED AS RETROSPECTIVE. THE HONBL E APEX COURT HELD AS UNDER:- THE DEPARTMENTAL UNDERSTANDING ALSO APPEARS TO BE THAT SECTION 43B, THE PROVISO AND EXPLANATION 2 HAVE TO BE READ TOGETHER AS EXPRESSING THE TRUE INTENTION OF SECTION 43B. EXPLANATION 2 HAS BEEN EXPRESSLY MADE RETROSPECTIVE. THE FIRST PROVISO, HOWEVER, CANNOT BE ISOLATED FROM EXPLANATION 2 AND ITA NO.2941AHD/2009 M/S. NAVNIRMAN INFRASTRUCTURE VS DCIT (OSD), CIR-9, AHMEDABAD 10 THE MAIN BODY OF SECTION 43B. WITHOUT THE FIRST PROVISO, EXPLANATION 2 WOULD NOT OBVIATE THE HARDSHIP OR THE UNINTENDED CONSEQUENCES OF SECTION 43B. THE PROVISO SUPPLIES N OBVIOUS, OMISSION. BUT FOR THIS PROVISO THE AMBIT OF SECTION 43B BECOMES UNDULY WIDE BRINGING WITHIN ITS SCOPE THOSE PAYMENTS, WHICH WERE NOT INTENDED TO BE PROHIBITED FROM THE CATEGORY OF PERMISSIBLE DEDUCTIONS. IN THE CASE OF GOODYEAR INDIA LTD. V. STATE OF HARYANA (1991) 188 ITR 402, THIS COURT SAID THAT THE RULE OF REASONABLE CONSTRUCTION MUST BE APPLIED WHILE CONSTRUING A STATUTE. A LITERAL CONSTRUCTION SHOULD BE AVOIDED IF IT DEFEATS THE MANIFEST OBJECT AND PURPOSE OF THE ACT. THEREFORE, IN THE WELL KNOWN WORDS OF JUDGE LEARNED HAND, ONE CANNOT MAKE A FORTRESS OUT OF THE DICTIONARY; AND SHOULD REMEMBER THAT STATUTES HAVE SOME PURPOSE AND OBJECT TO ACCOMPLISH WHOSE SYMPATHETIC AND IMAGINATIVE DISCOVERY IS THE SUREST GUIDE TO THEIR MEANING. IN THE CASE OF R.B. JODHA MAL KUTHIALA V. CIT (1971) 82 ITR 570, THIS COURT SAID THAT ONE SHOULD APPLY THE RULE OF REASONABLE INTERPRETATION. A PROVISO WHICH IS INSERTED TO REMEDY UNINTENDED CONSEQUENCES AND TO MAKE THE PROVISION WORKABLE, A PROVISO WHICH SUPPLIES AN OBVIOUS OMISSION IN THE SECTION AND IS REQUIRED TO BE READ INTO THE SECTION TO GIVE THE SECTION A REASONABLE INTERPRETATION, REQUIRES TO BE TREATED AS RETROSPECTIVE IN OPERATION, SO THAT A REASONABLE INTERPRETATION CAN BE GIVEN TO THE SECTION AS A WHOLE. THIS VIEW HAS BEEN ACCEPTED BY A NUMBER OF HIGH COURTS. IN THE CASE OF CIT V. CHANDULAL VENICHAND (1984) 209 ITR 7, THE GUJARAT HIGH COURT HAS HELD THAT THE FIRST PROVISO TO SECTION 43B IS RETROSPECT IVE AND SALES TAX FOR THE LAST QUARTER PAID BEFORE THE ITA NO.2941AHD/2009 M/S. NAVNIRMAN INFRASTRUCTURE VS DCIT (OSD), CIR-9, AHMEDABAD 11 FILING OF THE RETURN FOR THE ASSESSMENT YEAR IS DEDUCTIBLE. THIS DECISION DEALS WITH ASSESSMENT YEAR 1984-85. THE CALCUTTA HIGH COURT IN THE CASE OF CIT V. SRI JAGANNATH STEEL CORPORATION (1991) 191 ITR 676, HAS TAKEN A SIMILAR VIEW HOLDING THAT THE STATUTORY LIABILITY FOR SALES TAX ACTUALLY DISCHARGED AFTER THE EXPIRY OF THE ACCOUNTING YEAR IN COMPLIANCE WITH THE RELEVANT STATUTE IS ENTITLED TO DEDUCTION UNDER SECTION 43B. THE HIGH COURT HAS HELD THE AMENDMENT TO BE CLARIFICATORY AND, THEREFORE, RETROSPECTIVE. THE GUJARAT HIGH COURT IN THE ABOVE CASE HELD THE AMENDMENT TO BE CURATIVE AND EXPLANATORY AND HENCE RETROSPECTIVE. THE PATNA HIGH COURT HAS ALSO HELD THE AMENDMENT INSERTING THE FIRST PROVISOS TO BE EXPLANATORY IN T HE CASE OF JAMSHEDPUR MOTOR ACCESSORIES STORES V. UNION OF INDIA (1991) 189 ITR 70. IT HAS HELD THE AMENDMENT INSERTING FIRST PROVISO TO BE RETROSPECTIVE. THE SPECIAL LEAVE PETITION FROM THIS DECISION OF THE PATNA HIGH COURT WAS DISMISSED (SEE [1991] 191 ITR (ST.)8). THE VIEW OF THE DELHI HIGH COURT, THEREFORE, THAT THE FIRST PROVISO TO SECTION 43B WILL BE AVAILABLE ONLY PROSPECTIVELY DOES NOT APPEAR TO BE CORRECT. AS OBSERVED BY G.P. SINGH IN HIS PRINCIPLES OF STATUTORY INTERPRETATION, 43B WILL BE AVAILABLE ONLY PROSPECTIVELY DOES NOT APPEAR TO BE CORRECT. AS OBSERVED BY G.P. SINGH IN HIS PRINCIPLES OF STATUTORY INTERPRETATION, 4 TH EDN., PAGE 291. IT IS WELL SETTLED THAT IF A STATUTE IS CURATIVE OR MERELY DECLARATORY OF THE PREVIOUS LAW, RETROSPECTIVE OPERATION IS GENERALLY INTENDED. IN ACT THE AMENDMENT WOULD NOT SERVE ITS SUBJECT IN SUCH A SITUATION, UNLESS IT IS CONSTRUED AS RETROSPECTIV E. THE VIEW, THEREFORE, TAKEN BY THE DELHI HIGH COURT CANNOT BE SUSTAINED. 12. ACCORDINGLY, WE ARE OF THE VIEW THAT THE AMENDMENTS BROUGHT OUT IN SECTION 40(A)(IA) OF THE ACT FROM TIME-TO-TIME WAS CLARIFICATORY AND WHEN AN AMENDMENT IS DECLARATORY AND CLARIFICATORY IN NATUR E, THE ITA NO.2941AHD/2009 M/S. NAVNIRMAN INFRASTRUCTURE VS DCIT (OSD), CIR-9, AHMEDABAD 12 PRESUMPTION AGAINST ITS RETROSPECTIVITY IS NOT APPL ICABLE AND AMENDMENTS OF THIS KIND ONLY DECLARE. IT IS NO DOUBT TRUE THAT, ORDINARILY, A STATUTE, AND PARTICULARLY WHEN THE SAME HAS BEEN MADE APPLICABLE WITH EFFECT FROM A PARTICULAR DATE SHOULD BE CONSTRUED PROSPECTIVELY A ND NOT RETROSPECTIVELY. BUT THIS PRINCIPLE WILL NOT BE APP LICABLE 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 E XPLAIN THE MEANING AND INTENDMENT OF THE ACT ITSELF AND TH IS VIEW HAS BEEN HOLD BY HOBLE CALCUTTA HIGH COURT IN THE CASE OF CIT V. INDIA STEAMSHIP CO. LTD. (1992) 196 ITR 9 17, 936 (CAL)]. IN THAT CASE, EXPLANATION 8, WHICH HAS NEWLY BEEN INSERTED BY THE FINANCE ACT, 1986, WITH RETROSPECTIVE EFFECT FROM 1ST APRIL, 1974, TO SECTI ON 43(1), HAS BEEN HELD TO BE CLARIFICATORY IN NATURE AND THE SAME HAS BEEN HELD TO BE DEEMED TO BE ALWAYS IN EXISTENC E EVEN BEFORE 1-4-1974. SIMILARLY, IN THE CASE OF ALL IED MOTORS (P) LTD (SUPRA), IT HAS BEEN HELD THAT THE PROVISIONS OF THE FIRST PROVISO, WHICH HAS NEWLY BE EN INSERTED BY THE FINANCE ACT, 1987, WITH EFFECT FROM 1ST APRIL, 1988 TO SECTION 43B IS REMEDIAL IN NATURE, D ESIGNED TO ELIMINATE UNINTENDED CONSEQUENCES WHICH MAY CAUS E UNDUE HARDSHIP TO THE ASSESSEE AND WHICH MADE THE PROVISION UNWORKABLE OR UNJUST IN A SPECIFIC SITUAT ION, AND IS OF CLARIFICATORY NATURE AND, THEREFORE, HAS TO B E TREATED AS RETROSPECTIVE WITH EFFECT FROM 1 ST APRIL, 1984, THE DATE ON WHICH SECTION 43B HAS NEWLY BEEN INSERTED BY THE FINANCE ACT, 1983. IN TAKING THIS VIEW, THE SUPREME COURT HAS APPROVED JAMSHEDPUR MOTOR ACCESSORIES STORES V. UNION OF INDIA [(1991) 189 ITR 70 (PAT), SPECIAL LE AVE PETITION DISMISSED B THE SUPREME COURT : (1991) 191 ITR (ST.) 8 (SC)], CIT V. SRI JAGANNATH STEEL CORPORATI ON [(1991) 191 ITR 676 (CAL)], AND CIT V. CHANDULAL VENICHAND [(1992) 197 ITR 718, 720 (CAL)] AND CIT V . PYARILAL KASAM MANJI & CO. [(1992) 198 IGTR 110 (OR I)]. 13. IN VIEW OF THE ABOVE DISCUSSION, FOLLOWING THE CASE LAWS OF HONBLE APEX COURT AND OF HONBLE HIGH COUR TS CITED ABOVE, WE ARE OF THE VIEW THAT THE PROVISIONS OF ITA NO.2941AHD/2009 M/S. NAVNIRMAN INFRASTRUCTURE VS DCIT (OSD), CIR-9, AHMEDABAD 13 SECTION 40(A)(IA) AS AMENDED BY THE FINANCE ACT, 20 10 W.E.F 1-4-2010, WHICH HAS NEWLY BEEN INSERTED BY TH E FINANCE (NO.2) ACT, 2004, WITH EFFECT FROM 1ST APRI L, 2005 TO SECTION 40 OF THE ACT IS REMEDIAL IN NATURE, DES IGNED TO ELIMINATE UNINTENDED 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 B E TREATED AS RETROSPECTIVE WITH EFFECT FROM 1 ST APRIL, 2005, THE DATE ON WHICH SECTION 40(A)(IA) HAS BEEN INSERTED BY TH E FINANCE (NO.2) ACT, 2004. ACCORDINGLY, THIS ISSUE O F THE ASSESSEES APPEAL IS ALLOWED. 6. SINCE THE ISSUE IS ENTIRELY DEPENDENT UPON THE A MENDMENT MADE IN SECTION 40(A) (IA) OF THE IT ACT WHICH IS C ONSIDERED FAVOURABLY IN THE CASE OF SHRI KANUBHAI RAMJIBHAI M AKWANA (SUPRA) IN THE SAME ASSESSMENT YEAR 2005-06, WE ARE OF THE VIEW THE MATTER REQUIRES RECONSIDERATION AT THE LEVEL OF THE AO. WE ACCORDINGLY SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND RESTO RE THE ISSUE TO THE FILE OF THE AO WITH DIRECTION TO RE-DECIDE THE ISSU E AFRESH IN THE LIGHT OF THE DECISION IN THE CASE OF SHRI KANUBHAI RAMJIBHAI MAKWANA (SUPRA). THE AO IS DIRECTED TO PASS THE ORDER IN TH E LIGHT OF THE DECISION IN THE CASE OF SHRI KANUBHAI RAMJIBHAI MAK WANA (SUPRA) AFTER DUE VERIFICATION OF THE FACTS BY GIVING REASO NABLE SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. IN THE RESULT, GROUNDS NO.1 TO 6 OF THE APPEAL OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 7. THE LEARNED COUNSEL FOR THE ASSESSEE DID NOT PRE SS GROUND NO.7 OF THE APPEAL. THE SAME IS DISMISSED AS NOT PR ESSED. ITA NO.2941AHD/2009 M/S. NAVNIRMAN INFRASTRUCTURE VS DCIT (OSD), CIR-9, AHMEDABAD 14 8. ON GROUND NO.8 OF THE APPEAL, THE ASSESSEE CHALL ENGED THE DISALLOWANCE OF RS.50,000/- OUT OF LABOUR EXPENSES. IT WAS NOTED THAT THE ASSESSEE DEBITED LABOUR EXPENSES OF RS.12,66,61 9/- IN THE PROFIT & LOSS ACCOUNT. ON VERIFICATION OF THE VOUCHERS THE AO FOUND THAT THESE EXPENSES WERE INCURRED IN CASH AND THE VOUCHE RS DID NOT CONTAIN FULL DETAILS OF THE PAYEES, THESE WERE SELF -PREPARED BY THE EMPLOYEES OF THE ASSESSEE. THE AO MADE LUMP SUM DIS ALLOWANCE OF RS.50,000/-. THE LEARNED CIT(A) FOUND THAT THE ASSE SSEE HAS NOT DISPUTED THAT ENTIRE EXPENDITURE WAS SPENT IN CASH AND THE VOUCHERS DID NOT CONTAIN FULL DETAILS, THEREFORE, THE EXPEND ITURE WAS NOT VERIFIABLE. 9. ON CONSIDERATION OF THE ABOVE FACTS, WE DO NOT F IND ANY MERIT IN THIS GROUND OF APPEAL OF THE ASSESSEE. THE OBJECTIO NS RAISED BY THE AUTHORITIES HAVE NOT BEEN MET BY THE ASSESSEE BECAU SE NO MATERIAL OR EVIDENCE IS PRODUCED BEFORE US TO CONTRADICT THE FINDINGS OF THE AUTHORITIES BELOW. THE AUTHORITIES MADE NOMINAL ADD ITION OUT OF THE LABOUR EXPENSES AND, THEREFORE, NO INTERFERENCE IS CALLED FOR. GROUND NO.8 OF THE APPEAL OF THE ASSESSEE IS DISMISSED. 10. ON GROUND NO.9 OF THE APPEAL, THE ASSESSEE CHAL LENGED THE DISALLOWANCE OF RS.2,225/- OUT OF TELEPHONE EXPENSE S. THE AO DISALLOWED 20% OF THE EXPENSES BEING PERSONAL ELEME NT IN USER OF THE TELEPHONE BY THE PARTNERS AND EMPLOYEES OF THE ASSESSEE FIRM. NO RECORD OF TELEPHONE CALLS HAS BEEN MAINTAINED. N O COMPLETE DETAILS WERE FILED. THE LEARNED CIT(A) HOWEVER, DIS ALLOWED 10% OUT OF THE DISALLOWANCE IN WHICH WE DO NOT FIND ANY JUS TIFICATION TO ITA NO.2941AHD/2009 M/S. NAVNIRMAN INFRASTRUCTURE VS DCIT (OSD), CIR-9, AHMEDABAD 15 INTERFERE WITH THE ORDER OF THE LEARNED CIT(A). THI S GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 11. ON GROUND NO.10 OF THE APPEAL, THE ASSESSEE CHA LLENGED DISALLOWANCE OF RS.10,000/- OUT OF MISC. EXPENSES A ND CONVEYANCE EXPENSES. IT IS NOTED THAT THE ASSESSEE CLAIMED MIS C. EXPENSES OF RS.35,450/-, OFFICE EXPENSES OF RS.20,255/- AND CO NVEYANCE EXPENSES OF RS.18,732/-. THE ASSESSEE DID NOT PRODU CE COMPLETE DETAILS AND NO DETAILS WERE FURNISHED TO PROVE EXPE NSES INCURRED EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. RS.10,000/ - WAS ACCORDINGLY DISALLOWED. ON GOING THROUGH THE SUBMISSIONS OF THE PARTIES WE ARE OF THE VIEW NO INTERFERENCE IS REQUIRED IN THE MATTER BECAUSE NO EVIDENCE WAS FURNISHED BEFORE THE LEARNED CIT(A) TO CHALLENGE THE DISALLOWANCE. SIMILAR IS THE POSITION BEFORE US AS THE ASSESSEE HAS NOT FURNISHED ANY EVIDENCE IN SUPPORT OF THE CLAIM. THIS GROUND OF APPEAL OF THE ASSESSEE IS, THEREFORE, DISMISSED. 12. GROUND NO.11 OF THE APPEAL OF THE ASSESSEE IS G ENERAL IN NATURE AND IS REJECTED. GROUND NO.12 IS FOR CHARGIN G OF INTEREST WHICH IS MANDATORY AND CONSEQUENTIAL AND IS NOT ARGUED BE FORE US. GROUND NO.13 IS REGARDING INITIATION OF PENALTY PROCEEDING S U/S 271(1) (C) OF THE IT ACT WHICH IS DISTINCT AND SEPARATE PROCEEDIN GS AND THIS GROUND IS PREMATURELY RAISED. THESE GROUNDS ARE ACCORDINGL Y DISMISSED. ITA NO.2941AHD/2009 M/S. NAVNIRMAN INFRASTRUCTURE VS DCIT (OSD), CIR-9, AHMEDABAD 16 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 13-05-2011 SD/- SD/- (A. K. GARODIA) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 13-05-2011 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD