Shri Brijgopal Madhusudan Bhattand, Buldhana V. Income Tax Officer, Khamgaon

ITA 52/NAG/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1004 (ITAT-NAGPUR)
• Duration Of Justice: 2 year(s) 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 07-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D RAVI KUMAR
• Assessee Lawyers: S C THAKAR; SHRI C J THAKAR
• Keywords: Capital asset; Principle of natural justice; Retrospective amendment
• Section: 143(3); 37(1); 201(1); 37; 139

Judgement Text

1 I.T.A. NO. 52/NAG/2013 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR. BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T.A. NO. 52/NAG/2013 ASSESSMENT YEAR :2008-09. SHRI BRIJGOPAL MADHUSUDAN BHATTAD, THE INCOME-TAX OFFICER, PROP. SRIHARI OIL INDUSTRIES, V/S. KHAMGAON. AT POST: SAWARNA-444203. TAH. SHEGAON, DIST. BULDHANA. PAN ABHPB 8683J. APPELLANT. RESPONDENT. APPELLANT BY : SHRI SHRI C.J.THAKAR & SHRI S.C.THAKAR. RESPONDENT BY : SH RI D. RAVI KUMAR. DATE OF HEARING - 30-04-2015 DATE OF ORDER 5 TH JUNE,2015 O R D E R PER SHRI MUKUL K. SHRAWAT, J.M. THIS IS AN APPEAL FILED BY THE ASSESSEE ARISING FRO M THE ORDER OF LEARNED CIT(APPEALS)-I, NAGPUR DATED 29-10-2012 AND THE SUB STANTIVE GROUND RAISED IS REPRODUCED BELOW : THE LEARNED C.I.T.(A)-I ERRED IN CONFIRMING THE D ISALLOWANCE OF INTEREST U/S 40A(IA) AMOUNTING TO RS.6,86,739/-. THE CLAIM OF T HE APPELLANT THAT THE INTEREST HAS TO BE ALLOWED U/S 36(1)(III). 2 I.T.A. NO. 52/NAG/2013 2. FACTS IN BRIEF, AS EMERGED FROM THE CORRESPONDIN G ASSESSMENT ORDER PASSED UNDER SECTION 143(3) DATED 23-10-2010 WERE THAT THE ASSESSEE IN INDIVIDUAL CAPACITY IS A PROPRIETOR OF SHRIRAM OIL INDUSTRIES AND DERIVES INCOME FROM CRUSHING OF OIL SEEDS AND TRADING IN PRODUCTS LIKE COTTON SE ED, OIL AND COTTON SEED CAKE ETC. IN RESPECT OF THE IMPUGNED GROUND, THE OBSERVATION OF THE ASSESSING OFFICER WAS THAT THE ASSESSEE HAD DEBITED AN INTEREST OF ` .6,86,739/- IN THE PROFIT & LOSS ACCOUNT. THE BIFURCATION OF THE SAME WAS AS UNDER : DURING THE EXAMINATION OF BOOKS OF ACCOUNTS, IN INDIVIDUAL CAPACITY OF THE ASSESSEE, IT IS SEEN THAT THE ASSESSEE HAS DEB ITED INTEREST OF ` .6,86,739/- TO THE P&L ACCOUNT PAID TO (I) SHRI RAM ESH N. BHATTAD ` .6,70,279/- AND (II) ` .16,500/- TOTALING TO ` .6,86,779/- LESS INTEREST IN SAVING ACCOUNT OF BANK ` .40/- = ` .6,86,739/- THE ASSESSING OFFICER HAS RAISED TWO FOLD OBJECTIONS . THE FIRST OBJECTION OF THE ASSESSING OFFICER WAS AS UNDER : THE SUBMISSION OF THE ASSESSEE HAS BEEN PERUSED CAREFULLY AND IS NOT ACCEPTABLE. THE ASSESSEE HAS NOT PROVED HOW THE IN TEREST PAID IS INCIDENTAL TO THE BUSINESS ALONGWITH THE EVIDENCE. THE CAPITA L BORROWED ON INTEREST AND ITS UTILIZATION IN BUSINESS HAVE TO BE PROVED THEN ONLY INTEREST CLAIM CAN BE ALLOWED U/S 36(1)(III) OF THE I.T. ACT,1961. M ERE, SAYING THAT THE PERSONAL BOOKS AS WELL AS THE OIL MILL BOOKS ARE INTERLINKE D FINANCIALLY DOES NOT SERVE THE PURPOSE FOR CLAIMING DEDUCTION U/S 36(1)(III) OF THE I.T. ACT. HENCE THE INTEREST DEBITED AT ` . 6,86,739/- IS NOT ALLOWED U/S 36(1)(III) OF THE I .T. ACT,1961 AND ADDED BACK TO THE RETURNED INCOME. 2.1 THE SECOND OBJECTION OF THE ASSESSING OFFICER WA S ABOUT NON DEDUCTION OF TDS AS UNDER : FURTHER VIDE LETTER 30-07-2010, THE ASSESSEE WAS ASKED TO SUBMIT THE EVIDENCE OF T.D.S. MADE ON INTEREST PAID TO THE AB OVE PARTIES. IT IS PERTINENT TO MENTION HERE THAT THE INTEREST PAID AT ` .6,86,739/- IS LIABLE FOR T.D.S. U/S 3 I.T.A. NO. 52/NAG/2013 194A(1) OF THE I.T. ACT SINCE THE ASSESSEE HAS NOT COMPLIED THE PROVISION OF THE TDS AS LAID DOWN IN CHAPTER XVII-B OF THE I.T . ACT,1961 DISALLOWING U/S 40(A)(IA) OF THE I.T. ACT IS TO BE MADE. THE SAY O F THE ASSESSEE THAT NO TAX CAN BE RECOVERED FROM THE DEDUCTOR IF THE DEDUCTEE HAS ALREADY PAID THE TAX ON THE AMOUNTS RECEIVED FROM THE DEDUCTOR IS N OT RELEVANT FOR THE PURPOSE OF DISALLOWANCE OF INTEREST U/S 40(A)(IA) OF THE I.T. ACT, 1961. THUS THE AMOUNT OF ` .6,86,739/- SHALL NOT BE DEDUCTED IN COMPUTING THE INCOME OF THE ASSESSEE ON ACCOUNT OF INTEREST PAID ON WHI CH TAX DEDUCTION AT SOURCE UNDER CHAPTER XVII-B OF THE I.T. ACT,1961 A ND SUCH TAX HAS NOT BEEN DEDUCTED AND SIMULTANEOUSLY, HAS NOT BEEN PAID ON OR BEFORE THE DUE DATE. THUS, DISALLOWANCE OF ` .6,86,739/- IS MADE U/S 40(A)(IA) OF THE I.T. ACT. 3. FINALLY, THE ASSESSING OFFICER HAD MADE AN ADDIT ION OF ` .6,86,739/- WHICH WAS CHALLENGED BEFORE THE FIRST APPELLATE AUTHORITY . 4. THE FIRST APPELLATE AUTHORITY HAS AFFIRMED THE A CTION OF THE ASSESSING OFFICER, ALTHOUGH THE DECISION OF HINDUSTAN COCACOL A BEVERAGE 293 ITR 226 (SC) WAS CITED BEFORE HIM. FOR READY REFERENCE THE FIND ING OF LEARNED CIT(APPEALS) ARE REPRODUCED BELOW: I HAVE CAREFULLY CONSIDERED THE ISSUES BEFORE ME . THE DECISION RELIED UPON BY THE APPELLANT REPORTED IN 293 ITR 226 IS N OT RELEVANT TO THE FACTS OF THE CASE AND THE ISSUE OF DISALLOWANCE UNDER SECTI ON 40A(IA). THE SAID DECISION IS ONLY CONCERNED WITH THE PROVISION OF T HE SEC. 201 WHICH DEAL WITH THE FAILURE OF A DEDUCTOR TO DEDUCT TAX AT SO URCE. IN THE SAID DECISION IT HAS BEEN HELD THAT ONCE TAX HAS BEEN PAID BY THE D EDUCTEE THERE IS NO DEFAULT U/S 201. THE PROVISIONS OF SEC 40A(IA) EXP RESSLY PROVIDE THAT WHEN THERE IS DEFAULT RELATING TO DEDUCTION OF TDS, AN ITEM OF EXPENDITURE SHALL NOT BE ALLOWED AS A DEDUCTION FOR COMPUTING PROFIT S AND GAINS OF A BUSINESS OR PROFESSION. IN A RECENT DECISION REPORTED IN TH E CASE OF MAHARASHTRA STATE ELECTRICITY DISTRIBUTION COMPANY LTD. V/S. A CIT 2011-TIOL-722 ITAT MUMBAI, IT HAS BEEN HELD THAT PAYMENT OF TAX DUE B Y PAYEE WOULD EXONERATE THE ASSESSEE FROM BEING TREATED AS ASSE SSEE IN DEFAULT U/S 201 BUT WOULD NOT OBLITERATE THE OTHER STATUTORY CONSE QUENCE FOR NON 4 I.T.A. NO. 52/NAG/2013 DEDUCTION OF TAX AT SOURCE INCLUDING THIS ALLOWANC E U/S 40A(IA). IT HAS BEEN CLEARLY HELD THAT THE PROVISION OF SECTION 40A(IA) ARE ATTRACTED WHEN THE ASSESSEE FAILS TO DEDUCT TAX AT SOURCE OR PAY SUCH TAX TO THE EXCHEQUER WITHIN THE STIPULATED PERIOD. CONSIDERING THE FACT S AND THE LEGAL PROPOSITION DISCUSSED ABOVE THE DISALLOWANCE IS SUSTAINED. THI S GROUND IS DISMISSED. 5. FROM THE SIDE OF THE APPELLANT, LEARNED A.R. MR. C.J. THAKAR APPEARED. IN RESPECT OF THE APPLICABILITY OF THE PROVISIONS OF S ECTION 36(1)(III) LEARNED A.R. HAS VEHEMENTLY CONTESTED THAT THE PERSONAL BOOKS OF ACC OUNTS AS WELL AS THE BOOKS OF ACCOUNT OF THE PROPRIETARY CONCERN ARE BOTH FOR THE PURPOSE OF BUSINESS ACTIVITY OF THE ASSESSEE, HENCE THE FINANCIAL TRANSACTION BE TWEEN THE SAID TWO ACCOUNTS WERE INTER LINKED AND CONNECTED WITH THE BUSINESS A CTIVITY OF THE ASSESSEE. HE HAS ALSO PLEADED THAT THE LEARNED CIT(APPEALS) HAS CALL ED FOR A REMAND REPORT BUT THERE WAS NO ADVERSE COMMENT ON THIS ISSUE BY THE A SSESSING OFFICER. THE LEARNED A.R. FURTHER MENTIONED THAT ALTHOUGH THE INTEREST W AS PAID FROM THE PERSONAL SET OF BOOKS OF ACCOUNT BUT THAT TOO WAS CONNECTED WITH THE BUSINESS ACTIVITY OF THE ASSESSEE. 5.1 MOREOVER, HE HAS ALSO INFORMED THAT THE INTERES T TO THE TUNE OF ` .6,70,279/- WAS PAID TO SHRI RAMESH BHATTAD WHO IS INDEPENDENTLY ASSESSED TO TAX AND DULY SHOWN THE INTEREST INCOME IN HIS HANDS WHICH WAS ASSESSED ACCORDINGLY. THEREFORE, HE HAS PLEADED THAT THE INT EREST BEING ASSESSED IN THE HANDS OF THE RECIPIENTS DESERVES TO BE ALLOWED IN THE HANDS OF THE ASSESSEE U/S 36(III) OF THE I.T. ACT. 5.2 IN RESPECT OF THIS SECOND ISSUE OF THE APPLICAB ILITY OF THE PROVISIONS OF SECTION 40(A)(IA) HE HAS PLACED RELIANCE ON THE ORD ER OF ITAT, AGRA BENCH, AGRA IN THE CASE OF RAJEEV KUMAR AGRAWAL (ITA NO.337/AGRA)/ 2013. HIS MAIN ARGUMENT 5 I.T.A. NO. 52/NAG/2013 WAS THAT THE PROVISO ANNEXED TO SECTION 40(A)(IA) W AS APPLICABLE FOR THE YEAR UNDER CONSIDERATION AS WELL BEING RETROSPECTIVE IN NATURE AS HELD BY THE RESPECTED AGRA BENCH. 6. ON THE OTHER HAND, FROM THE SIDE OF THE REVENUE, LEARNED D.R. MR. D. RAVI KUMAR HAS CONTESTED THAT IN A SITUATION WHEN THE AD MITTED FACTUAL POSITION IS THAT THE ASSESSEE HAD NOT DEDUCTED TAX ON THE IMPUGNED A MOUNT OF INTEREST THEN THE PROVISIONS OF SECTION 40(A)(IA) WERE RIGHTLY INVOKE D BY THE ASSESSING OFFICER. ABOUT THE SECOND PLANK OF ARGUMENT, LEARNED D.R. HA S ALSO CONTESTED THAT LAW AS INTRODUCED AS PER THE SECOND PROVISOS TO SECTION 40 (A)(IA) IS APPLICABLE WITH EFFECT FROM 01-04-2013. HOWEVER, THE ASSESSMENT YEAR UNDER CONSIDERATION IS ASSESSMENT YEAR 2008-09 THEREFORE, IT IS NOT CORREC T TO APPLY THE SAID PROVISO BY CONSIDERING AS RETROSPECTIVE IN NATURE. LEARNED D.R . HAS PLEADED TO AFFIRM THE ACTION BY THE REVENUE AUTHORITIES. 7. WE HAVE HEARD BOTH THE SIDES AT SOME LENGTH. WE HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW IN THE LIGHT OF THE CASE L AWS CITED AND THE PROVISIONS OF THE ACT REFERRED. AS FAR AS THE ALLOWABILITY OF INT EREST PAYMENT VIS--VIS THE PROVISIONS OF SECTION 36(1)(IIIA) IS CONCERNED, WE ARE NOT IN AGREEMENT WITH THE ACTION TAKEN BY THE ASSESSING OFFICER BECAUSE THE F ACTS OF THE CASE HAVE REVEALED THAT THE PERSONAL ACCOUNTS AS WELL AS THE ACCOUNT O F THE PROPRIETORSHIP CONCERN WERE INTER LINKED. THEREFORE, THE FUNDS UTILIZED BY THE ASSESSEE WERE MEANT FOR THE PURPOSE OF THE BUSINESS. THIS IS NOT THE CASE OF THE ASSESSING OFFICER THAT THERE WAS A NEXUS THAT THE BORROWED FUNDS WERE UTIL IZED FOR THE PERSONAL PURPOSE OF THE ASSESSEE. FROM THE SIDE OF THE ASSESSEE CERT AIN ACCOUNTS WERE PLACED BEFORE THE ASSESSING OFFICER TO DEMONSTRATE THAT TH E SAID FUNDS WERE BORROWED 6 I.T.A. NO. 52/NAG/2013 FOR SETTING UP THE OIL MILL IN THE ASSESSMENT YEAR 2001-02. IT HAS ALSO NOT BEEN DISPUTED BY THE REVENUE AUTHORITIES THAT THE AMOUNT OF INTEREST PAID TO R.N. BHATTAD WAS NOT DISCLOSED BY HIM IN HIS PERSONAL RE TURN. 7.1 MOREOVER SECTION 37(1) WHICH IS A RESIDUARY GEN ERAL PROVISION, MAY HAVE APPLICATION TO ANY EXPENDITURE, INCLUDING INTEREST EXPENDITURE, WHICH IS NOT OF THE NATURE DESCRIBED IN SECTION 30 TO 36 OF I.T. ACT. TO AN EXTENT, SECTION 36(1)(III) AND SECTION 37(1) SO FAR AS THE ALLOWANCE OF INTEREST I S CONCERNED, RUN PARALLEL TO EACH OTHER. BUT THESE TWO SECTIONS DO DIFFER AND IT CAN BE DISCERNED THAT UNDER SECTION 36(1)(III) THE BORROWED AMOUNT MAY BE UTILI ZED EVEN FOR PROCURING A CAPITAL ASSET RELATED TO THE BUSINESS. HOWEVER, ON THE OTHER HAND, UNDER SECTION 37(1) THE DEBT INCURRED MUST NOT BE UTILIZED FOR PR OCURING A CAPITAL ASSET. HENCE CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTA NCES OF THE CASE, EVEN THE ALTERNATIVE PLEA IS ACCEPTABLE THAT THE INTEREST IN QUESTION IS OTHERWISE ALLOWABLE UNDER SECTION 37(1) OF THE I.T. ACT BEING WHOLLY A ND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THUS CONSIDERING THE TOTALITY OF THE FA CTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT THERE WAS NO LOGICAL BASIS BY THE ASSESSING OFFICER TO DISALLOW THE CLAIM OF INTEREST UNDER SECTION 36(1)(III) OF THE I.T. ACT. ACCORDINGLY THIS PART OF THE ACTION OF TH E ASSESSING OFFICER IS HEREBY REVERSED. 7.2 NEXT IS THE LEGAL ISSUE ABOUT THE APPLICABILITY OF PROVISO TO SECTION 40(A)(IA) OF THE ACT THAT TOO FOR THE YEAR UNDER CONSIDERATIO N. THE ADMITTED FACTUAL POSITION WAS THAT THE ASSESSEE HAS NOT DEDUCTED THE TDS ON I NTEREST. AS PER THE ASSESSING OFFICER, THE ASSESSEE WAS LIABLE TO DEDUCT THE TDS UNDER SECTION 194A(1) OF THE I.T. ACT. SINCE THE ASSESSEE HAD NOT COMPLIED WITH THE SAID PROVISIONS OF DEDUCTING 7 I.T.A. NO. 52/NAG/2013 THE TDS, HENCE INVOKED THE PROVISIONS OF SECTION 40 (A)(IA) OF THE I.T. ACT. ON THE OTHER HAND, THE CONTENTION OF THE ASSESSEE BEFORE T HE REVENUE AUTHORITIES WAS THAT IN THE LIGHT OF THE DECISION OF HINDUSTAN COCA COLA BEVERAGE 293 ITR 226 (SUPRA) THE ASSESSEE WAS NOT UNDER AN OBLIGATION TO DEDUCT THE TDS WHEN THE ADMITTED FACTUAL POSITION WAS THAT THE DEDUCTEE/REC IPIENT HAS PAID THE INCOME- TAX ON THE SAID AMOUNT OF INTEREST BY FILING THE RE TURN. THE ARGUMENT OF THE ASSESSEE IS THAT IN A SITUATION WHEN THE DEDUCTEE H AS PAID THE TAX ON THE IMPUGNED INTEREST AMOUNT THEN THERE WAS NO LOSS TO THE REVENUE DEPARTMENT AS FAR AS THE TAX ON THE SAID INTEREST AMOUNT WAS CONC ERNED. THIS ARGUMENT HAS OTHER LEGAL PROPOSITION AS WELL, THAT ON THE SAME AMOUNT OF INTEREST THERE SHALL NOT BE INCIDENCE OF INCOME-TAX AT TWO PLACES, ONE A S TDS AND THE OTHER AS SELF ASSESSMENT TAX BY THE RECIPIENT. OTHERWISE ALSO THU MB RULE IS THAT THERE SHALL NOT BE DOUBLE TAXATION ON THE SAME AMOUNT OF INCOME. 7.3 TO ADDRESS THIS SITUATION OF DOUBLE TAXATION NOW THE LEGISLATURE HAS CONSIDERED THAT ASPECT OF DOUBLE TAXATION AND THERE UPON CAME WITH AN AMENDMENT BY INSERTION OF SECOND PROVISO TO SECTION 40(A)(IA) BY FINANCE ACT, 2012 WITH EFFECT FROM 01-04-2013. FOR READY REFERE NCE, THE SECOND PROVISO IS REPRODUCED BELOW : PROVIDED FURTHER THAT WHERE AN ASSESSEE FAILS TO DEDUCT THE WHOLE OR ANY PART OF THE TAX IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER XVII-B ON ANY SUCH SUM BUT IS NOT DEEMED TO BE AN ASSESSEE IN DE FAULT UNDER THE FIST PROVISO TO SUB-SECTION (1) OF SECTION 201, THEN, F OR THE PURPOSE OF THIS SUB- CLAUSE, IT SHALL BE DEEMED THAT THE ASSESSEE HAS D EDUCTED AND PAID THE TAX ON SUCH SUM ON THE DATE OF FURNISHING OF RETURN OF INCOME BY THE RESIDENT PAYEE REFERRED TO IN THE SAID PROVISO. 8 I.T.A. NO. 52/NAG/2013 7.4 IN OUR HUMBLE OPINION, THIS PROVISO IS INSERTE D BY KEEPING IN MIND THE LAW LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF HINDUSTAN COCACOLA BEVERAGE (SUPRA). SO, ACCORDING TO THIS PROVISO, IN A SITUATION WHERE AN ASSESSEE HAD FAILED TO DEDUCT THE TAX IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER XVII-B, HOWEVER, IS NOT DEEMED TO BE IN DEFAULT ON ACCOUNT OF APPLICABILITY OF THE PROVISIONS OF SECTION 201(1), THEN FOR THE PURPOSE OF THE PROVISIONS OF SECTION 40(A)(IA), AS WELL, SHALL BE DEEMED THAT THE ASSESS EE HAS DEDUCTED AND PAID THE TAX ON SUCH SUM ON THE DATE OF FURNISHING OF THE R ETURN OF INCOME BY THE PAYEE REFERRED TO IN THE SAID PROVISO. 8. TO UNDERSTAND THE INTENTION OF THIS LEGISLATURE, WE HAVE ALSO PERUSED THE PROVISIONS OF SECTION 201(1) OF CHAPTER XVII OF I.T . ACT. AS PER THIS SECTION, WHERE ANY PERSON WHO IS REQUIRED TO DEDUCT ANY SUM IN ACC ORDANCE WITH THE PROVISIONS OF THIS ACT DOES NOT DEDUCT TAX, THEN SHALL BE DEEM ED TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF SUCH TAX. HOWEVER, BY FIRST PROVISO, AN EXCEPTION HAS BEEN PROVIDED THAT IF ANY PERSON WHO FAILS TO DEDUCT THE TAX UNDE R THIS CHAPTER ON THE SUM CREDITED TO THE ACCOUNT OF THE RECIPIENT, SHALL NOT BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF SUCH TAX, IF THE RECIPIENT HA S FURNISHED THE RETURN OF INCOME UNDER SECTION 139 OF I.T. ACT AND HAS TAKEN INTO AC COUNT SUCH SUM FOR COMPUTING INCOME IN THE RETURN OF INCOME AND THAT THE RECIPIE NT HAS PAID THE TAX DUE ON THE INCOME DECLARED BY HIM IN THE RETURN OF INCOME. THE RE IS A PROCEDURAL REQUIREMENT THAT A CERTIFICATE TO THAT EFFECT IS RE QUIRED TO BE FURNISHED IN THE PRESCRIBED FORM. SO THE CONSEQUENCE OF THE INSERTIO N OF SECOND PROVISO TO SECTION 40(A)(IA) IS THAT THE DEFAULT UNDER SECTION 40(A)(IA) IS NOT TO BE EXAMINED 9 I.T.A. NO. 52/NAG/2013 IN ISOLATION BUT NOW IT IS REQUIRED TO BE EXAMINED ALONG WITH THE APPLICABILITY OF THE PROVISIONS AS ENUMERATED IN SECTION 201(1) OF I .T. ACT. IN OTHER WORDS, HENCEFORTH, AFTER THE SAID INSERTION, A CONJOINED READING OF BOTH THE PROVISIONS OF CHAPTER IV AND CHAPTER XVII-B ARE REQUIRED. 9. THE NEXT ISSUE IS ABOUT THE PERIOD FROM WHICH TH E SECOND PROVISO TO SECTION 40(A)(IA) IS APPLICABLE. THIS ASPECT WAS CONSIDERED BY RESPECTED COORDINATE BENCH, ITAT, AGRA IN THE CASE OF RAJEEV KUMAR AGRAWAL (SUP RA). ON CAREFUL READING OF THIS JUDGMENT IT EMERGES THAT A VIEW HAS BEEN TAKEN THA T THE INSERTION OF SECOND PROVISO TO SECTION 40(A)(IA) WAS DECLARATORY AS WEL L AS CURATIVE IN NATURE, HENCE EFFECTIVE RETROSPECTIVELY FROM 1 ST APRIL, 2005, BEING THE DATE FROM WHICH SUB- CLAUSE (IA) OF SECTION 40(A) WAS INSERTED BY FINANC E (NO.2) ACT , 2004. THE INSERTION OF SECOND PROVISO APPEARS TO BE ON THE GROUND OF E QUITY AND NATURAL JUSTICE BECAUSE THE INCOME-TAX CANNOT BE LEVIED TWO TIMES O N THE SAME INCOME. FURTHER, ACCORDING TO US, THERE SHOULD BE ONE MORE REASONS T HAT THE PROVISIONS OF SECTION 40(A)(IA) ARE OTHERWISE HARSH IN NATURE BECAUSE AN EXPENDITURE WHICH IS OTHERWISE ALLOWABLE UNDER SECTION 37 OR UNDER GENERAL PROVISI ONS OF I.T. ACT ARE FORCED TO BE DISALLOWED BY INVOKING THIS SECTION SIMPLY BECAUSE OF THE REASON THAT THE REQUIREMENT OF TDS WAS NOT FOLLOWED. THE CONSEQUENC E OF THE PROVISIONS OF SECTION 40(A)(IA) IS THAT A GENUINE EXPENDITURE WHI CH IS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS ALTHOUGH AL LOWABLE UNDER THE NORMAL PROVISIONS OF I.T. ACT SHOULD BE CURTAILED SIMPLY BECAUSE OF THE REASON THAT THE PAYEE OR THE ASSESSEE WHO HAS INCURRED THE EXPENDIT URE HAS NOT DEDUCTED THE TAX. THEREFORE, TO OVERCOME THIS HARDSHIP, SPECIAL LY WHEN THE DEDUCTEE HAS PAID THE TAX ON THE SAID AMOUNT, THE RESPECTED LEGISLATU RE , IN OUR HUMBLE VIEW, SEEMS 10 I.T.A. NO. 52/NAG/2013 TO BE JUSTIFIED IN INSERTING THIS NEW PROVISO. THER EFORE, WE ARE ALSO OF THE OPINION, AS EXPRESSED BY THE RESPECTED COORDINATE BENCH AGRA , THAT THE AMENDMENT HAS BROUGHT INTO THE STATUTE WAS MAINLY TO MITIGATE THE RIGOR OF HARSH PROVISIONS OF DISALLOWANCE OF EXPENDITURE UNDER SECTION 40(A)(IA) , THEREFORE, INTENDED TO BE APPLIED RETROSPECTIVELY, SPECIALLY WHEN THERE IS NO INDICATION IN THE LANGUAGE OF THE SAID PROVISO ABOUT THE PROSPECTIVE APPLICABILIT Y. 10. WE, THEREFORE, CONCLUDE THAT AFTER LAYING DOWN THE APPLICABILITY OF SECOND PROVISO TO SECTION 40(IA) WITH RETROSPECTIVE EFFECT , WE HERE BY REMIT THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER TO DECIDE ACCORDING TO LAW AFTER HAVING VERIFIED THE PAYMENT OF TAX BY THE RECIPIENT OF THE INTEREST INCOME IN HIS RESPECTIVE HANDS BY FILING THE RETURN AS PRESCRIBED IN THE STATUTE. . THE ASSESSEE IS SIDE BY SIDE DIRECTED TO FURNISH THE REQUISITE DETA ILS TO THE ASSESSING OFFICER AND FULLY COOPERATE WITH THE PROCEEDINGS. 11. RESULTANTLY, THE GROUND RAISED BY THE ASSESSEE BEING RESTORED BACK FOR READJUDICATION , HENCE MAY BE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 5 TH DAY OF JUNE, 2015. SD/- SD/- (SHAMIM YAHYA) (MUKUL K. SHRAWAT) ACCOUNTANT MEMBER JUDICIAL MEMBER. NAGPUR, DATED: 5 TH JUNE, 2015.