M/s. Shree Balaji Grit Udyog, Gurgaon V. ITO, Rewari

ITA 5476/DEL/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3673 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2012-2013
• Appeal Filed On: 21-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Keywords: Retrospective amendment; Question of law
• Section: 143(3); 142(1); 139

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES G, DELHI .. , , , ! BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI JOGINDER SINGH, JUDICIAL MEMBER, ITA NO.5476/DEL/2016 ASSESSMENT YEAR: 2012-13 M/S SHREE BALAJI GRIT UDYOG, NEAR SBI, RAO PRASAD SADAN, NH8, DHARUHERA DIST. REWARI-123106 / VS. ITO, WARD-3, REWARI ( %& /ASSESSEE) ( / REVENUE) P.A. NO.-ABMFS6461N + / DATE OF HEARING : 09 /11 /2017 + / DATE OF ORDER: 09 / 11 /2017 %& / ASSESSEE BY SHRI MAHAVIR SINGH / REVENUE BY SHRI S.S. RANA CIT -DR ITA NO.5476/DEL./2016 M/S SHREE BALAJI GRIT UDYOG 2 / O R D E R PER JOGINDER SINGH, JUDICIAL MEMBER THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER DAT ED 14/09/2016 OF THE LD. FIRST APPELLATE AUTHORITY, DE LHI, IN CONFIRMING THE DISALLOWANCE OF INTEREST PAID TO NBF CS WITHOUT DEDUCTION OF TAX U/S 40(A)(IA) OF THE INCOM E TAX ACT, 1961 (HEREINAFTER THE ACT) DESPITE THE FACT THAT TH E ASSESSEE SUBMITTED THE CERTIFICATE OF THE C.A., IN PRESCRIBE D PERFORMA, IN RESPECT OF EACH COMPANY AND ALL THESE NBFCS ARE ASSESSED TO TAX IN INDIA ON THEIR INCOME. 2. DURING HEARING, THE LD. COUNSEL FOR THE ASSESSE E, SHRI MAHAVIR SINGH, ADVANCED ARGUMENTS WHICH IS IDE NTICAL TO THE GROUND RAISED BY CLAIMING THAT THE IMPUGNED ISSUE IS COVERED BY THE DECISION OF THE AGRA BENCH OF THE TR IBUNAL IN THE CASE OF RAJEEV KUMAR AGARWAL VS ADDL. CIT (ITA NO.337/AGRA/2013), ORDER DATED 29/05/2013 AND ALSO FROM HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF AN SAL LAND MARK TOWNSHIP PVT. LTD. (ITA 160 OF 2015 AND 161 OF 2015), ORDER DATED 26/08/2015. THIS FACTUAL MATRIX WAS NOT ITA NO.5476/DEL./2016 M/S SHREE BALAJI GRIT UDYOG 3 CONTROVERTED BY THE LD. CIT-DR, SHRI S.S. RANA, THO UGH HE DEFENDED THE ADDITION/DISALLOWANCE, MADE BY THE LD. AO. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT THE ASSESSEE DECLARED INCOME OF RS.14,78,4 70/- IN ITS RETURN FILED ON 29/09/2012, WHICH WAS PROCESSED U/S 143(1) ON 26/02/2013 AT THE RETURNED INCOME. THE CA SE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY UNDER CASS, THEREFORE, NOTICES U/S 143(2), AND 142(1) WERE SERV ED UPON THE ASSESSEE TO WHICH THE ASSESSEE ATTENDED THE ASS ESSMENT PROCEEDINGS FROM TIME TO TIME AND FURNISHED THE DET AILS ASKED FOR ALONG WITH THE COPY OF AUDITORS REPORT D ATED 12/09/2012. IT WAS OBSERVED FROM THE ACCOUNTS OF T HE ASSESSEE THAT A LOAN OF RS.3,33,24,028/- WAS RAISED AND THE ASSESSEE MADE PAYMENT OF INTEREST TO THE FINANCIAL COMPANIES. IT WAS OBSERVED BY THE AO THAT THESE ORGANIZATION ARE NEITHER BY BANKING COMPANY NOR FIN ANCIAL CORPORATION, THEREFORE, THE EXPENSES CLAIMED ON ACC OUNT OF INTEREST/FINANCES CHARGES AMOUNTING TO RS.53,75,972 /- ARE NOT ALLOWABLE U/S 40(A)(IA) OF THE ACT. THUS, THE D ISALLOWANCE ITA NO.5476/DEL./2016 M/S SHREE BALAJI GRIT UDYOG 4 OF THIS AMOUNT WAS MADE BY THE AO WITHOUT DEDUCTION OF TDS AND ADDED BACK TO THE RETURNED INCOME. ON APPEA L BEFORE THE LD. CIT(A), THE ADDITION MADE BY THE AO SUSTAINED, WHICH IS UNDER CHALLENGE BEFORE THIS TRI BUNAL. 2.2. IF THE OBSERVATION MADE IN THE ASSESSMENT ORD ER, CONCLUSION DRAWN IN THE IMPUGNED ORDER, CASES RELIE D UPON BY THE ASSESSEE AND THE MATERIAL FACTS AVAILABLE ON RECORD, IF KEPT IN JUXTAPOSITION AND ANALYZED, BEFORE ADVERTIN G FURTHER, WE ARE REPRODUCING HEREUNDER THE RELEVANT PORTION F ROM THE ORDER OF THE AGRA BENCH OF THE TRIBUNAL IN THE CASE OF RAJEEV KUMAR AGRAWAL (SUPRA) FOR READY REFERENCE AND ANALY SIS:- 1. THIS APPEAL, FILED BY THE ASSESSEE, CALLS INTO Q UESTION CORRECTNESS OF LEARNED COMMISSIONER (APPEALS) ORDER DATED 2 ND SEPTEMBER, 2013, IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER TO AS THE ACT) , FOR THE ASSESSMENT YEAR 2006-07, UPHOLDING THE DISALLOWANCE OF RS 5,01,872 UNDER SECTION 40(A)(IA) OF THE ACT. 2. THE ISSUE IN APPEAL LIES IN A RATHER NARROW COMP ASS OF UNDISPUTED MATERIAL FACTS. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTIC ED THAT THE ASSESSEE HAS MADE INTEREST PAYMENTS, AGGREGATIN G TO RS 5,01,872, WITHOUT DISCHARGING HIS TAX WITHHOLDING O BLIGATIONS UNDER SECTION 194A. IT WAS IN THIS BACKDROP THAT TH E ASSESSING OFFICER, HAVING NOTED THE UNDISPUTED POSI TION REGARDING APPLICABILITY OF SECTION 194 A ON THE FAC TS OF THIS CASE, AND HAVING NOTED THAT THE SCOPE OF SECTION 40 (A)(IA) RESTRICTING DEDUCTION IN RESPECT OF SUMS IN RESPECT OF WHICH TAX WITHHOLDING LIABILITY IS NOT DISCHARGED, DISALL OWED RS 5,01,872 UNDER SECTION 40(A)(IA) R.W.S. 194 A OF TH E ACT. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BE FORE THE ITA NO.5476/DEL./2016 M/S SHREE BALAJI GRIT UDYOG 5 CIT(A). IT WAS, INTER ALIA, CONTENDED BY THE ASSESSEE THAT IN VIEW OF THE INSERTION OF SECOND PROVISO TO SECTION 40(A)(IA) BY THE FINANCE ACT 2012, AND IN VIEW OF THE FACT THAT THE RECIPIENTS OF THE INTEREST HAVE ALREADY INCLUDED TH E INCOME EMBEDDED IN THESE PAYMENTS IN THEIR TAX RETURNS FIL ED UNDER SECTION 139, DISALLOWANCE UNDER SECTION 40(A)(IA) C OULD NOT BE INVOKED IN THIS CASE. IT WAS ALSO CONTENDED THAT EVEN THOUGH THIS PROVISO IS STATED TO BE EFFECTIVE 1 ST APRIL 2013, SINCE THE AMENDMENT IN DECLARATORY AND CURATIVE IN NATURE, AND, THEREFORE, IT SHOULD BE GIVEN RETROSPECTIVE EF FECT FROM 1 ST APRIL, 2005, BEING THE DATE FROM WHICH SUB CLAUSE ( IA) OF SECTION 40(A) WAS INSERTED BY THE FINANCE (NO. 2) A CT, 2004. NONE OF THESE SUBMISSIONS, HOWEVER, IMPRESSED THE L EARNED CIT(A). RELYING UPON A SPECIAL BENCH DECISION IN TH E CASE OF BHARATI SHIPYARD LTD VS. DCIT (141 TTJ 129), HEREJECTED THIS PLEA AND CONCLUDED THAT INSERTION OF SECOND P ROVISO TO SECTION 40(A)(IA) CANNOT BE HELD TO HAVE RETROSPECT IVE EFFECT. THE DISALLOWANCE WAS THUS CONFIRMED BY THE LEARNED CIT(A). THE ASSESSEE IS AGGRIEVED AND IS IN APPEAL BEFORE U S. 3. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATR IX OF THE CASE AS ALSO THE APPLICABLE LEGAL POSITION. 4. LET US FIRST TAKE A LOOK AT THE LEGISLATIVE AMEN DMENT OF SECTION 40(A)(IA), VIDE FINANCE ACT 2012, AND TRY T O APPRECIATE THE SCHEME OF THINGS AS EVIDENT IN THE AMENDED SECT ION. SECOND PROVISO TO SECTION 40(A)(IA), INTRODUCED WIT H EFFECT FROM 1 ST APRIL 2013, PROVIDES, THAT WHERE AN ASSESSEE FAILS TO DEDUCT THE WHOLE OR ANY PART OF THE TAX IN ACCOR DANCE WITH THE PROVISIONS OF CHAPTER XVII-B ON ANY SUCH S UM BUT IS NOT DEEMED TO BE AN ASSESSEE IN DEFAULT UNDE R THE FIRST PROVISO TO SUB-SECTION (1) OF SECTION 201, TH EN, FOR THE PURPOSE OF THIS SUB-CLAUSE, IT SHALL BE DEEMED THAT THE ASSESSEE HAS DEDUCTED AND PAID THE TAX ON SUCH SUM ON THE DATE OF FURNISHING OF RETURN OF INCOME BY TH E RESIDENT PAYEE REFERRED TO IN THE SAID PROVISO. IN OTHER WORDS, AS LONG AS THE ASSESSEE CANNOT BE TREATED AS AN ASSESSEE IN DEFAULT, THE DISALLOWANCE UNDER SECTION 40(A)(IA) CANNOT COME INTO PLAY EITHER. TO UNDERSTAND THE EFF ECT OF THIS PROVISO, IT IS USEFUL TO REFER TO FIRST PROVISO TO SECTION 201(1), WHICH IS ALSO INTRODUCED BY THE FINANCE ACT 2012AND EFFECTIVE1 ST JULY 2012, AND WHICH PROVIDES THAT ANY PERSON, INCLUDING THE PRINCIPAL OFFICER OF A COMPANY, WHO F AILS TO DEDUCT THE WHOLE OR ANY PART OF THE TAX IN ACCORDAN CE WITH THE PROVISIONS OF THIS CHAPTER ON THE SUM PAID TO A RESIDENT OR ON THE SUM CREDITED TO THE ACCOUNT OF A RESIDENT SHALL NOT BE DEEMED TO BE AN ASSESSEE IN D EFAULT IN RESPECT OF SUCH TAX IF SUCH RESIDENT-(I) HAS FUR NISHED HIS RETURN OF INCOME UNDER SECTION 139; (II) HAS TA KEN INTO ITA NO.5476/DEL./2016 M/S SHREE BALAJI GRIT UDYOG 6 ACCOUNT SUCH SUM FOR COMPUTING INCOME IN SUCH RETUR N OF INCOME; AND(III) HAS PAID THE TAX DUE ON THE INC OME DECLARED BY HIM IN SUCH RETURN OF INCOME, AND THE P ERSON FURNISHES A CERTIFICATE TO THIS EFFECT FROM AN ACCO UNTANT IN SUCH FORM AS MAY BE PRESCRIBED . THE UNAMBIGUOUS UNDERLYING PRINCIPLE SEEMS TO BE THAT IN THE SITUAT IONS IN WHICH THE ASSESSEES TAX WITHHOLDING LAPSE HAVE NOT RESULTED IN ANY LOSS TO THE EXCHEQUER, AND THIS FACT CAN BE REASONABLY DEMONSTRATED, THE ASSESSEE CANNOT BE TREATED AS AN ASSESSEE IN DEFAULT. THE NET EFFECT OF THESE AMENDM ENTS IS THAT THE DISALLOWANCE UNDER SECTION 40(A)(IA) SHALL NOT BE ATTRACTED IN THE SITUATIONS IN WHICH EVEN IF THE AS SESSEE HAS NOT DEDUCTED TAX AT SOURCE FROM THE RELATED PAYMENT S FOR EXPENDITURE BUT THE RECIPIENT OF THE MONIES HAS TAK EN INTO ACCOUNT THESE RECEIPTS IN COMPUTATION OF HIS INCOME , PAID DUE TAXES, IF ANY, ON THE INCOME SO COMPUTED AND HAS FI LED HIS INCOME TAX RETURN UNDER SECTION 139(1). THERE IS AL SO A PROCEDURAL REQUIREMENT OF ISSUANCE OF A CERTIFICATE , IN THE PRESCRIBED FORMAT, EVIDENCING COMPLIANCE OF THESE C ONDITIONS BY THE RECIPIENTS OF INCOME, BUT THAT IS ESSENTIALL Y A PROCEDURAL ASPECT OF THE MATTER. THE LEGISLATIVE AM ENDMENT SO BROUGHT ABOUT BY THE FINANCE ACT, 2012, SO FAR A S THE SCHEME OF DISALLOWANCE UNDER SECTION 40(A)(IA) IS C ONCERNED, SUBSTANTIALLY MITIGATES THE RIGOUR OF, WHAT OTHERWI SE SEEMED TO BE, A RATHER HARSH DISALLOWANCE PROVISION. 5. AS FOR THE QUESTION AS TO WHETHER THIS AMENDMENT CAN BE TREATED AS RETROSPECTIVE IN NATURE, EVEN IN THE CASE OF BHARTI SHIPYARD (SUPRA) A SPECIAL BENCH DECISION VEHEMENTLY RELIED UPON IN SUPPORT OF REVENUES CASE , THE SPECIAL BENCH, ON PRINCIPLES, SUMMED UP THE SETTLED LEGAL POSITION TO THE EFFECT THAT ANY AMENDMENT OF THE SUBSTANTIVE PROVISION WHICH IS AIMED AT (INTER ALIA) REMOVING UNINTENDED CONSEQUENCES TO MAKE THE PROVISIONS WORKABLE HAS TO BE TREATED AS RETROSPECT IVE NOTWITHSTANDING THE FACT THAT THE AMENDMENT HAS BEE N GIVEN EFFECT PROSPECTIVELY . IT WAS HELD THAT IF THE CONSEQUENCES SOUGHT TO BE REMEDIED BY THE SUBSEQUEN T AMENDMENTS WERE TO BE TREATED AS INTENDED CONSEQUE NCES, THE AMENDMENT COULD NOT BE TREATED AS RETROSPECTIVE IN EFFECT. THE SPECIAL BENCH THEN PROCEEDED TO DRAW A LINE OF DEMARCATION BETWEEN INTENDED CONSEQUENCES AND UNINT ENDED CONSEQUENCES, AND FINALLY THE RETROSPECTIVITY OF FI RST PROVISO WAS DECIDED AGAINST THE ASSESSEE ON THE GROUND THAT THIS SPECIAL BENCH WAS OF THE CONSIDERED VIEW THAT THE OBJECTIVE SOUGHT TO BE ACHIEVED BY BRINGING OUT SECTION 40(A) (IA) IS THE AUGMENTATION OF TDS PROVISIONS AND WENT ON TO ADD THAT IF, IN ATTAINING THIS MAIN OBJECTIVE OF AUGMENTATIO N OF SUCH PROVISIONS, THE ASSESSEE SUFFERS DISALLOWANCE OF ANY AMOUNT IN THE YEAR OF DEFAULT, WHICH IS OTHERW ISE ITA NO.5476/DEL./2016 M/S SHREE BALAJI GRIT UDYOG 7 DEDUCTIBLE, THE LEGISLATURE ALLOWED IT TO CONTINUE . IT WAS FURTHER OBSERVED THAT THIS IS THE COST WHICH PARLIAMENT HAS AWARDED TO THOSE ASSESSEES WHO FAIL TO COMPLY WITH THE RELEVANT PROVISIONS BY CONSIDERING OVERALL OBJECTIV E OF BOOSTING TDS COMPLIANCE (EMPHASIS BY UNDERLINING SUPPLIED BY US) . IN OTHER WORDS, THE AMENDMENT WAS HELD TO BE PROSPECTIVE BECAUSE, IN THE WISDOM OF THE SPECIA L BENCH, THE 2010 AMENDMENT TO SECTION 40(A)(IA) BY INSERTIN G FIRST PROVISO THERETO, WHICH IS WHAT THE SPECIAL BENCH WA S DEALING WITH, WAS AN INTENDED CONSEQUENCE OF THE PROVISIO N OF SECTION 40(A)(IA). 6. HOWEVER, THE STAND SO TAKEN BY THE SPECIAL BENCH WAS DISAPPROVED BY HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS RAJINDER KUMAR (362 ITR 241). WHILE DOING SO, THEIR LORDSHIPS OBSERVED THAT, THE OBJECT OF INTRODUCTIO N OF SECTION 40(A)(IA) IS TO ENSURE THAT TDS PROVISIONS ARE SCRUPULOUSLY IMPLEMENTED WITHOUT DEFAULT IN ORDER T O AUGMENT RECOVERIES ..FAILURE TO DEDUCT TDS OR DEPOSIT TDS RESULTS IN LOSS OF REVENUE AND MAY DEPRIVE THE GOVERNMENT OF THE TAX DUE AND PAYABLE (EMPHASIS BY UNDERLINING SUPPLIED BY US) . HAVING NOTED THE UNDERLYING OBJECTIVES, THEIR LORDSHIPS ALSO PUT IN A WORD OF C AUTION BY OBSERVING THAT, THE PROVISION SHOULD BE INTERPRETED IN A FAIR, JUST AND EQUITABLE MANNER . THEIR LORDSHIPS THUS RECOGNIZED THE BIGGER PICTURE OF REALIZATION OF LEG ITIMATE TAX DUES, AS OBJECT OF SECTION 40(A)(IA), AND THE NEED OF ITS FAIR, JUST AND EQUITABLE INTERPRETATION. THIS APPROACH IS QUALITATIVELY DIFFERENT FROM PERCEIVING THE OBJECT OF SECTION 40(A)(IA) AS AWARDING OF COSTS ON THE ASSESSEES WH O FAIL TO COMPLY WITH THE RELEVANT PROVISIONS BY CONSIDERING OVERALL OBJECTIVE OF BOOSTING TDS COMPLIANCE. NOT ONLY THE CONCLUSIONS ARRIVED AT BY THE SPECIAL BENCH WERE DI SAPPROVED BUT THE VERY FUNDAMENTAL ASSUMPTION UNDERLYING ITS APPROACH, I.E. ON THE ISSUE OF THE OBJECT OF SECTION 40(A)(IA ), WAS REJECTED TOO. IN ANY EVENT, EVEN GOING BY BHARTI SH IPYARD DECISION (SUPRA), WHAT WE HAVE TO REALLY EXAMINE IS WHETHER 2012 AMENDMENT, INSERTING SECOND PROVISO TO SECTION 40(A)(IA), DEALS WITH AN INTENDED CONSEQUENCE OR WITH AN UNINTENDED CONSEQUENCE. 7. WHEN WE LOOK AT THE OVERALL SCHEME OF THE SECTIO N AS IT EXISTS NOW AND THE BIGGER PICTURE AS IT EMERGES AFT ER INSERTION OF SECOND PROVISO TO SECTION 40(A)(IA), IT IS BEYON D DOUBT THAT THE UNDERLYING OBJECTIVE OF SECTION 40(A)(IA) WAS T O DISALLOW DEDUCTION IN RESPECT OF EXPENDITURE IN A SITUATION IN WHICH THE INCOME EMBEDDED IN RELATED PAYMENTS REMAINS UNTAXED DUE TO NON DEDUCTION OF TAX AT SOURCE BY THE ASSESSEE. IN OTHER WORDS, DEDUCTIBILITY OF EXPENDITURE IS MADE CONTING ENT UPON ITA NO.5476/DEL./2016 M/S SHREE BALAJI GRIT UDYOG 8 THE INCOME, IF ANY, EMBEDDED IN SUCH EXPENDITURE BE ING BROUGHT TO TAX, IF APPLICABLE. IN EFFECT, THUS, A D EDUCTION FOR EXPENDITURE IS NOT ALLOWED TO THE ASSESSEES, IN CAS ES WHERE ASSESSEES HAD TAX WITHHOLDING OBLIGATIONS FROM THE RELATED PAYMENTS, WITHOUT CORRESPONDING INCOME INCLUSION BY THE RECIPIENT.THAT IS THE CLEARLY DISCERNABLE BIGGER PI CTURE, AND, UNMISTAKABLY, A VERY PRAGMATIC AND FAIR POLICY APPR OACH TO THE ISSUE HOWSOEVER BELATED THE REALIZATION OF UN INTENDED AND UNDUE HARDSHIPS TO THE TAXPAYERS MAY HAVE BEEN. IT SEEMS TO PROCEED ON THE BASIS, AND RIGHTLY SO, THAT SEEKING TAX DEDUCTION AT SOURCE COMPLIANCE IS NOT AN END IN ITSELF, SO FAR AS THE SCHEME OF THIS LEGAL PROVISION IS CONCER NED, BUT IS ONLY A MEAN OF RECOVERING DUE TAXES ON INCOME EMBED DED IN THE PAYMENTS MADE BY THE ASSESSEE. THATS HOW, AS WE HAVE SEEN A SHORT WHILE AGO, HONBLE DELHI HIGH COURT HA S VISUALIZED THE SCHEME OF THINGS AS EVIDENT FROM T HEIR LORDSHIPS REFERENCE TO AUGMENTATION OF RECOVERIES IN THE CONTEXT OF LOSS OF REVENUE AND DEPRIVING THE GOVERNMENT OF THE TAX DUE AND PAYABLE. 8. WITH THE BENEFIT OF THIS GUIDANCE FROM HONBLE D ELHI HIGH COURT, IN VIEW OF LEGISLATIVE AMENDMENTS MADE FROM TIME TO TIME, WHICH THROW LIGHT ON WHAT WAS ACTUALLY SO UGHT TO BE ACHIEVED BY THIS LEGAL PROVISION, AND IN THE LIGHT OF THE ABOVE ANALYSIS OF THE SCHEME OF THE LAW, WE ARE OF THE CO NSIDERED VIEW THAT SECTION 40(A)(IA) CANNOT BE SEEN AS INTEN DED TO BE A PENAL PROVISION TO PUNISH THE LAPSES OF NON DEDUCTI ON OF TAX AT SOURCE FROM PAYMENTS FOR EXPENDITURE- PARTICULAR LY WHEN THE RECIPIENTS HAVE TAKEN INTO ACCOUNT INCOME EMBED DED IN THESE PAYMENTS, PAID DUE TAXES THEREON AND FILED IN COME TAX RETURNS IN ACCORDANCE WITH THE LAW. AS A COROLLARY TO THIS PROPOSITION, IN OUR CONSIDERED VIEW, DECLINING DEDU CTION IN RESPECT OF EXPENDITURE RELATING TO THE PAYMENTS OF THIS NATURE CANNOT BE TREATED AS AN INTENDED CONSEQUENCE OF S ECTION 40(A)(IA). IF IT IS NOT AN INTENDED CONSEQUENCE I.E . IF IT IS AN UNINTENDED CONSEQUENCE, EVEN GOING BY BHARTI SHIPYA RD DECISION (SUPRA), REMOVING UNINTENDED CONSEQUENCES TO MAKE THE PROVISIONS WORKABLE HAS TO BE TREATED AS RETROSPECTIVE NOTWITHSTANDING THE FACT THAT THE AME NDMENT HAS BEEN GIVEN EFFECT PROSPECTIVELY. REVENUE, THUS , DOES NOT DERIVE ANY ADVANTAGE FROM SPECIAL BENCH DECISION IN THE CASE BHARTI SHIPYARD (SUPRA). 9. ON A CONCEPTUAL NOTE, PRIMARY JUSTIFICATION FOR SUCH A DISALLOWANCE IS THAT SUCH A DENIAL OF DEDUCTION IS TO COMPENSATE FOR THE LOSS OF REVENUE BY CORRESPONDING INCOME NOT BEING TAKEN INTO ACCOUNT IN COMPUTATION OF TAXA BLE INCOME IN THE HANDS OF THE RECIPIENTS OF THE PAYMENTS. SUC H A POLICY MOTIVATED DEDUCTION RESTRICTIONS SHOULD, THEREFORE, NOT COME ITA NO.5476/DEL./2016 M/S SHREE BALAJI GRIT UDYOG 9 INTO PLAY WHEN AN ASSESSEE IS ABLE TO ESTABLISH THA T THERE IS NO ACTUAL LOSS OF REVENUE. THIS DISALLOWANCE DOES DEINCENTIVIZE NOT DEDUCTING TAX AT SOURCE, WHEN SUC H TAX DEDUCTIONS ARE DUE, BUT, SO FAR AS THE LEGAL FRAMEW ORK IS CONCERNED, THIS PROVISION IS NOT FOR THE PURPOSE OF PENALIZING FOR THE TAX DEDUCTION AT SOURCE LAPSES. THERE ARE S EPARATE PENAL PROVISIONS TO THAT EFFECT. DEINCENTIVIZING A LAPSE AND PUNISHING A LAPSE ARE TWO DIFFERENT THINGS AND HAVE DISTINCTLY DIFFERENT, AND SOMETIMES MUTUALLY EXCLUSIVE, CONNOT ATIONS. WHEN WE APPRECIATE THE OBJECT OF SCHEME OF SECTION 40(A)(IA), AS ON THE STATUTE, AND TO EXAMINE WHETHE R OR NOT, ON A FAIR, JUST AND EQUITABLE INTERPRETATION OF L AW- AS IS THE GUIDANCE FROM HONBLE DELHI HIGH COURT ON INTERPRET ATION OF THIS LEGAL PROVISION, IN OUR HUMBLE UNDERSTANDING, IT COULD NOT BE AN INTENDED CONSEQUENCE TO DISALLOW THE EXPEN DITURE, DUE TO NON DEDUCTION OF TAX AT SOURCE, EVEN IN A SI TUATION IN WHICH CORRESPONDING INCOME IS BROUGHT TO TAX IN THE HANDS OF THE RECIPIENT. THE SCHEME OF SECTION 40(A)(IA), AS WE SEE IT, IS AIMED AT ENSURING THAT AN EXPENDITURE SHOULD NO T BE ALLOWED AS DEDUCTION IN THE HANDS OF AN ASSESSEE IN A SITUATION IN WHICH INCOME EMBEDDED IN SUCH EXPENDIT URE HAS REMAINED UNTAXED DUE TO TAX WITHHOLDING LAPSES BY T HE ASSESSEE. IT IS NOT, IN OUR CONSIDERED VIEW, A PENA LTY FOR TAX WITHHOLDING LAPSE BUT IT IS A SORT OF COMPENSATORY DEDUCTION RESTRICTION FOR AN INCOME GOING UNTAXED DUE TO TAX WITHHOLDING LAPSE. THE PENALTY FOR TAX WITHHOLDING LAPSE PER SE IS SEPARATELY PROVIDED FOR IN SECTION 271 C, AND, SECT ION 40(A)(IA) DOES NOT ADD TO THE SAME. THE PROVISIONS OF SECTION 40(A)(IA), AS THEY EXISTED PRIOR TO INSERTION OF SE COND PROVISO THERETO, WENT MUCH BEYOND THE OBVIOUS INTENTIONS OF THE LAWMAKERS AND CREATED UNDUE HARDSHIPS EVEN IN CASES IN WHICH THE ASSESSEES TAX WITHHOLDING LAPSES DID NOT RESULT IN ANY LOSS TO THE EXCHEQUER. NOW THAT THE LEGISLATURE HAS BEEN COMPASSIONATE ENOUGH TO CURE THESE SHORTCOMINGS OF PROVISION, AND THUS OBVIATE THE UNINTENDED HARDSHIP S, SUCH AN AMENDMENT IN LAW, IN VIEW OF THE WELL SETTLED LE GAL POSITION TO THE EFFECT THAT A CURATIVE AMENDMENT TO AVOID UN INTENDED CONSEQUENCES IS TO BE TREATED AS RETROSPECTIVE IN N ATURE EVEN THOUGH IT MAY NOT STATE SO SPECIFICALLY, THE INSERT ION OF SECOND PROVISO MUST BE GIVEN RETROSPECTIVE EFFECT FROM THE POINT OF TIME WHEN THE RELATED LEGAL PROVISION WAS INTRODUCE D. IN VIEW OF THESE DISCUSSIONS, AS ALSO FOR THE DETAILED REAS ONS SET OUT EARLIER, WE CANNOT SUBSCRIBE TO THE VIEW THAT IT CO ULD HAVE BEEN AN INTENDED CONSEQUENCE TO PUNISH THE ASSESS EES FOR NON DEDUCTION OF TAX AT SOURCE BY DECLINING THE DED UCTION IN RESPECT OF RELATED PAYMENTS, EVEN WHEN THE CORRESPO NDING INCOME IS DULY BROUGHT TO TAX. THAT WILL BE GOING M UCH BEYOND THE OBVIOUS INTENTION OF THE SECTION. ACCORDINGLY, WE HOLD THAT THE INSERTION OF SECOND PROVISO TO SECTION 40( A)(IA) IS DECLARATORY AND CURATIVE IN NATURE AND IT HAS RETRO SPECTIVE ITA NO.5476/DEL./2016 M/S SHREE BALAJI GRIT UDYOG 10 EFFECT FROM 1 ST APRIL, 2005, BEING THE DATE FROM WHICH SUB CLAUSE (IA) OF SECTION 40(A) WAS INSERTED BY THE FI NANCE (NO. 2) ACT, 2004. 10. IN VIEW OF THE ABOVE DISCUSSIONS, WE DEEM IT FI T AND PROPER TO REMIT THE MATTER TO THE FILE OF THE ASSES SING OFFICER FOR FRESH ADJUDICATION IN THE LIGHT OF OUR ABOVE OB SERVATIONS AND AFTER CARRYING OUT NECESSARY VERIFICATIONS REGA RDING RELATED PAYMENTS HAVING BEEN TAKEN INTO ACCOUNT BY THE RECIPIENTS IN COMPUTATION OF THEIR INCOME, REGARDIN G PAYMENT OF TAXES IN RESPECT OF SUCH INCOME AND REGARDING FI LING OF THE RELATED INCOME TAX RETURNS BY THE RECIPIENTS. WHILE GIVING EFFECT TO THESE DIRECTIONS, THE ASSESSING OFFICER S HALL GIVE DUE AND FAIR OPPORTUNITY OF HEARING TO THE ASSESSEE, D ECIDE THE MATTER IN ACCORDANCE WITH THE LAW AND BY WAY OF A S PEAKING ORDER. WE ORDER SO. 11. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIS TICAL PURPOSES IN THE TERMS INDICATED ABOVE. 2.3. THE AFORESAID DECISION OF THE TRIBUNAL WAS AFFIRMED BY HONBLE DELHI HIGH COURT VIDE ORDER DAT ED 26/08/2015 (ITA NO.160 & 161/2015), THE RELEVANT PORTION OF THE SAME IS ALSO REPRODUCED HEREUNDER:- 1. ALLOWED, SUBJECT TO ALL JUST EXCEPTIONS. 2. THE APPLICATIONS ARE DISPOSED OF. ITA NO. 160 OF 2015 & ITA NO. 161 OF 2015 3. THESE TWO APPEALS BY THE REVENUE UNDER SECTION 2 60A OF THE INCOME TAX ACT (ACT ) ARE DIRECTED AGAINST THE COMMON ORDER DATED 21ST JULY 2014 PASSED BY THE INCOME TAX APPEL LATE TRIBUNAL (ITAT ) IN ITA NO. 2972/DEL/2012 AND ITA NO. 877/DEL/2013 FOR THE ASSESSMENT YEARS (AYS ) 2008-09 AND 2009-10 RESPECTIVELY. 4. AT THE OUTSET, IT IS POINTED OUT BY LEARNED COUN SEL FOR THE REVENUE THAT THE QUESTIONS (A) TO (E) AS PROJECTED BY THE R EVENUE IN PARA 2 OF THE MEMORANDUM OF APPEAL CONCERNING ITAT S ORDER DELETING ITA NO.5476/DEL./2016 M/S SHREE BALAJI GRIT UDYOG 11 CERTAIN ADDITIONS STAND ANSWERED IN FAVOUR OF THE A SSESSEE BY THE ORDER DATED 2 ND MARCH 2015 IN ITA NO. 162 OF 2015 (CIT V. ANSAL LAND MARK TOWNSHIP (P) LTD.) CONCERNING AND EARLIER AY. CONSEQUENTLY, THOSE QUESTIONS FOR THE PRESENT AYS A LSO STAND ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 5. THE OTHER ISSUE URGED BY THE REVENUE DURING THE COURSE OF ARGUMENTS PERTAINS TO THE RETROSPECTIVITY OF THE SE COND PROVISO TO SECTION 40(A) (IA) OF ACT WHICH READS AS UNDER: PROVIDED FURTHER THAT WHERE AN ASSESSEE FAILS TO D EDUCT THE WHOLE OR ANY PART OF THE TAX IN ACCORDANCE WITH THE PROVI SIONS OF CHAPTER XVII-B ON ANY SUCH SUM BUT IS NOT DEEMED TO BE AN A SSESSEE IN DEFAULT UNDER THE FIRST PROVISO TO SUB-SECTION (1) OF SECTION 201, THEN, FOR THE PURPOSE OF THIS SUB-CLAUSE, IT SHALL BE DEE MED THAT THE ASSESSEE HAS DEDUCTED AND PAID THE TAX ON SUCH SUM ON THE DATE OF FURNISHING OF RETURN OF INCOME BY THE RESIDENT PAYE E REFERRED TO IN THE SAID PROVISO 6.WHEN IT WAS POINTED OUT TO LEARNED COUNSEL FOR TH E APPELLANT THAT NO QUESTION AS SUCH HAS BEEN SOUGHT TO BE URGED BY THE REVENUE IN THE MEMORANDUM OF APPEAL, LEARNED COUNSEL STATED TH AT AN APPLICATION HAS BEEN FILED TO AMEND THE MEMORANDUM OF APPEAL TO INCLUDE SUCH A QUESTION AND THAT PERHAPS THE SAID A PPLICATION IS LYING UNDER OBJECTION. 7. NOTWITHSTANDING THE ABOVE, THE COURT HAS HEARD L EARNED COUNSEL FOR THE REVENUE ON THE ABOVE ISSUE AS WELL. 8. IT IS SEEN THAT THE ISSUE IN THESE AYS ARISES IN THE CONTEXT OF THE DISALLOWANCE BY THE ASSESSING OFFICER OF THE PAYMEN T MADE BY THE RESPONDENT ASSESSEE TO ANSAL PROPERTIES AND INFRAST RUCTURE LTD. (APIL ) WHICH PAYMENT, ACCORDING TO THE REVENUE, OUGHT TO HAVE BEEN MADE ONLY AFTER DEDUCTING TAX AT SOURCE UNDER SECTION 194J OF THE ACT. BEFORE THE ITAT, IT WAS URGED BY THE ASSES SEE THAT IN VIEW OF ITA NO.5476/DEL./2016 M/S SHREE BALAJI GRIT UDYOG 12 THE INSERTION OF THE SECOND PROVISO TO SECTION 40(A ) (IA) OF THE ACT, THE PAYMENT MADE COULD NOT HAVE BEEN DISALLOWED. RE LIANCE WAS PLACED ON THE DECISION OF THE AGRA BENCH OF ITAT IN ITA NO. 337/AGRA/2013 (RAJIV KUMAR AGARWAL V. ACIT) IN WHIC H IT WAS HELD THAT THE SECOND PROVISO TO SECTION 40 (A) (IA) OF T HE ACT IS DECLARATORY AND CURATIVE IN NATURE AND SHOULD BE GI VEN RETROSPECTIVE EFFECT FROM 1 ST APRIL 2005. 9. IT IS SEEN THAT THE SECOND PROVISO TO SECTION 40 (A) (IA) WAS INSERTED BY THE FINANCE ACT 2012 WITH EFFECT FROM 1 ST APRIL 2013. THE EFFECT OF THE SAID PROVISO IS TO INTRODUCE A LE GAL FICTION WHERE AN ASSESSEE FAILS TO DEDUCT TAX IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER XVII B. WHERE SUCH ASSESSEE IS DEEMED NOT T O BE AN ASSESSEE IN DEFAULT IN TERMS OF THE FIRST PROVISO T O SUB-SECTION (1) OF SECTION 201 OF THE ACT, THEN, IN SUCH EVENT, IT SH ALL BE DEEMED THAT THE ASSESSEE HAS DEDUCTED AND PAID THE TAX ON SUCH SUM ON THE DATE OF FURNISHING OF RETURN OF INCOME BY THE RESIDENT P AYEE REFERRED TO IN THE SAID PROVISO. 10. IT IS POINTED OUT BY LEARNED COUNSEL FOR THE RE VENUE THAT THE FIRST PROVISO TO SECTION 201 (1) OF THE ACT WAS INSERTED WITH EFFECT FROM 1 ST JULY 2012. THE SAID PROVISO READS AS UNDER: PROVIDED THAT ANY PERSON, INCLUDING THE PRINCIPAL OFFICER OF A COMPANY, WHO FAILS TO DEDUCT THE WHOLE OR ANY PART OF THE TAX IN ACCORDANCE WITH THE PROVISIONS OF THIS CHAPTER ON T HE SUM PAID TO A RESIDENT OR ON THE SUM CREDITED TO THE ACCOUNT OF A RESIDENT SHALL NOT BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT O F SUCH TAX IF SUCH RESIDENT- (I) HAS FURNISHED HIS RETURN OF INCOME UNDER SECTIO N 139; (II) HAS TAKEN INTO ACCOUNT SUCH SUM FOR COMPUTING INCOME IN SUCH RETURN OF INCOME; AND (III) HAS PAID THE TAX DUE ON THE INCOME DECLARED B Y HIM IN SUCH RETURN OF INCOME; ITA NO.5476/DEL./2016 M/S SHREE BALAJI GRIT UDYOG 13 AND THE PERSON FURNISHES A CERTIFICATE TO THIS EFFE CT FROM AN ACCOUNTANT IN SUCH FORM AS MAY BE PRESCRIBED. 11. THE FIRST PROVISO TO SECTION 210 (1) OF THE ACT HAS BEEN INSERTED TO BENEFIT THE ASSESSEE. IT ALSO STATES THAT WHERE A PERSON FAILS TO DEDUCT TAX AT SOURCE ON THE SUM PAID TO A RESIDENT OR ON THE SUM CREDITED TO THE ACCOUNT OF A RESIDENT SUCH PERSON S HALL NOT BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF S UCH TAX IF SUCH RESIDENT HAS FURNISHED HIS RETURN OF INCOME UNDER S ECTION 139 OF THE ACT. NO DOUBT, THERE IS A MANDATORY REQUIREMENT UND ER SECTION 201 TO DEDUCT TAX AT SOURCE UNDER CERTAIN CONTINGENCIES , BUT THE INTENTION OF THE LEGISLATURE IS NOT TO TREAT THE ASSESSEE AS A PERSON IN DEFAULT SUBJECT TO THE FULFILMENT OF THE CONDITIONS AS STIP ULATED IN THE FIRST PROVISO TO SECTION 201(1). THE INSERTION OF THE SEC OND PROVISO TO SECTION 40(A) (IA) ALSO REQUIRES TO BE VIEWED IN TH E SAME MANNER. THIS AGAIN IS A PROVISO INTENDED TO BENEFIT THE ASS ESSEE. THE EFFECT OF THE LEGAL FICTION CREATED THEREBY IS TO TREAT THE A SSESSEE AS A PERSON NOT IN DEFAULT OF DEDUCTING TAX AT SOURCE UNDER CER TAIN CONTINGENCIES. 12. RELEVANT TO THE CASE IN HAND, WHAT IS COMMON TO BOTH THE PROVISOS TO SECTION 40 (A) (IA) AND SECTION 210 (1) OF THE ACT IS THAT THE AS LONG AS THE PAYEE/RESIDENT (WHICH IN THIS CA SE IS ALIP) HAS FILED ITS RETURN OF INCOME DISCLOSING THE PAYMENT R ECEIVED BY AND IN WHICH THE INCOME EARNED BY IT IS EMBEDDED AND HAS A LSO PAID TAX ON SUCH INCOME, THE ASSESSEE WOULD NOT BE TREATED AS A PERSON IN DEFAULT. AS FAR AS THE PRESENT CASE IS CONCERNED, I T IS NOT DISPUTED BY THE REVENUE THAT THE PAYEE HAS FILED RETURNS AND OF FERED THE SUM RECEIVED TO TAX. 13. TURNING TO THE DECISION OF THE AGRA BENCH OF IT AT IN RAJIV KUMAR AGARWAL V. ACIT (SUPRA ) , THE COURT FINDS TH AT IT HAS UNDERTAKEN A THOROUGH ANALYSIS OF THE SECOND PROVIS O TO SECTION 40 (A)(IA) OF THE ACT AND ALSO SOUGHT TO EXPLAIN THE R ATIONALE BEHIND ITS ITA NO.5476/DEL./2016 M/S SHREE BALAJI GRIT UDYOG 14 INSERTION. IN PARTICULAR, THE COURT WOULD LIKE TO R EFER TO PARA 9 OF THE SAID ORDER WHICH READS AS UNDER: ON A CONCEPTUAL NOTE, PRIMARY JUSTIFICATION FOR SU CH A DISALLOWANCE IS THAT SUCH A DENIAL OF DEDUCTION IS TO COMPENSATE FOR THE LOSS OF REVENUE BY CORRESPONDING INCOME NOT BEING TAKEN INT O ACCOUNT IN COMPUTATION OF TAXABLE INCOME IN THE HANDS OF THE R ECIPIENTS OF THE PAYMENTS. SUCH A POLICY MOTIVATED DEDUCTION RESTRIC TIONS SHOULD, THEREFORE, NOT COME INTO PLAY WHEN AN ASSESSEE IS A BLE TO ESTABLISH THAT THERE IS NO ACTUAL LOSS OF REVENUE. THIS DISAL LOWANCE DOES DEINCENTIVIZE NOT DEDUCTING TAX AT SOURCE, WHEN SUC H TAX DEDUCTIONS ARE DUE, BUT, SO FAR AS THE LEGAL FRAMEWORK IS CONC ERNED, THIS PROVISION IS NOT FOR THE PURPOSE OF PENALIZING FOR THE TAX DEDUCTION AT SOURCE LAPSES. THERE ARE SEPARATEPENAL PROVISIONS T O THAT EFFECT. DEINCENTIVIZING A LAPSE AND PUNISHING A LAPSE ARE T WO DIFFERENT THINGS AND HAVE DISTINCTLY DIFFERENT, AND SOMETIMES MUTUALLY EXCLUSIVE, CONNOTATIONS. WHEN WE APPRECIATE THE OBJ ECT OF SCHEME OF SECTION 40(A)(IA), AS ON THE STATUTE, AND TO EXAMIN E WHETHER OR NOT, ON A 'FAIR, JUST AND EQUITABLE' INTERPRETATION OF L AW- AS IS THE GUIDANCE FROM HON'BLE DELHI HIGH COURT ON INTERPRET ATION OF THIS LEGAL PROVISION, IN OUR HUMBLE UNDERSTANDING, IT CO ULD NOT BE AN 'INTENDED CONSEQUENCE' TO DISALLOW THE EXPENDITURE, DUE TO NON DEDUCTION OF TAX AT SOURCE, EVEN IN A SITUATION IN WHICH CORRESPONDING INCOME IS BROUGHT TO TAX IN THE HANDS OF THE RECIPIENT. THE SCHEME OF SECTION 40(A)(IA), AS WE SEE IT, IS A IMED AT ENSURING THAT AN EXPENDITURE SHOULD NOT BE ALLOWED AS DEDUCT ION IN THE HANDS OF AN ASSESSEE IN A SITUATION IN WHICH INCOME EMBED DED IN SUCH EXPENDITURE HAS REMAINED UNTAXED DUE TO TAX WITHHOL DING LAPSES BY THE ASSESSEE. IT IS NOT, IN OUR CONSIDERED VIEW, A PENALTY FOR TAX WITHHOLDING LAPSE BUT IT IS A SORT OF COMPENSATORY DEDUCTION RESTRICTION FOR AN INCOME GOING UNTAXED DUE TO TAX WITHHOLDING LAPSE. THE PENALTY FOR TAX WITHHOLDING LAPSE PER SE IS SEPARATELY PROVIDED FOR IN SECTION 271 C, AND, SECTION 40(A)(I A) DOES NOT ADD TO THE SAME. THE PROVISIONS OF SECTION 40(A)(IA), AS T HEY EXISTED PRIOR TO INSERTION OF SECOND PROVISO THERETO, WENT MUCH BEYO ND THE OBVIOUS INTENTIONS OF THE LAWMAKERS AND CREATED UNDUE HARDS HIPS EVEN IN CASES IN WHICH THE ASSESSEE'S TAX WITHHOLDING LAPSE S DID NOT RESULT IN ANY LOSS TO THE EXCHEQUER. NOW THAT THE LEGISLATURE HAS BEEN COMPASSIONATE ENOUGH TO CURE THESE SHORTCOMINGS OF PROVISION, AND THUS OBVIATE THE UNINTENDED HARDSHIPS, SUCH AN AMEN DMENT IN LAW, IN VIEW OF THE WELL SETTLED LEGAL POSITION TO THE EFFE CT THAT A CURATIVE AMENDMENT TO AVOID UNINTENDED CONSEQUENCES IS TO BE TREATED AS RETROSPECTIVE IN NATURE EVEN THOUGH IT MAY NOT STAT E SO SPECIFICALLY, THE INSERTION OF SECOND PROVISO MUST BE GIVEN RETRO SPECTIVE EFFECT FROM THE POINT OF TIME WHEN THE RELATED LEGAL PROVI SION WAS ITA NO.5476/DEL./2016 M/S SHREE BALAJI GRIT UDYOG 15 INTRODUCED. IN VIEW OF THESE DISCUSSIONS, AS ALSO F OR THE DETAILED REASONS SET OUT EARLIER, WE CANNOT SUBSCRIBE TO THE VIEW THAT IT COULD HAVE BEEN AN 'INTENDED CONSEQUENCE' TO PUNISH THE A SSESSEES FOR NON DEDUCTION OF TAX AT SOURCE BY DECLINING THE DED UCTION IN RESPECT OF RELATED PAYMENTS, EVEN WHEN THE CORRESPONDING IN COME IS DULY BROUGHT TO TAX. THAT WILL BE GOING MUCH BEYOND THE OBVIOUS INTENTION OF THE SECTION. ACCORDINGLY, WE HOLD THAT THE INSER TION OF SECOND PROVISO TO SECTION 40(A)(IA) IS DECLARATORY AND CUR ATIVE IN NATURE AND IT HAS RETROSPECTIVE EFFECT FROM 1ST APRIL, 200 5, BEING THE DATE FROM WHICH SUB CLAUSE (IA) OF SECTION 40(A) WAS INS ERTED BY THE FINANCE (NO. 2) ACT, 2004. 14. THE COURT IS OF THE VIEW THAT THE ABOVE REASONI NG OF THE AGRA BENCH OF ITAT AS REGARDS THE RATIONALE BEHIND THE I NSERTION OF THE SECOND PROVISO TO SECTION 40(A) (IA) OF THE ACT AND ITS CONCLUSION THAT THE SAID PROVISO IS DECLARATORY AND CURATIVE A ND HAS RETROSPECTIVE EFFECT FROM 1ST APRIL 2005, MERITS AC CEPTANCE. 15. IN THAT VIEW OF THE MATTER, THE COURT IS UNABLE TO FIND ANY LEGAL INFIRMITY IN THE IMPUGNED ORDER OF THE ITAT IN ADOP TING THE RATIO OF THE DECISION OF THE AGRA BENCH, ITAT IN (RAJIV KUMA R AGARWAL V. ACIT). 16. NO SUBSTANTIAL QUESTION OF LAW ARISES IN THE FA CTS AND CIRCUMSTANCES OF THE PRESENT CASE. THE APPEAL IS DI SMISSED. THE TRIBUNAL IN THE AFORESAID ORDER HELD THAT THE INSERTION OF SECOND PROVISO TO SECTION 40(A)(IA) IS DECLARATORY AND CURATIVE IN NATURE AND IT HAS RETROSPECTIVE EFF ECT FROM 1 ST APRIL, 2005, BEING THE DATE FROM WHICH SUB-CLAUSE(I A) OF SECTION 40(A) WAS INSERTED BY THE FINANCE (NO.2) AC T 2004. THUS, FOLLOWING THE AFORESAID ORDER OF THE TRIBUNAL /HONBLE JURISDICTIONAL HIGH COURT, THE APPEAL OF THE ASSESS EE IS ALLOWED. ITA NO.5476/DEL./2016 M/S SHREE BALAJI GRIT UDYOG 16 FINALLY, THE APPEAL OF THE ASSESSEE IS ALLOWED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF THE LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 09/11/2017. SD/- SD/- (N. K. SAINI) (JOGINDER SINGH) ' / ACCOUNTANT MEMBER # ' /JUDICIAL MEMBER DELHI; DATED : 09/11/2017 F{X~{T? P.S/. .. $#&' (' / COPY OF THE ORDER FORWARDED TO : 1. / / THE APPELLANT 2. 01/ / THE RESPONDENT. 3. 3 ( ) / THE CIT, NEW DELHI. 4. 3 / CIT(A)- , DELHI 5. 5 0 , , / DR, ITAT, DELHI 6. % / GUARD FILE. / BY ORDER, 15 0 //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, DELHI