M/s. Vastu Builders, Anand V. The Income tax Officer,Ward-1, Anand

ITA 3995/AHD/2008

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50528 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 18-08-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 10-12-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Retrospective amendment; Non-deduction of tax
• Section: 43B; 139

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE S/SHRI D.K. TYAGI, JM AND A. K. GARODIA, A. M. M/S VASTU BUILDERS, 7, SHANTINIKETAN, OPP. ARYA SAMAJ, ANAND, 388001. INCOME-TAX OFFICER, WARD-1, ANAND. APPELLANT VS. RESPONDENT APPELLANT BY :- NONE (WRITTEN SUBMISSION) RESPONDENT BY:- SHRI MAHESH KUMAR, SR.DR O R D E R DATE OF HEARING 18/08/2011. DATE OF PRONOUNCEMENT -26/8/2011. PER D.K. TYAGI, JUDICIAL MEMBER . THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. CIT(A) DATED 11.08.2008 RAISING FOLLOWING GROUND :- (1) THE LD. CIT(A) ERRED ON FACTS AND ON LAW IN CONFIRM ING DISALLOWANCE OF RS.14,30,535/- U/S 40(A)(IA) OF THE ACT. THE AMOUNT OF TDS BEING PAID BEFORE DUE DATE U/S 200(1) IS ALLOWABLE. THE DISALLOWANCE OF RS.14,30,535/- BE DE LETED NOW. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS E NGAGED IN THE BUSINESS OF CONSTRUCTION. THE RETURN OF INCOME WAS FILED ON 24.8.2005 DECLARING TOTAL INCOME OF RS.2,03,620/-. THE CASE W AS SELECTED FOR SCRUTINY. DURING THE COURSE OF ASSESSMENT PROCEEDIN GS, THE DETAILS OF TDS DEDUCTED AND PAID WERE VERIFIED. ON PERUSAL OF THE SAME, THE AO FOUND ITA NO.3995/AHD/2008 ASST. YEAR 2005-06 ITA NO.3995/AHD/2008 ASST. YEAR 2005-06 2 THAT THE ASSESSEE HAD NOT COMPLIED WITH THE PROVISI ONS OF CHAPTER XVII-B OF THE INCOME-TAX ACT IN RESPECT OF PAYMENTS OF RS. 15,12,485/-, THE DETAILS OF WHICH HAVE BEEN GIVEN IN PARA 3 OF LD. C IT(A)S ORDER. SINCE THE ASSESSEE DID NOT DEDUCT AND DEPOSIT THE TDS IN RESPECT OF THE PAYMENTS/CREDITS MADE BEFORE 31.3.2005, IN CONSONAN CE WITH CHAPTER XVII-B R.W.S. RULE 30 OF THE I.T. RULES, THE AO ADD ED BACK THE SUM OF RS.15,12,485/- U/S 40(A)(IA) OF THE ACT. 3. IN APPEAL BEFORE LD. CIT(A) THE ASSESSEE SUBMITT ED THAT THE ADDITION OF THE ABOVE AMOUNT IS NOTIONAL IN NATURE. IT WAS A LSO SUBMITTED THAT ON THE ENTIRE AMOUNT, TDS HAD BEEN DEDUCTED AND PAID O N 10.5.2003. IT WAS FURTHER SUBMITTED THAT WITH THE NEWLY AMENDED SECTI ON EFFECTIVE FROM ASST. YEAR 2005-06 THE MATTER HAS BEEN SETTLED, THE REFORE, THE AO WAS NOT CORRECT IN MAKING THE SAID DISALLOWANCE. THE LD. CI T(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE CONTENTION OF THE AO CONFIRMED PART OF THE DISALLOWANCE AND GAVE PART RELIEF TO TH E ASSESSEE BY OBSERVING AS UNDER :- 5. I HAVE CONSIDERED THE SUBMISSIONS OF THE AR AND THE ASSESSMENT ORDER. THE AO MERELY FOLLOWED THE PROVISIONS OF THE UNAMENDED SEC TION 40(A)(IA). AS PER THE SAID SECTION, THE DISALLOWANCE IS JUSTIFIED. HOWEVER, TH E FOLLOWING PAYMENTS, I.E.: SHRI RAHIMKHAN P. PATHAN 24.03.2005 RS.12,000/- SHRI GOMARAM B. PRAJAPATI 01.03.2005 RS.35,000/- SHRI CHHATRASINH S. PATEL 22.03.2005 RS.5,000/- SHRI JAVAHARLAL S. SHARMA 08.03.2005 RS.3,000/- FALL WITHIN THE AMENDED PROVISIONS OF SECTION 40(A) (IA) WHICH STATES THAT IF TAX HAD BEEN DEDUCTED IN THE MONTH OF MARCH AND DEPOSITED W ITH THE GOVERNMENT BEFORE SUBMISSION OF RETURN OF INCOME, THE PROVISIONS OF S ECTION 40(A)(IA) ARE NOT ATTRACTED. IN THE ABOVE CASES, SINCE THE TAX HAD BEEN DEPOSITE D ON 10.05.2005, THE PROVISIONS OF SECTION 40(A)(IA) ARE NOT ATTRACTED. THEREFORE, THE ADDITION TO THE EXTENT OF RS.81,950/- [12,000 + 35,000 + 5,000 + 3,000 + 26,950] IS DELET ED AND BALANCE IS CONFIRMED. AGGRIEVED BY THIS ORDER OF LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. ITA NO.3995/AHD/2008 ASST. YEAR 2005-06 3 4. NONE APPEARED ON BEHALF OF THE ASSESSEE. HOWEVER , IN THE WRITTEN SUBMISSION IT HAS BEEN SUBMITTED THAT TDS AMOUNT WI TH INTEREST RS.36,726/- HAS BEEN DEPOSITED BY THE ASSESSEE ON 1 0.05.2005 I.E. BEFORE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 13 9 OF THE ACT. SECTION 40(A)(IA) HAS BEEN AMENDED VIDE FINANCE ACT, 2010 W ITH RETROSPECTIVE EFFECT. ACCORDINGLY TAX IS DEDUCTIBLE AT SOURCE UND ER CHAPTER XVII-B AND SUCH TAX HAS NOT BEEN DEDUCTED OR AFTER DEDUCTION H AS NOT BEEN PAID ON OR BEFORE THE DUE DATE SPECIFIED IN SUB-SECTION (1) SE CTION 139 OF THE I.T. ACT THE AMOUNT SHALL NOT BE ALLOWED AS DEDUCTION IN COM PUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFIT AND GAINS OF BUSI NESS OR PROFESSION. THE ASSESSEE FURTHER SUBMITTED THAT THE TDS HAS BEE N DEPOSITED ON OR BEFORE THE DUE DATE SPECIFIED U/S 139(1) OF THE ACT AS PROVIDED IN THE AMENDED IN SECTION 40(A) (IA) OF THE ACT VIDE FINAN CE ACT, 2010. THEREFORE, NO DISALLOWANCE CAN BE MADE U/S 40(A)(IA ) OF THE ACT. IN VIEW OF THE AMENDMENT BY FINANCE ACT, 2010 THE DISALLOWA NCE MADE BY LD. AO MAY KINDLY BE DELETED. 5. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDE RS OF AUTHORITIES BELOW. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT A SIMILAR ISSU E CAME UP BEFORE THE TRIBUNAL IN THE CASE OF ACIT VS. SHRI SANDEEP R. KA POOR AND VICE VERSA IN ITA BOS.989 & 116/AHD/2009 FOR ASST. YEAR 2005-0 6 WHEREIN THE ISSUE HAS BEEN CONSIDERED IN DETAIL AND DECIDED BY OBSERVING AS UNDER :- 9. WE HAVE CONSIDERED RIVAL CONTENTIONS AND ALSO G ONE THROUGH THE ORDER OF THE TRIBUNAL REFERRED BY LD. AR. WE FOUND THAT IN THE INSTANT CASE DISALLOWANCE HAS BEEN MADE BY ASSESSING OFFICE R ONLY ON THE PLEA THAT PAYMENT OF TDS WAS NOT MADE TO THE CREDIT TO T HE GOVERNMENT ACCOUNT WITHIN THE PRESCRIBED TIME I.E. ON OR BEFOR E 07-04-2005. THE ITA NO.3995/AHD/2008 ASST. YEAR 2005-06 4 CONTENTION OF LD. AR WAS THAT PAYMENT WAS MADE BEFO RE LAST DATE OF FILING RETURN, THEREFORE AMENDMENT MADE U/S.40(A)(IA) TO T HE EFFECT THAT IF THE PAYMENT OF TDS MADE BEFORE LAST DATE OF FILING RETU RN, NO DISALLOWANCE CAN BE MADE U/S.40(A)(IA) OF THE ACT. AMENDMENT BRO UGHT IN SECTION 40(A)(IA) BY THE FINANCE ACT, 2010 HAS BEEN ELABORA TELY DISCUSSED BY TRIBUNAL IN THE CASE OF SHRI KANUBHAIRAMJIBHAI V. I TO IN ITA NO.3983/AHD/2008, ORDER DATED 03-12-2010, IT WAS HE LD THAT AMENDMENT BROUGHT OUT IN U/S.40(A)(IA) BY FINANCE ACT, 2010 W AS DECLARATORY AND CLARIFICATORY IN NATURE. THUS IT IS DESIGNED TO ELI MINATE UNINTENDED CONSEQUENCES WHICH MAY CAUSE UNDUE HARDSHIP TO THE TAXPAYER AND WHICH MADE THE PROVISION UN-WORKABLE OR UNJUST IN A SPECIFIC SITUATION, THEREFORE HAS TO BE TREATED AS RETROSPECTIVE WITH E FFECT FROM 01-04-2005 THAT ON THE DATE ON WHICH SECTION 40(A)(IA) HAS BEE N INSERTED BY THE FINANCE ACT NO.2 IN 2004. FOLLOWING WAS THE PRECISE OBSERVATION OF THE BENCH:- 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) ...... (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 ITA NO.3995/AHD/2008 ASST. YEAR 2005-06 5 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; 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 ITA NO.3995/AHD/2008 ASST. YEAR 2005-06 6 (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: (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 ITA NO.3995/AHD/2008 ASST. YEAR 2005-06 7 (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-CLAUSE (IA ) OF CLAUSE (A) OF THE AFORESAID SECTION, NON-DEDUCTION OF TAX OR NON- PAYMENT OF TAX AFTER DEDUCTION ON PAYMENT OF ANY SU M BY WAY OF INTEREST, COMMISSION OR BROKERAGE, RENT, ROY ALTY, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SER VICES 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, THE EXISTING PROVISIONS OF SECTION 40(A)(IA) OF TH E INCOME-TAX ACT PROVIDE FOR THE DISALLOWANCE OF ITA NO.3995/AHD/2008 ASST. YEAR 2005-06 8 EXPENDITURE LIKE INTEREST, COMMISSION,, BROKERAGE, PROFESSIONAL FEES, ETC. IF TAX ON SUCH EXPENDITURE WAS NOT DEDUCTED, OR AFTER DEDUCTION WAS NOT PAID DURIN G THE PREVIOUS YEAR. HOWEVER, IN CASE THE DEDUCTION O F TAX IS MADE DURING THE LAST MONTH OF THE PREVIOUS Y EAR, NO DISALLOWANCE IS MADE IF THE TAX IS DEPOSITED ON OR BEFORE THE DUE DATE OF FILING OF RETURN. 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 PAI D ON OR BEFORE THE DUE DATE OF FILING OF RETURN OF IN COME 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 TOGETHER AS EXPRESSING THE TRUE INTENTION OF SECTIO N 43B. EXPLANATION 2 HAS BEEN EXPRESSLY MADE RETROSPECTIVE . THE ITA NO.3995/AHD/2008 ASST. YEAR 2005-06 9 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 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 ITA NO.3995/AHD/2008 ASST. YEAR 2005-06 10 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. (1992) 196 ITR 917, 936 (CAL)]. IN THAT CASE, EXPLANATION 8, WHICH HAS NEWLY BEEN INSERTED BY THE FINANCE ACT, 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 ITA NO.3995/AHD/2008 ASST. YEAR 2005-06 11 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 BY 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) 198 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. 10. IN VIEW OF ABOVE DECISION, WE DIRECT THE ASSESS ING OFFICER TO VERIFY THE ACTUAL DATE OF PAYMENT OF TDS AND WHERE THE AMOUNT OF TDS IS FOUND TO BE DEPOSITED BEFORE DUE DATE OF FILING OF RETURN, N O DISALLOWANCE IS WARRANTED U/S.40(A)(IA). HOWEVER, IN RESPECT OF ITE MS, WHERE NO TDS WAS DEDUCTED OR AFTER DEDUCTION THE SAME IS NOT DEPOSIT ED BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME, THE DISALLOWANCE WOU LD BE SUSTAINED. WE DIRECT ACCORDINGLY. NEEDLESS TO SAY THAT ASSESSING OFFICER WILL ADJUDICATE THE ISSUE AFTER GIVING ADEQUATE OPPORTUNITY OF BEIN G HEARD TO THE ASSESSEE, IN THE LIGHT OF OUR ABOVE DIRECTION. 7. FOLLOWING THE ABOVE DECISION OF THE TRIBUNAL, WE RESTORE THE MATTER TO THE FILE OF AO WITH SIMILAR DIRECTION TO VERIFY THE ACTUAL DATE OF ITA NO.3995/AHD/2008 ASST. YEAR 2005-06 12 PAYMENT OF TDS AND WHERE THE AMOUNT OF TDS IS FOU ND TO BE DEPOSITED BEFORE DUE DATE OF FILING OF RETURN, NO DISALLOWANC E IS WARRANTED U/S.40(A)(IA). HOWEVER, IN RESPECT OF ITEMS, WHERE NO TDS WAS DEDUCTED OR AFTER DEDUCTION THE SAME IS NOT DEPOSITED BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME, THE DISALLOWANCE WOULD BE SUST AINED. WE DIRECT ACCORDINGLY. NEEDLESS TO SAY THAT ASSESSING OFFICER WILL ADJUDICATE THE ISSUE AFTER GIVING ADEQUATE OPPORTUNITY OF BEING HE ARD TO THE ASSESSEE, IN THE LIGHT OF OUR ABOVE DIRECTION. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED BUT FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN OPEN COURT ON 26.8.2011. SD/- SD/- (A. K. GARODIA) (D.K. TYAGI) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD, DATED : 26/8/2011. MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD ITA NO.3995/AHD/2008 ASST. YEAR 2005-06 13 1.DATE OF DICTATION 23/8/11. 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER 25/8/11. /OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..