M/s. Aavkar Developers, Ahmedabad V. The Income tax Officer,Ward-9(2), Ahmedabad

ITA 3165/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6426 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-06-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 26-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAKASH DUBEY
• Assessee Lawyers: M K PATEL
• Keywords: Opportunity of being heard; Retrospective amendment; Non-deduction of tax
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, A BENCH (BEFORE S/SHRI G.D. AGARWAL, VICE-PRESIDENT AND D.K. TYAGI, JUDICIAL MEMBER) ITA NO.3165/AHD/2009 [ASSTT. YEAR : 2006-2007] AAVKAR DEVELOPERS 201-202, AAYNA COMPLEX OPP: SUVARNAVILL BUNGLOW THALTEJ, AHMEDABAD. PAN : AAKFA 4243P VS. ITO, WARD-9(2) AHMEDABAD. ITA NO.3085/AHD/2009 [ASSTT. YEAR : 2006-2007] ITO, WARD-9(2) AHMEDABAD. VS. AAVKAR DEVELOPERS 201-202, AAYNA COMPLEX OPP: SUVARNAVILL BUNGLOW THALTEJ, AHMEDABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI M.K. PATEL REVENUE BY : SHRI PRAKASH DUBEY O R D E R PER G.D. AGARWAL, VICE-PRESIDENT : THESE ARE CROSS-APPEALS AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF IN COME-TAX (APPEALS)- XV, AHMEDABAD DATED 17.9.2009 FOR A.Y.2006-2007. 2. IN THE APPEAL OF THE ASSESSEE, THE FOLLOWING GRO UNDS ARE RAISED: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE ADDITION OF RS.7,54,353/- UNDER SECTION 40(A)(IA); 2. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) OUGHT TO HAVE DELETED THE ADDITION OF RS.7,54,353 U /S.40(A)(IA). 3. AT THE TIME OF HEARING BEFORE US, IT IS STATED B Y THE LEARNED COUNSEL THAT THE ASSESSEE HAS MADE DEPOSIT OF TDS BEFORE TH E DUE DATE OF FILING OF ITA NO.1607/AHD/2008 -2- THE RETURN EXCEPT ON THE PAYMENT OF RS.85,850/- ON WHICH NO TAX WAS DEDUCTED. HE HAS STATED THAT THE SECTION 40(A)(IA) HAS BEEN AMENDED AND AFTER AMENDMENT NO DISALLOWANCE TO BE MADE IF THE T DS IS DEPOSITED BEFORE THE DUE DATE OF FILING OF THE RETURN. THE I TAT B BENCH IN THE CASE OF SHRI KANUBHAI RAMJIBHAI VS. ITO, IN ITA NO. 3983/AHD/2008 ORDER DATED 3-12-2010 HAS HELD THE AMENDMENT TO BE RETROSPECTIVE. HE THEREFORE SUBMITTED THAT IN VIEW OF THE ABOVE DECIS ION OF THE ITAT, NO DISALLOWANCE IS TO BE MADE IN RESPECT OF THE AMOUNT FOR WHICH THE TDS IS DEPOSITED BEFORE THE DUE DATE OF FILING OF THE RETU RN. THE LEARNED DR, ON THE OTHER HAND, RELIED UPON THE ORDERS OF THE AUTHO RITIES BELOW. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL PLACED BEFORE US. WE FIND THAT THE B BENCH OF THE ITAT I N THE CASE OF SHRI KANUBHAI RAMJIBHAI (SUPRA) CONSIDERED THE IDENTICAL ISSUE AND AFTER DETAILED EXAMINATION CAME TO THE CONCLUSION THAT TH E AMENDMENT IN THE SECTION 40(A)(IA) BY THE FINANCE ACT, 2010 IS RETRO SPECTIVE IN NATURE. THE RELEVANT FINDINGS OF THE ITAT READ AS UNDER: 9. NOW THE QUESTION ARISES IS, WHETHER THE AMENDME NT BROUGHT OUT BY THE FINANCE ACT, 2010 W.E.F 1-4-2010 IN SECTION 40(A)(IA) OF THE ACT IS CLARIFICATORY IN NATURE OR NOT. TO DECIDE TH IS ISSUE, NOW WE HAVE TO GO TO THE HISTORY OF THE PROVISIONS OF SECT ION 40(A)(IA), WHICH WAS SUBSTITUTED FOR SUB-CLAUSE-I BY FINANCE ( NO. 2) ACT, 2004 W.E.F. 1-4-2005 AS UNDER: AMOUNT NOT DEDUCTIBLE. 40. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SEC TIONS 30 TO 38, THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMP UTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSIONS, - (A) ...... ITA NO.1607/AHD/2008 -3- (IA) ANY INTEREST, COMMISSION OR BROKERAGE, FEES FO R 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 LABO UR 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 DURING THE PREVIOUS YEAR, OR IN THE S UBSEQUENT YEAR BEFORE THE EXPIRY OF THE TIME PRESCRIBED UNDER SUBS ECTION (1) OF SECTION 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 (1) OF SECTIO N 200, SUCH SUM SHALL BE ALLOWED AS A DEDUCTION IN COMPUTING THE IN COME OF THE PREVIOUS YEAR IN WHICH SUCH TAX HAS BEEN PAID. EXPLANATION:- FOR THE PURPOSES OF THIS SUB-CLAUSE: (I) COMMISSION OR BROKERAGE SHALL HAVE THE SAME M EANING AS IN CLAUSE ) OF THE EXPLANATION TO SECTION 194H; (II) FEES FOR TECHNICAL SERVICES SHALL HAVE THE S AME MEANING AS IN EXPLANATION 2 TO CLAUSE (VII) OF SUB- SECTION (11) OF SECTION 9; (III) PROFESSIONAL SERVICES SHALL HAVE THE SAME M EANING AS IN CLAUSE (A) OF THE EXPLANATION TO SECTION 194J; (IV) WORK SHALL HAVE THE SAME MEANING AS IN EXPLA NATION- ILL TO SECTION 194C; SUBSEQUENTLY, IN SUB-CLAUSE (IA) THE WORDS, (RENT A ND ROYALTY) HAS BEEN INSERTED BY THE TAXATION LAWS (AMENDMENT) ACT, 2006 W.R.E.F. 1-4-2006 AND SIMILARLY IN EXPLANATION SUB-CLAUSE (V ) & (VI) WERE INSERTED AS UNDER: (V) RENT SHALL HAVE THE SAME MEANING AS IN CLAUS E ) TO THE EXPLANATION TO SECTION 194-1; (VI) ROYALTY SHALL HAVE THE SAME MEANING AS IN EX PLANATION 2 TO CLAUSE (VI) OF SUB-SECTION (1) OF SECTION 9; ITA NO.1607/AHD/2008 -4- 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 RO YALTY, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SER VICES PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONT RACTOR OR SUB-CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT AN Y WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WO RK), ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVI I-B AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION, HAS NOT BEEN PAID ON OR BEFORE THE DUE DATE SPECIFIED IN SU B-SECTION (1) OF SECTION 139: 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 PROVISION, ON WHICH TAX IS DED UCTIBLE AT SOURCE UNDER CHAPTER XVII-B OF THE ACT AND THE ASSESSEE HA S NOT DEDUCTED THE TAX OR AFTER DEDUCTION HAS NOT BEEN PAID ON OR BEFORE THE DUE DATE SPECIFIED IN SECTION 139(1) OF THE ACT, WILL B E DISALLOWED WHILE COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PRO FITS AND GAINS OF BUSINESS OR PROFESSION. IT MEANS THAT THE TAX SO DEDUCTIBLE AT SOURCE HAS BEEN DEDUCTED AND PAID ON OR BEFORE T HE DUE DATE SPECIFIED IN SECTION 139(1) OF THE ACT, THE EXPENSE S RELATED TO THE SAME WILL BE ALLOWED WHILE COMPUTING THE INCOME CHA RGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PR OFESSION. PRIOR TO ITS AMENDMENT, THIS SECTION WAS AMENDED BY THE F INANCE ACT, 2008, W.R.E.F. 1-4-2005 WHERE THE PROVISION WAS MAD E TO DISALLOW THE PAYMENTS ON WHICH TAX IS DEDUCTIBLE AT SOURCE A ND SUCH TAX HAS NOT BEEN DEDUCTED OR AFTER DEDUCTION HAS NOT BEEN P AID: ITA NO.1607/AHD/2008 -5- (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 LE GISLATURE IS TO OPERATES RETROSPECTIVELY TO SERVE ITS OBJECT OF REM OVING HARDSHIP FACED BY THE TAXPAYERS. WHILE BRINGING THIS AMENDME NT BY FINANCE BILL, 2010, THE OBJECT WAS EXPLAINED IN NOTES ON CL AUSES 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. UNDER THE EXISTING PROVISIONS CONTAINED IN SUB-CLAU SE (IA) OF CLAUSE (A) OF THE AFORESAID SECTION, NON-DEDUCTION OF TAX OR NON-PAYMENT OF TAX AFTER DEDUCTION ON PAYMENT OF AN Y 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 CONTR ACTOR OR SUB-CONTRACTOR, BEING RESIDENT, RESULTS IN THE DISA LLOWANCE OF THE SAID SUM, IN THE COMPUTATION OF INCOME OF THE P AYER, ON WHICH TAX IS REQUIRED TO BE DEDUCTED UNDER CHAPTER XVII-B. THE PROVISO TO THE SAID SUB-CLAUSE PROVIDES THAT WH ERE IN RESPECT OF ANY SUCH SUM, TAX HAS BEEN DEDUCTED IN A NY SUBSEQUENT YEAR, OR HAS BEEN DEDUCTED DURING THE LA ST MONTH OF THE PREVIOUS YEAR BUT PAID AFTER THE DUE DATE OF FILING OF RETURN OR DEDUCTED DURING ANY OTHER MONTH OF THE PR EVIOUS YEAR BUT PAID AFTER THE END OF THE SAID PREVIOUS YE AR, SUCH SUM SHALL BE ALLOWED AS A DEDUCTION IN COMPUTING TH E INCOME OF THE PREVIOUS YEAR IN WHICH SUCH TAX HAS B EEN PAID. FURTHER THE AMENDMENT WAS EXPLAINED IN MEMORANDUM E XPLAINING THE PROVISION IN FINANCE BILL, 2010 AS UNDER: DISALLOWANCE EXPENDITURE ON ACCOUNT OF NON-COMPLIAN CE WITH TDS PROVISIONS, ITA NO.1607/AHD/2008 -6- THE EXISTING PROVISIONS OF SECTION 40(A)(IA) OF TH E INCOME- TAX ACT PROVIDE FOR THE DISALLOWANCE OF EXPENDITURE LIKE INTEREST, COMMISSION,, BROKERAGE, PRO FESSIONAL FEE S, 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 T HE PREVIOUS YEAR, NO DISALLOWANCE IS MADE IF THE TAX I S DEPOSITED ON OR BEFORE THE DUE DATE OF FILING OF RE TURN. IT IS PROPOSED TO AMEND THE SAID SECTION TO PROVIDE THAT NO DISALLOWANCE WILL BE MADE IF AFTER DEDUCTION OF TAX DURING THE PREVIOUS YEAR, THE SAME HAS BEEN PAID ON OR BEF ORE THE DUE DATE OF FILING OF RETURN OF INCOME SPECIFIED IN SUBSECTION(1) OF SECTION 139. THIS AMENDMENT IS PROPOSED TO TAKE EFFECT RETROSPEC TIVELY FROM 1ST APRIL, 2010 AND WILL, ACCORDINGLY, APPLY I N 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 DIFFICUL TIES OF TAXPAYERS A REMEDIAL STEPS WERE TAKEN BY THE LEGISLATURE. WE AR E OF THE VIEW THAT FOR MODERN PURPOSES A DECLARATORY AMENDMENT IN SECTION OF THE ACT MAY BE DEFINED AS AN AMENDMENT TO REMOVE DO UBTS EXISTING AS TO THE MEANING OR EFFECT OF ANY STATUTE AND SUCH AMENDMENTS ARE USUALLY HELD TO BE RETROSPECTIVE. AN EXPLANATORY AC T IS GENERALLY PASSED TO SUPPLY AN OBVIOUS OMISSION OR TO CLEAR UP DOUBTS AS TO THE MEANING OF THE PREVIOUS ACT AND THIS VIEW HAS B EEN 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 ITR 625, 652 (SC ) SETTLED THAT IF A STATUTE IS CURATIVE OR MERELY DECLARATORY OF T HE PREVIOUS LAW RETROSPECTIVE OPERATION IS GENERALLY INTENDED. FURT HER MORE IN SIMILAR CIRCUMSTANCES, HONBLE APEX COURT IN THE CA SE 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 HONBLE APEX COURT HELD AS UNDER: THE DEPARTMENTAL UNDERSTANDING ALSO APPEARS TO BE THAT SECTION 43B, THE PROVISO AND EXPLANATION 2 HAVE TO BE READ ITA NO.1607/AHD/2008 -7- TOGETHER AS EXPRESSING THE TRUE INTENTION OF SECTIO N 43B. EXPLANATION 2 HAS BEEN EXPRESSLY MADE RETROSPECTIVE . THE FIRST PROVISO, HOWEVER, CANNOT BE ISOLATED FROM EXP LANATION 2 AND THE MAIN BODY OF SECTION 43B. WITHOUT THE FIR ST PROVISO, EXPLANATION 2 WOULD NOT OBVIATE THE HARDSH IP 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 DEDUCTI ONS. IN THE CASE OF GOODYEAR INDIA LTD. V. STATE OF HARY ANA (1991) 188 ITR 402, THIS COURT SAID THAT THE RULE O F REASONABLE CONSTRUCTION MUST BE APPLIED WHILE CONST RUING A STATUTE. A LITERAL CONSTRUCTION SHOULD BE AVOIDED I F 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; A ND SHOULD REMEMBER THAT STATUTES HAVE SOME PURPOSE AND OBJECT TO ACCOMPLISH WHOSE SYMPATHETIC AND IMAGINATIVE DISCOV ERY IS THE SUREST GUIDE TO THEIR MEANING. IN THE CASE OF R .B. JODHA MAL KUTHIALA V. CIT (1971) 82 ITR 570, THIS COURT S AID THAT ONE SHOULD APPLY THE RULE OF REASONABLE INTERPRETAT ION. 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 A ND IS REQUIRED TO BE READ INTO THE SECTION TO GIVE THE SE CTION A REASONABLE INTERPRETATION, REQUIRES TO BE TREATED A S RETROSPECTIVE IN OPERATION, SO THAT A REASONABLE INTERPRETATION CAN BE GIVEN TO THE SECTION AS A WHO LE. THIS VIEW HAS BEEN ACCEPTED BY A NUMBER OF HIGH COU RTS. IN THE CASE OF CIT V. CHANDULAL VENICHAND (1984) 209 I TR 7, THE GUJARAT HIGH COURT HAS HELD THAT THE FIRST PROV ISO TO SECTION 43B IS RETROSPECTIVE AND SALES TAX FOR THE LAST QUARTER PAID BEFORE THE FILING OF THE RETURN FOR THE ASSESS MENT YEAR IS DEDUCTIBLE. THIS DECISION DEALS WITH ASSESSMENT YEA R 1984- 85. THE CALCUTTA HIGH COURT IN THE CASE OF CIT V. S RI JAGANNATH STEEL CORPORATION (1991) 191 ITR 676, HAS TAKEN A SIMILAR VIEW HOLDING THAT THE STATUTORY LIABILITY FOR SALES ITA NO.1607/AHD/2008 -8- TAX ACTUALLY DISCHARGED AFTER THE EXPIRY OF THE ACC OUNTING YEAR IN COMPLIANCE WITH THE RELEVANT STATUTE IS ENT ITLED TO DEDUCTION UNDER SECTION 43B. THE HIGH COURT HAS HEL D THE AMENDMENT TO BE CLARIFICATORY AND, THEREFORE, RETRO SPECTIVE. 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 T HE AMENDMENT INSERTING THE FIRST PROVISOS TO BE EXPLAN ATORY IN THE CASE OF JAMSHEDPUR MOTOR ACCESSORIES STORES V. UNION OF INDIA (1991) 189 ITR 70. IT HAS HELD THE AMENDME NT INSERTING FIRST PROVISO TO BE RETROSPECTIVE. THE SP ECIAL 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 SE CTION 43B WILL BE AVAILABLE ONLY PROSPECTIVELY DOES NOT APPEA R TO BE CORRECT. AS OBSERVED BY G. P. SINGH IN HIS PRINCIPL ES OF STATUTORY INTERPRETATION, 43B WILL BE AVAILABLE ONL Y PROSPECTIVELY DOES NOT APPEAR TO BE CORRECT. AS OBS ERVED BY G. P. SINGH IN HIS PRINCIPLES OF STATUTORY INTERPRE TATION, 4TH EDN., PAGE 291. IT IS WELL SETTLED THAT IF A STATU TE IS CURATIVE OR MERELY DECLARATORY OF THE PREVIOUS LAW, RETROSPE CTIVE OPERATION IS GENERALLY INTENDED. IN ACT THE AMENDM ENT WOULD NOT SERVE ITS SUBJECT IN SUCH A SITUATION, UN LESS IT IS CONSTRUED AS RETROSPECTIVE. THE VIEW, THEREFORE, TA KEN BY THE DELHI HIGH COURT CANNOT BE SUSTAINED. 12. ACCORDINGLY, WE ARE OF THE VIEW THAT THE AMENDM ENTS BROUGHT OUT IN SECTION 40(A)(IA) OF THE ACT FROM TIME-TO-TI ME WAS CLARIFICATORY AND WHEN AN AMENDMENT IS DECLARATORY AND CLARIFICATORY IN NATURE, THE PRESUMPTION AGAINST IT S RETROSPECTIVITY IS NOT APPLICABLE AND AMENDMENTS OF THIS KIND ONLY DECLARE. IT IS NO DOUBT TRUE THAT, ORDINARILY, A STATUTE, AND PARTICU LARLY WHEN THE SAME HAS BEEN MADE APPLICABLE WITH EFFECT FROM A PA RTICULAR DATE SHOULD BE CONSTRUED PROSPECTIVELY AND NOT RETROSPEC TIVELY. BUT THIS PRINCIPLE WILL NOT BE APPLICABLE IN A CASE WHERE TH E PROVISION CONSTRUED IS MERELY EXPLANATORY, CLARIFICATORY OR D ECLARATORY IT CANNOT BE DISPUTED THAT THE OBJECT OF THE EXPLANATI ON IS TO EXPLAIN THE MEANING AND INTENDMENT OF THE ACT ITSELF AND TH IS VIEW HAS BEEN HOLD BY HOBLE CALCUTTA HIGH COURT IN THE CASE OF C IT 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, ITA NO.1607/AHD/2008 -9- 1986, WITH RETROSPECTIVE EFFECT FROM 1ST APRIL, 197 4, TO SECTION 43(1), HAS BEEN HELD TO BE CLARIFICATORY IN NATURE AND THE SAME HAS BEEN HELD TO BE DEEMED TO BE ALWAYS IN EXISTENCE EV EN BEFORE 1-4- 1974. SIMILARLY, IN THE CASE OF ALLIED MOTORS (P) L TD (SUPRA), IT HAS BEEN HELD THAT THE PROVISIONS OF THE FIRST PROVISO, WHICH HAS NEWLY BEEN INSERTED BY THE FINANCE ACT, 1987, WITH EFFECT FROM 1ST APRIL, 1988 TO SECTION 43B IS REMEDIAL IN NATURE, DESIGNED TO ELIMINATE UNINTENDED CONSEQUENCES WHICH MAY CAUSE UNDUE HARDS HIP 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 B Y THE FINANCE ACT, 1983. IN TAKING THIS VIEW, THE SUPREME COURT H AS APPROVED JAMSHEDPUR MOTOR ACCESSORIES STORES V. UNION OF IND IA [(1991) 189 ITR 70 (PAT), SPECIAL LEAVE PETITION DISMISSED B THE SUPREME COURT : (1991) 191 ITR (ST.) 8 (SC)], CIT V. SRI JA GANNATH STEEL CORPORATION [(1991) 191 ITR 676 (CAL)], AND CIT V. CHANDULAL VENICHAND [(1992) 197 ITR 718, 720 (CAL)] AND CIT V . PYARILAL KASAM MANJI & CO. [(1992) 1 98 IGTR 110 (ON)]. 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 EFFE CT FROM 1ST APRIL, 2005 TO SECTION 40 OF THE ACT IS REMEDIAL IN NATURE , DESIGNED TO ELIMINATE UNINTENDED CONSEQUENCES WHICH MAY CAUSE U NDUE HARDSHIP TO THE TAXPAYERS AND WHICH MADE THE PROVIS ION UNWORKABLE OR UNJUST IN A SPECIFIC SITUATION, AND I S OF CLARIFICATORY NATURE AND, THEREFORE, HAS TO BE TREATED AS RETROSP ECTIVE WITH EFFECT FROM 1ST APRIL, 2005, THE DATE ON WHICH SECTION 40( A)(IA) HAS BEEN INSERTED BY THE FINANCE (NO.2) ACT, 2004. ACCORDING LY, THIS ISSUE OF THE ASSESSEES APPEAL IS ALLOWED. NO CONTRARY DECISION IS BROUGHT TO OUR KNOWLEDGE. WE THEREFORE RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE IT AT HOLD THAT THE AMENDMENT IN THE SECTION 40(A)(IA) BY THE FINANCE A CT, 2001 IS REMEDIAL IN NATURE AND IT WAS DESIGNED TO ELIMINATE UNINTEND ED CONSEQUENCES WHICH MAY CAUSE UNDUE HARDSHIP TO THE TAXPAYERS AND THEREFORE THIS ITA NO.1607/AHD/2008 -10- AMENDMENT WOULD BE RETROSPECTIVE IN NATURE AND ACCO RDINGLY APPLICABLE TO THE ASSESSMENT YEAR UNDER APPEAL. WE THEREFORE DIRECT THE AO TO EXAMINE THE PAYMENT OF TDS BY THE ASSESSEE AND IN R ESPECT OF PAYMENT FOR WHICH TDS IS DEPOSITED BEFORE THE DUE DATE OF F ILING OF THE RETURN NO DISALLOWANCE UNDER SECTION 40(A)(IA) WOULD BE MADE. HOWEVER, IN RESPECT OF THE ITEM WHERE EITHER NO TDS IS DEDUCTED OR AFTER THE DEDUCTION THE SAME IS NOT DEPOSITED BEFORE THE DUE DATE FOR F ILING OF THE RETURN, DISALLOWANCE WOULD BE SUSTAINED. NEEDLESS TO MENTI ON, THE LEARNED AO WILL RE-ADJUDICATE THE ISSUE AFTER GIVING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ITA NO.3085/AHD/2009 5. GROUND NO.1 OF THE REVENUES APPEAL READS AS UND ER: 1.THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN D ELETING THE ADDITION OF RS.85,850/- MADE U/S.40(A(IA) OF THE AC T. 6. WE HAVE HEARD BOTH THE PARTIES AND WE FIND THAT THE CIT(A) HAS NOT ALLOWED ANY RELIEF FOR THE AMOUNT OF RS.85,850/-. THERE SEEMS TO BE SOME MIS-APPRECIATION OF THE FACTS BY THE AO WHILE FILING THE APPEAL. IN FACT, IN RESPECT OF RS.85,850/-, THE ASSESSEE HAS N OT DEDUCTED ANY TAX. THE CIT(A) HAS CONFIRMED THIS DISALLOWANCE AND EVEN AS PER THE OBSERVATION BY US WHILE DISPOSING OF THE ASSESSEES APPEAL, THE DISALLOWANCE OF RS.85,850/- IS LIKELY TO BE CONFIRM ED. HOWEVER, SINCE NO RELIEF IS ALLOWED BY THE CIT(A), GROUND NO.1 OF THE REVENUE IS MISCONCEIVED AND INFRUCTOUS AND IS ACCORDINGLY REJECTED. 7. THE GROUND NO.2 OF HE REVENUES APPEAL READS AS UNDER: ITA NO.1607/AHD/2008 -11- 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELEING THE ADDITION OF RS.1214189/- MADE AFTER REJECTING THE A SSESSEES BOOKS OF ACCOUNTS. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL PLACED BEFORE US. IT WAS POINTED OUT BY THE LEARNED COUNS EL THAT THE ASSESSEE IS A DEVELOPER AND IT IS FOLLOWING PROJECT COMPLETION ME THOD IN RESPECT OF EACH UNIT. DURING THE YEAR UNDER CONSIDERATION, T HE PROJECT FOR CONSTRUCTION OF OFFICES AND SHOPS WAS IN PROGRESS A ND ADVANCE AGAINST SALE OF SOME OF THE OFFICES/SHOPS WAS RECEIVED. TH EREFORE, THE SAME WAS DISCLOSED AS ADVANCE AND EXPENDITURE FOR CONSTRUCTI ON WAS ALSO CAPITALIZED. THE SAME WAS OFFERED AS INCOME IN THE YEAR IN WHICH PROJECT WAS COMPLETED AND THE SAME WAS ASSESSED AS SUCH. TH AT THE AO HAS ESTIMATED THE PROFIT AT 11% ON THE ADVANCE RECEIVED DURING THE YEAR UNDER CONSIDERATION. IT WAS POINTED OUT BY THE LEARNED C OUNSEL THAT THE PROJECT IS COMPLETED IN THE SUBSEQUENT YEAR IN WHICH THE IN COME WAS OFFERED BY THE ASSESSEE AND THE SAME IS ASSESSED IN THAT YEAR. IT WAS ALSO POINTED OUT BY THE LEARNED COUNSEL THAT IN THE PRECEDING AS WEL L AS SUBSEQUENT YEARS, THE SAME METHOD I.E. PROJECT COMPLETION METHOD FOR EACH UNIT IS ACCEPTED BY THE REVENUE. THE LEARNED DR, ON OTHER HAND, REL IED UPON THE ORDER OF THE AO. 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE MATERIAL PLACED BEFORE US. THE CONTENTION OF T HE LEARNED COUNSEL THAT THE SIMILAR METHOD WAS ACCEPTED BY THE REVENUE IN T HE PRECEDING AS WELL AS SUBSEQUENT YEAR HAS NOT BEEN CONTROVERTED BY THE REVENUE. HE ALSO MADE A STATEMENT THAT THE INCOME FROM ENTIRE PROJEC T IS OFFERED IN THE SUBSEQUENT YEAR AND WHICH IS ASSESSED AS SUCH. FRO M PARA-4 OF THE ASSESSMENT ORDER, IT IS EVIDENT THAT PROJECT WAS NO T SUBSTANTIALLY ITA NO.1607/AHD/2008 -12- COMPLETED. OUT OF THE TOTAL SALE PROCEEDS OF RS.4. 40 CRORES FROM THE PROJECT, THE AMOUNT RECEIVED DURING THE YEAR UNDER CONSIDERATION WAS ONLY RS.1.03 CRORES, WHICH IS LESS THAN 25%. IN VI EW OF TOTALITY OF THE ABOVE FACTS, WE DO NOT FIND ANY INFIRMITY IN THE OR DER OF THE LEARNED CIT(A) WHEREIN HE DELETED THE ADDITION MADE BY THE AO BY ESTIMATING THE PROFIT ON THE ADVANCE RECEIVED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. THIS GROUND OF THE REVENUES APPEAL IS REJECTED. 10. IN THE RESULT, ASSESSEES APPEAL IS DEEMED TO B E ALLOWED FOR STATISTICAL PURPOSE, WHILE THE REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 17 TH JUNE, 2011 SD/- SD/- (D.K. TYAGI) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 17-06-2011 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