ITO, Ward-45(2), Kolkata, Kolkata V. M/S Ashok Trading Company, Kolkata

ITA 650/KOL/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 99870 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-10-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 22-08-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 23-04-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHRIPINAKI MUKHERJEE JCITSRDR
• Assessee Lawyers: V N PUROHIT
• Keywords: Unexplained cash credit; Capital asset converted into stock in trade; Business expenditure; Retrospective amendment; Non-deduction of tax; Onus to prove
• Section: 43B; 194C; 201(1); 28; 11; 139; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA BEFORE SHRIN.V.VASUDEVAN, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 650 / KOL / 2012 ASSESSMENT YEAR :2006-07 I.T.O. WARD-45(2), 3, GOVT. PLACE (W), GR. FLOOR, KOLKATA 01 V/S . M/S ASHOK TRADING COMPANY, 13, NOORMALLOHIA LANE, KOLKATA-07 [ PAN NO.AAGFA 0299 M ] /APPELLANT .. / RESPONDENT /BY APPELLANT SHRIPINAKI MUKHERJEE, JCIT-SR-DR /BY RESPONDENT SHRI V.N. PUROHIT, FCA /DATE OF HEARING 09-09-2015 /DATE OF PRONOUNCEMENT 07-10-2015 / O R D E R PER WASEEM AHMED, ACCOUNTANTMEMBER:- THIS APPEAL BY THE REVENUE IS ARISING OUT OF ORDE R OF COMMISSIONER OF INCOME TAX (APPEALS)XXX, KOLKATA IN APPEAL NO.142/C IT(A)-XXX/WD-45(2), KOLKATA DATED 05.08.2011. ASSESSMENT WAS FRAMED BY ITO WARD-45(2), KOLKATA U/S 143(3)(II) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 05.12.2008 FOR ASSE SSMENT YEAR 2006- 07.REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPE AL. (I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD . CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT THE FACTS AND CIRCUMSTANCES OF THE CAS E OF THE ASSESSEE WAS IDENTICAL WITH THE FACTS AND CIRCUMSTANCES OF THE C ASE OF RAKSHIT TRANSPORT VS. ACIT, CIRCLE-2, BURDWAN IN ITA NO. 261/KOL/2009 AS READ WITH THE CASE OF PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. UNITED RICE LAND LTD., WHERE PAYMENTS WERE MADE DIRECTLY TO THE TRUCK OWNE RS/OPERATORS OR THROUGH TRANSPORTERS WHEREAS IN THE PRESENT CASE THE PAYMEN TS WERE ADMITTEDLY MADE TO THE PARTIES CONCERNED BY THE ACCOUNT PAYEE CHEQUES ONLY AND ITA NO.650/KOL/2012 A.Y. 2006-07 ITO WD-45(2) KOL V. M/S ASHOK TRADING CO. PAGE 2 THEREBY DELETING THE ADDITION OF RS.7,64,717/- U/S. 40(A)(IA) FOR NON DEDUCTION OF TDS ON PAYMENT OF TRANSPORTATION CHARGES. (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, LD. CIT(A) WAS NOT JUSTIFIED IN OBSERVING THAT TDS WAS DEDUCTED ON PAY MENT TO MITHILA SHIPPING AGENCY ON RS.2,69,870/- WITHOUT MENTIONING BY HIM T HE PARTICULARS OF SUCH DEDUCTIONS AND PARTICULARS OF TAX DEPOSITS INTO THE GOVERNMENT ACCOUNT CONTRARY TO THE FACTS ON RECORD; AND REGARDING PAYM ENT TO SIMLA CLEARING SERVICES AMOUNTING TO RS.1,06,000/- THAT THE PAYMEN T IS ON ACCOUNT OF CUSTOMS AND PORT EXPENSES WITHOUT THERE MENTIONING ANY MATERIALS IN SUPPORT OF HIS SUCH OBSERVATION REGARDING THE FACT; AND ACCORDINGLY, HE WAS NOT JUSTIFIED IN DELETING THE ADDITION OF RS.4,00,8 70/- U/S. 40(A)(A) FOR NON DEDUCTION OF TDS ON PAYMENT OF ON CLEANING AND FORW ARDING CHARGES, AND AS SUCH HIS ORDER IS SUFFERING FROM PERVERSITY WITHOUT BEING SUPPORTED BY ANY MATERIALS. (III) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE LD. CIT(A) IS NOT JUSTIFIED IN DELETING THE ADDITION OF 3,29,900/- U/S 40(A)(IA ) OUT OF TOTAL ADDITION OF RS.6,29,940/- ON ACCOUNT OF RENT WITHOUT MENTIONING THE REASONS FOR HIS SATISFACTION; AND AS SUCH, HIS DELETION OF ADDITION IS NOT FAVOURED BY ANY REASONED ORDER OR MATERIALS AND IS THUS SUFFERING F ROM PERVERSITY MAKING HIS ORDER AS LIABLE TO BE CANCELLED. (IV) ON THE FATS AND IN RELATION TO THE CIRCUMSTANC ES LD. CIT(A) IS NOT JUSTIFIED IN DELETING THE ADDITION OF RS.2,35,105/- U/S. 68 O N ACCOUNT OF ADVANCE FROM SUNDRY DEBTORS OUT OF ADDITION OF RS.2,95,105/- UNJ USTIFIABLE PLACING ONUS ON THE DEPARTMENT AND MERELY ON THEFACT THAT THE ASSES SING OFFICER HAS NOT VERIFIED INDEPENDENTLY FROM THE CONCERNED PARTY M/S ANKITA ENTERPRISES IN THE REMAND PROCEEDINGS WHILE THE ASSESSEE DID NOT EVEN SUPPLY THE PRIMARY DETAILS VIZ., I.T. PARTICULARS ETC., AND FAILED TO DISCHARGE ITS ONUS AND ULTIMATE BURDEN OF PROOF RESPECTING THE CLAIM OF RECEIPT OF ADVANCE. 2. FIRST WE TAKE UP REVENUES FIRST ISSUE. THE ASSE SSEE IS A PARTNERSHIP FIRM AND DURING THE ASSESSMENT PROCEEDINGS ASSESSEE HAS EARNED INCOME FROM THE BUSINESS OF IMPORT AND TRADING OF UMBRELL A REQUISITES. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE CLAIMED AN E XPENDITURE OF RS.7,64,717/- TOWARDS THE TRANSPORT CHARGES. THE SA ME EXPENDITURE HAS BEEN DISALLOWED BY THE AO FOR NON-DEDUCTION OF TDS IN TERMS OF SECTION 194C READ WITH SECTION TO 40(A)(IA) OF THE ACT. THE DET AILS OF THE EXPENSES CAN BE SUMMARIZED IN THE FOLLOWING MANNER : SL. NO. NAME OF PARTY AMOUNT PAID 1 M/S SANGAM ROADWAYS 5,68,894/- 2 M/S MANGALAM PRIVAHAN PVT. LTD. 1,95,823/- ITA NO.650/KOL/2012 A.Y. 2006-07 ITO WD-45(2) KOL V. M/S ASHOK TRADING CO. PAGE 3 SO THE ABOVE EXPENSES HAS BEEN DISALLOWED AND ADDED TO THE INCOME OF ASSESSEE. BEFORE THE LD. CIT(A) , THE ASSESSEE DEMONSTRATED T HAT ALL THE PARTIES TO WHOM THE PAYMENTS WERE MADE, HAVE SHOWN THIS AMOUNT IN THEIR INCOME TAX RETURNS. THE ASSESSEE ALSO TOOK THE PLEA THAT THERE WAS NO CONTRACT EITHER ORAL OR WRITTEN BETWEEN THE PARTIES. THE LD. CIT(A) HAD RELIED ON THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. UNITED RICE LAND LTD. (2000) 174 TAXMAN 286(P&H) WHEREIN IT WAS HELD BY THE HON'BLE HIGH COURT THAT IN RESPECT OF FREIGHT CHARGES PAID BY AS SESSEE DIRECTLY TO TRUCK OWNERS/OPERATORS OR THROUGH TRANSPORTERS, WHERE THE RE WAS NO ORAL OR WRITTEN CONTRACT BETWEEN THE ASSESSEE AND TRANSPORTER, THE ASSESSEE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE ON FREIGHT CHARGES PAID TO TRUCK OWNERS/OPERATORS. THE SUBMISSIONS OF APPELLANT ARE ACCEPTED ON THIS P OINT AND IT IS HELD THAT PROVISIONS OF SECTION 194C ARE NOT APPLICABLE ON TH E PAYMENTS MADE BY THE APPELLANT. THE DISALLOWANCE MADE U/S. 40(A)(IA) IS THEREFORE DELETED. (RELIEF RS.7,64,714/-) . AGGRIEVED, REVENUE IS IN APPEAL BEFORE US. SHRI PI NAKI MUKHERJEE, LD DEPARTMENTAL REPRESENTATIVE APPEARING ON BEHALF OF DEPARTMENT AND SHRI V.N. PUROHIT, LD AUTHORIZED REPRESENTATIVE APPEARIN G ON BEHALF OF ASSESSEE. 3. WE HAVE HEARD THE RIVAL CONTENTIONS OF THE PARTI ES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD DR VEHEMENTLY SUPPORTED THE ORDER OF AO. THE LD. AR SUPPORTED THE ORDER OF THE CIT(A). T HE LD. AR SUBMITTED THAT THERE WAS NO CONTRACT BETWEEN THE ASSESSEE AND THE TRANSPORTERS. SO THE PROVISION OF DEDUCTING THE TAX DOES NOT ARISE. IN S UPPORT OF HIS CLAIM, THE LD. AR SUBMITTED THE VARIOUS CASE LAWS AS ENUMERATED BE LOW:- 1) CIT VS M/S STUMM INDIA, ITA NO. 127 OF 2009 IN THE HONBLE HIGH COURT AT CALCUTTA. 2) CIT VS M/S S.S. IMPEX, ITA NO. 977/KOL/2011 IN THE ITAT AT KOLKATA. 3) CIT VS UNIVERSAL TRAFFIC CO., EXPRESS TRANSPORT PVT. LTD. ITA NOS. 1426 TO 1429 /MUM/2013 & 1473 TO 1475/MUM/2013. ITA NO.650/KOL/2012 A.Y. 2006-07 ITO WD-45(2) KOL V. M/S ASHOK TRADING CO. PAGE 4 IN ALL THE ABOVE CASES, IT WAS HELD THAT THE PROVIS IONS OF TDS DO NOT ATTRACT IF THERE IS NO CONTRACT. A CAREFUL ANALYSIS OF THE OR DER OF AO, CIT(A) AND THE SUBMISSION OF THE ASSESSEE REVEALS THAT THE AO HAS DISALLOWED THE EXPENSES FOR NOT DEDUCTION OF TDS IN TERMS OF SECTION 194C R EAD WITH SECTION 40(A)(IA). THE LD. CIT(A) HAS DELETED THE ADDITION RELYING ON VARIOUS JUDGMENT AS DISCUSSED ABOVE. THE MAIN OBSERVATION OF THE CIT(A) WAS THAT SINCE THERE IS NO AGREEMENT BETWEEN THE PARTIES, THE PROVISION OF TDS DOES NOT ATTRACT TO THE EXPENSES OF TRANSPORT CHARGES. HOWEVER IT IS IM PORTANT TO NOTE THAT THE EVEN THE ORAL AND UNWRITTEN CONTRACTS ARE VALID CON TRACT IN THE EYES OF LAW. SO THE ABOVE STATED TRANSACTIONS VERY MUCH FALL WITHIN THE PURVIEW OF THE TDS PROVISIONS. THE SAME FACT HAS ALSO BEEN DECIDED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CRESCENT EXPORTS VS CIT (2013) 33 TAXMANN.COM 250 (CAL) WHEREIN EVEN THE ORAL OR UNWRITTEN CONTRACTS WERE HELD VALID AND WITHIN THE PURVIEW OF SECTIONS 194C READ WITH SECTION 40(A )(IA). SO THE CONTENTION OF THE ASSESSEE HEREIN THE CASE DOES NOT HOLD MERIT. H OWEVER, THE ASSESSEE HAS ALSO SUBMITTED BEFORE THE CIT(A) THAT THE TRANSPORT CHARGES HAS BEEN PAID AS PER THE LEDGER ACCOUNTS TO ALL THE PARTIES AND THOS E TRANSPORT PARTIES HAVE SHOWN THIS AMOUNT IN THEIR RESPECTIVE RETURNS. THER E IS NOT FINDING ON THIS ISSUE BY THE CIT(A) IN HIS ORDER. AS PER THE LAW IF THE PAYEE HAS SHOWN THE RECEIPT OF AMOUNT IN HIS INCOME TAX RETURN THEN THE PROVISIONS OF SECTION 40(A)(IA) DOES NOT APPLY. PURSUANT TO INSERTION TO THE SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT BY THE FINANCE ACT, 2012 W.E.F . 1.4.2013 WHERE TAX IS PAID BY THE RECIPIENT THEN NO DISALLOWANCE U/S. 40(A)(IA ) SHOULD BE MADE AS PER THE SECOND PROVISO REFERRED TO ABOVE. THE AFORESAID PR OVISO THOUGH STATED TO BE W.E.F. 1.4.2013 SHOULD BE CONSTRUED AS HAVING OPERA TION WITH RETROSPECTIVE EFFECT FROM 1.4.2005 WHEN THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT WERE FIRST INTRODUCED. THE PROVISIONS ARE INTENDED TO R EMOVE HARDSHIP WHICH WAS NEVER CONTEMPLATED AND THEREFORE SHOULD BE CONSTRUE D AS HAVING RETROSPECTIVE OPERATION. IN THIS REGARD, REFERENCE MAY BE MADE TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ALLIED MOTORS 224 ITR 677 (SC) AND IN THE CASE OF ALOM EXTRUSIONS LTD. 319 ITR 306 (SC) WHEREIN THE HONBLE ITA NO.650/KOL/2012 A.Y. 2006-07 ITO WD-45(2) KOL V. M/S ASHOK TRADING CO. PAGE 5 SUPREME COURT IN THE CONTEXT OF AMENDMENTS TO THE P ROVISIONS OF SECTION 43B OF THE ACT TOOK THE VIEW THAT THE AMENDMENT WERE IN TENDED TO REMOVE HARDSHIP AND THOUGH THEY WERE NOT STATED TO BE RETR OSPECTIVE IN OPERATION, WILL APPLY RETROSPECTIVELY. THE QUESTION FOR OUR CONSIDE RATION IS AS TO WHETHER SECTION 40(A)(IA) AMENDED BY THE FINANCE ACT, 2012 WITH EFFECT FROM 01.04.2013 IS RETROSPECTIVE FROM 01.04.2005 OR PROS PECTIVE FROM THE DATE SPECIFIED. IN ORDER TO FIND ANSWER TO THIS QUESTIO N, IT WOULD BE RELEVANT TO NOTE DOWN THE LEGISLATIVE HISTORY OF THE PROVISION. SECT ION 40 HAS CERTAIN CLAUSES PROVIDING FOR THE AMOUNTS WHICH ARE NOT DEDUCTIBLE. SUB-CLAUSE (IA) OF CLAUSE (A) OF SECTION 40 WAS INSERTED BY THE FINANCE (NO.2 ) ACT, 2004 WITH EFFECT FROM 1 ST APRIL, 2005 READING AS UNDER:- 40. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SE CTIONS 30 TO 38, THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMP UTED THE INCOME CHARGEABLE UNDER THE HEAD `PROFITS AND GAINS OF BUSINESS OR PROFESSION. .. (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 OR, AFTER DEDUCTION, HAS NOT BEEN PAI D DURING THE PREVIOUS YEAR, OR IN THE SUBSEQUENT YEAR BEFORE THE EXPIRY OF THE TIME PRESCRIBED UNDER SUB-SECTION (1) OF SECTION 20 0 : 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 SECTION 20 0, SUCH SUM SHALL BE ALLOWED AS A DEDUCTION IN COMPUTING THE INCOME O F 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 MEANING AS IN CLAUSE (I) OF THE EXPLANATION TO SECTION 194H; (II) FEES FOR TECHNICAL SERVICES SHALL HAVE THE SAME MEANING AS IN EXPLANATION 2 TO CLAUSE (VII) OF SUB-SECTION (1) OF SECTION 9; ITA NO.650/KOL/2012 A.Y. 2006-07 ITO WD-45(2) KOL V. M/S ASHOK TRADING CO. PAGE 6 (III) PROFESSIONAL SERVICES SHALL HAVE THE S AME MEANING AS IN CLAUSE (A) OF THE EXPLANATION TO SECTION 194J; (IV) WORK SHALL HAVE THE SAME MEANING AS IN EXPLANATION III TO SECTION 194C; 4. THE MEMORANDUM EXPLAINING THE PROVISIONS IN THE FINANCE BILL EXPLAINED THE RATIONALE OF THE INSERTION OF THE NEW PROVISION IN FOLLOWING WORDS :- WITH A VIEW TO AUGMENT COMPLIANCE OF TDS PROVISIONS, IT IS PROPOSED TO EXTEND THE PROVISIONS OF SECTION 40(A)( I) TO PAYMENTS OF INTEREST, COMMISSION OR BROKERAGE, FEES FOR PROFESS IONAL SERVICES OR FEES FOR TECHNICAL SERVICES TO RESIDENTS, AND PAYME NTS TO A RESIDENT CONTRACTOR OR SUB-CONTRACTOR FOR CARRYING OUT ANY W ORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK), ON WHI CH TAX HAS NOT BEEN DEDUCTED OR AFTER DEDUCTION, HAS NOT BEEN PAID BEFORE THE EXPIRY OF THE TIME PRESCRIBED UNDER SUB-SECTION (1) OF SECTION 200 AND IN ACCORDANCE WITH THE OTHER PROVISIONS OF CHAP TER XVII-B. IT IS ALSO PROPOSED TO PROVIDE THAT WHERE IN RESPECT OF P AYMENT OF ANY SUM, TAX HAS BEEN DEDUCTED UNDER CHAPTER XVII-B OR PAID IN ANY SUBSEQUENT YEAR, THE SUM OF PAYMENT SHALL BE ALLOWE D IN COMPUTING THE INCOME OF THE PREVIOUS YEAR IN WHICH SUCH TAX H AS BEEN PAID. THE PROPOSED AMENDMENT WILL TAKE EFFECT FROM 1ST DA Y OF APRIL, 2005 AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASS ESSMENT YEAR 2005- 2006 AND SUBSEQUENT YEARS. [CLAUSE 11] THEREAFTER THE FINANCE ACT, 2008 MADE AMENDMENT TO CLAUSE (A) IN SUB- CLAUSE (IA) IN SECTION 40 WITH RETROSPECTIVE EFFECT FROM 1 ST APRIL, 2005. THE SECTION AS AMENDED BY THE FINANCE ACT, 2008 READ AS UNDER:- (IA) ANY INTEREST, COMMISSION OR BROKERAGE, RENT, ROYALTY, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICE S PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB -CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WORK (INCLUDIN G SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK), ON WHICH TAX IS DEDUCTI BLE AT SOURCE UNDER CHAPTER XVII-B AND SUCH TAX 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 B EFORE THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139 ; OR ITA NO.650/KOL/2012 A.Y. 2006-07 ITO WD-45(2) KOL V. M/S ASHOK TRADING CO. PAGE 7 (B) IN ANY OTHER CASE, ON OR BEFORE THE LAST DA Y OF THE PREVIOUS YEAR. PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TAX HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR, OR HAS BEEN DEDUCT ED- (A) DURING THE LAST MONTH OF THE PREVIOUS YEAR BUT PAID AFTER THE SAID DUE DATE ; OR (B) DURING ANY OTHER MONTH OF THE PREVIOUS YEAR BUT PAID AFTER THE END OF THE SAID PREVIOUS YEAR, SUCH SUM SHALL BE AL LOWED AS A DEDUCTION IN COMPUTING THE INCOME OF THE PREVIOUS Y EAR IN WHICH SUCH TAX HAS BEEN PAID. ; THE FINANCE ACT, 2008 BROUGHT OUT AMENDMENT TO SECT ION 40(A)(IA) W.R.E.F. 1.4.2005 BY RELAXING EARLIER POSITION TO SOME EXTEN T. IT MADE TWO CATEGORIES OF DEFAULTS CAUSING DISALLOWANCE ON THE BASIS OF THE P ERIOD OF THE PREVIOUS YEAR IN WHICH TAX WAS DEDUCTIBLE. THE FIRST CATEGORY OF DISALLOWANCES INCLUDED THE CASES IN WHICH TAX WAS DEDUCTIBLE AND WAS SO DEDUCT ED DURING THE LAST MONTH OF THE PREVIOUS YEAR BUT THERE WAS FAILURE TO PAY S UCH TAX ON OR BEFORE THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139 OF THE ACT. IN OTHER WORDS, IF ANY AMOUNT ON WHICH TAX WAS DEDUCTIBLE DURING LAST MONTH OF THE PREVIOUS YEAR, THAT IS MARCH 2005, BUT WAS PAID BEFORE 31 ST OCTOBER, 2005, BEING THE DUE DATE U/S 139(1), THE DEDUCTIBILITY OF THE AMOUN T WAS KEPT INTACT. THE SECOND CATEGORY INCLUDED CASES OTHER THAN THOSE GIV EN IN CATEGORY FIRST. TO PUT IT SIMPLY, IF TAX WAS DEDUCTIBLE AND WAS SO DED UCTED DURING THE FIRST ELEVEN MONTHS OF THE PREVIOUS YEAR, THAT IS, UP TO FEBRUAR Y, 2005, THE DISALLOWANCE WAS TO BE MADE IF THE ASSESSEE FAILED TO PAY IT BEF ORE 31 ST MARCH, 2005. THEN CAME THE AMENDMENT TO SECTION 40(A)(IA) BY THE FINA NCE ACT, 2010 WITH RETROSPECTIVE EFFECT FROM 1 ST APRIL, 2010. THE PROVISION SO AMENDED, NOW READS AS UNDER :- (IA) ANY INTEREST, COMMISSION OR BROKERAGE, RENT , ROYALTY, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICE S PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB -CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WORK (INCLUDIN G SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK), ON WHICH TAX IS DEDUCTI BLE AT SOURCE UNDER CHAPTER XVII-B AND SUCH TAX HAS NOT BEEN DEDU CTED OR; AFTER ITA NO.650/KOL/2012 A.Y. 2006-07 ITO WD-45(2) KOL V. M/S ASHOK TRADING CO. PAGE 8 DEDUCTION, HAS NOT BEEN PAID ON OR BEFORE THE DUE D ATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139 PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TAX HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR, OR HAS BEEN DEDUCT ED DURING THE PREVIOUS YEAR BUT PAID AFTER THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139, SUCH SUM SHALL BE ALLOWED AS A DEDU CTION IN COMPUTING THE INCOME OF THE PREVIOUS YEAR IN WHICH SUCH TAX HAS BEEN PAID. FROM THE ABOVE PROVISION AS AMENDED BY THE FINANCE ACT, 2010 WITH RETROSPECTIVE EFFECT FROM 1 ST APRIL, 2010 IT CAN BE SEEN THAT THE ONLY DIFFERENCE WHICH THIS AMENDMENT HAS MADE IS DISPENSING WITH TH E EARLIER TWO CATEGORIES OF DEFAULTS AS PER THE FINANCE ACT, 2008, AS DISCUS SED IN THE EARLIER PARA, CAUSING DISALLOWANCE ON THE BASIS OF THE PERIOD OF THE PREVIOUS YEAR DURING WHICH TAX WAS DEDUCTIBLE. THE FIRST CATEGORY OF DIS ALLOWANCES INCLUDED THE CASES IN WHICH TAX WAS DEDUCTIBLE AND WAS SO DEDUCT ED DURING THE LAST MONTH OF THE PREVIOUS YEAR BUT THERE WAS FAILURE TO PAY S UCH TAX ON OR BEFORE THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139. T HE FINANCE ACT, 2010 HAS NOT TINKERED WITH THIS POSITION. THE SECOND CATEGOR Y OF THE FINANCE ACT, 2008 WHICH REQUIRED THE DEPOSIT OF TAX BEFORE THE CLOSE OF THE PREVIOUS YEAR IN CASE OF DEDUCTION DURING THE FIRST ELEVEN MONTHS, AS A P RE-CONDITION FOR THE GRANT OF DEDUCTION IN THE YEAR OF INCURRING EXPENDITURE, HAS BEEN ALTERED. THE HITHERTO REQUIREMENT OF THE ASSESSEE DEDUCTING TAX AT SOURCE DURING THE FIRST ELEVEN MONTHS OF THE PREVIOUS YEAR AND PAYING IT BEFORE TH E CLOSE OF THE PREVIOUS YEAR UP TO 3 1 ST MARCH OF THE PREVIOUS YEAR AS A REQUIREMENT FOR GRA NT OF DEDUCTION IN THE YEAR OF INCURRING SUCH EXPENDITURE , HAS BEEN EASED TO EXTEND SUCH TIME FOR PAYMENT OF TAX UP TO DUE DATE U/S 139 (1) OF THE ACT. AS PER THE NEW AMENDMENT, THE DISALLOWANCE WILL BE MADE IF AFT ER DEDUCTING TAX AT SOURCE, THE ASSESSEE FAILS TO PAY THE AMOUNT OF TAX ON OR BEFORE THE DUE DATE SPECIFIED IN SUBSECTION (1) OF SECTION 139 OF THE A CT. THE EFFECT OF THIS AMENDMENT IS THAT NOW THE ASSESSEE DEDUCTING TAX EI THER IN THE LAST MONTH OF THE PREVIOUS YEAR OR FIRST ELEVEN MONTHS OF THE PRE VIOUS YEAR SHALL BE ENTITLED TO DEDUCTION OF THE EXPENDITURE IN THE YEAR OF INCU RRING IT, IF THE TAX SO DEDUCTED AT SOURCE IS PAID ON OR BEFORE THE DUE DAT E U/S 139(1). THIS IS THE ITA NO.650/KOL/2012 A.Y. 2006-07 ITO WD-45(2) KOL V. M/S ASHOK TRADING CO. PAGE 9 ONLY DIFFERENCE WHICH HAS BEEN MADE BY THE FINANCE ACT, 2010. THE QUESTION AS TO WHETHER THE AMENDMENT BY THE FINANCE ACT, 201 0 AS AFORESAID IS PROSPECTIVE OR RETROSPECTIVE FROM 1.4.2005 CAME UP FOR CONSIDERATION BEFORE THE MUMBAI SPECIAL BENCH ITAT IN THE CASE OF BHARATI SHIPYARD LTD . BEFORE THE SPECIAL BENCH, IT WAS ARGUED THAT THE AMENDMENT WAS MADE WITH A VIEW TO REMOVE THE UNNECESSARY HARDSHIP CAUSED TO THE AS SESSEE BY THE EARLIER PROVISION. THE SPECIAL BENCH BY ITS ORDER DATED 9.9.2011, HOWEVER, HELD THAT THE AMENDMENT CARRIED OUT BY THE FINANCE ACT, 2010 WITH RETROSPECTIVE EFFECT FROM ASSESSMENT YEAR 2010-2011 CANNOT BE HELD TO BE RETROSPECTIVE FROM ASSESSMENT YEAR 2005-2006. THE SPECIAL BENCH HELD THAT THE AMENDMENT BROUGHT OUT BY THE FINANCE ACT, 2010 TO SECTION 40( A)(IA) W.E.F. 01.04.2010, IS NOT REMEDIAL AND CURATIVE IN NATURE. 5. PRIOR TO THE DECISION OF THE SPECIAL BENCH, IDEN TICAL ISSUE HAD COME UP FOR CONSIDERATION BEFORE THE ITAT KOLKATA BENCH IN THE CASE OF VIRGIN CREATIONS VS. ITO, WARD 32(4), KOLKATA ITA NO. 267/ KOL/2009 FOR AY 05-06 . THE ISSUE THAT AROSE FOR CONSIDERATION WAS DISALLOW ANCE OF EXPENSES U/S.40(A)(IA)CLAIMED AS DEDUCTION WHILE COMPUTING I NCOME FROM BUSINESS BEING EMBROIDERY CHARGES, DYEING CHARGES, INTEREST ON LOAN AND FREIGHT CHARGES WITHOUT DEDUCTING TAX AT SOURCE. THE EMBRO IDERY CHARGES WERE PAID BETWEEN 22 ND MAY, 2004 TO 30.11.2004. TAX HAD BEEN DEDUCTED AT SOURCE BUT WERE PAID TO THE GOVERNMENT ONLY ON 28.10.2005 AND NOT WITHIN THE TIME CONTEMPLATED BY SECTION 200(1) OF THE ACT. THE DYE ING CHARGES WERE PAID BETWEEN 5.4.2004 TO 20.8.2004. TAX WAS DEDUCTED AT SOURCE BUT WAS PAID TO THE GOVERNMENT ONLY ON 28.10.2005. FRIEGHT OUTWARD CHARGES WERE PAID WITHOUT DEDUCTION OF TAX AT SOURCE. INTEREST ON LO ANS WERE CREDITED TO THE CREDITORS ACCOUNT ON 31.3.2005 TO THE EXTENT THEY W ERE PAID AFTER THE DUE DATE FOR FILING RETURN OF INCOME U/S.139(1) OF THE ACT, THE DISALLOWANCE WAS MADE U/S.40(A)(IA) OF THE ACT. BEFORE THE TRIBUNAL, THE ASSESSEE CONTENTED THAT THE AMENDMENT BY THE FINANCE ACT, 2010 WITH RETROSPECTI VE EFFECT FROM 1 ST APRIL, 2010 WHEREBY AMOUNT OF TAX DEDUCTED AT THE TIME OF MAKING PAYMENT IN ITA NO.650/KOL/2012 A.Y. 2006-07 ITO WD-45(2) KOL V. M/S ASHOK TRADING CO. PAGE 10 RESPECT OF EXPENDITURE REFERRED TO IN SEC.40(A)(IA) OF THE ACT, IF PAID TO THE GOVERNMENT ON OR BEFORE THE DUE DATE FOR FILING THE RETURN OF INCOME DUE DATE U/S 139(1) OF THE ACT SHOULD BE ALLOWED AS A DEDUCT ION. IN OTHER WORDS IT WAS ARGUED THAT THE AMENDMENT BY THE FINANCE ACT, 2010 TO THE PROVISIONS OF SEC.40(A)(IA) HAS TO BE HELD TO BE RETROSPECTIVE W. E.F. 1-4-2005. THE ITAT KOLKATA BENCH BY ITS ORDER DATED 15.12.2010 , HELD AS FOLLOWS: 8. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CAR EFUL PERUSAL OF THE MATERIALS AVAILABLE ON RECORD, KEEPING IN VIEW OF T HE FACT THAT THOUGH THE LD.D.R. SUBMITTED THAT THE DECISIONS OF THE COO RDINATE BENCHES ARE NOT BINDING AND THE KOLKATA BENCHES MAY TAKE A DIFFERENT VIEW, SINCE MUMBAI BENCH AFTER ANALYZING THE PROVISIONS O F SEC.40(A)9IA) SINCE ITS INCEPTION AND VARIOUS AMENDMENTS MADE TO THE SAME INCLUDING THE SUGGESTION MADE BY THE INDUSTRY IN TH E FORM OF REPRESENTATION IN THEIR PRE-BUDGET MEMORANDUM TO TH E HONBLE FINANCE MINISTER AND BY APPLYING THE DECISION OF TH E HONBLE APEX COURT IN THE CASE OF ALOM EXTRUSIONS LTD., HAS OBSE RVED THAT THE PROVISIONS OF SECTION 40(A)(IA) AS STOOD PRIOR TO T HE AMENDMENTS MADE BY THE FINANCE ACT 2010 THUS WERE RESULTING IN TO UNINTENDED CONSEQUENCES AND CAUSING GRAVE AND GENUINE HARDSHIP S TO THE ASSESSES WHO HAD SUBSTANTIALLY COMPLIED WITH THE RE LEVANT TDS PROVISIONS BY DEDUCTING THE TAX AT SOURCE AND BY PA YING THE SAME TO THE CREDIT OF THE GOVERNMENT BEFORE THE DUE DATE OF FILING OF THEIR RETURNS U/S.139(1). IN ORDER TO REMEDY THIS POSITI ON AND TO REMOVE THE HARDSHIPS WHICH WAS BEING CAUSED TO THE ASSESSE E BELONGING TO SUCH CATEGORY, AMENDMENTS HAVE BEEN MADE IN THE PRO VISIONS OF SECTION 40(A)(IA) BY THE FINANCE ACT, 2010. THE SA ID AMENDMENTS, IN OUR OPINION, THUS ARE CLEARLY REMEDIAL/CURATIVE IN NATURE AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF ALLIED MOT ORS PVT. LTD. (SUPRA) AND MOM EXTRUSIONS LTD. (SUPRA) AND THE SAM E THEREFORE WOULD APPLY RETROSPECTIVELY W.E.F. 1 ST APRIL, 2005. IN THE CASE OF R.B.JODHA MAL KUTHIALA 82 ITR 570, IT WAS HELD BY T HE HONBLE SUPREME COURT THAT A PROVISO WHICH IS INSERTED TO R EMEDY UNINTENDED CONSEQUENCES AND TO MAKE THE PROVISION W ORKABLE, REQUIRES TO BE TREATED AS RETROSPECTIVE IN OPERATIO N SO THAT A REASONABLE INTERPRETATION CAN BE GIVEN TO THE SECTI ON AS A WHOLE. IN THE PRESENT CASE, THE AMOUNT OF TAX DEDUCTED AT SOU RCE FROM THE FREIGHT CHARGES DURING THE PERIOD 01/04/2005 TO 28/ 02/2006 WAS PAID BY THE ASSESSEE IN THE MONTH OF JULY AND AUGU ST 2006 I.E., WELL BEFORE THE DUE DATE OF FILING OF ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION. THIS BEING THE UNDISPUTED POS ITION, WE HOLD THAT THE DISALLOWANCE MADE BY THE A.O. AND CONFIRME D BY THE LEARNED CIT(A) ON ACCOUNT OF FREIGHT CHARGES BY INV OKING THE ITA NO.650/KOL/2012 A.Y. 2006-07 ITO WD-45(2) KOL V. M/S ASHOK TRADING CO. PAGE 11 PROVISIONS OF SECTION 40(A)(IA) IS NOT SUSTAINABLE AS PER THE AMENDMENTS MADE IN THE SAID PROVISIONS BY THE FINAN CE ACT, 2010 WHICH, BEING REMEDIAL/CURATIVE IN NATURE, HAVE RETR OSPECTIVE APPLICATION, WE FIND NO REASON TO DEVIATE FROM THE DECISIONS OF THE ITATS MUMBAI BENCH AND AHMEDABAD BENCH, IN THE ABS ENCE OF A CONTRARY VIEW, EXCEPT THE OTHER BENCHES DECISIONS O R ANY OTHER HIGH COURT. THEREFORE, RESPECTFULLY FOLLOWING THE DECIS ION OF THE COORDINATE BENCHES (SUPRA), WE ALLOW THE GROUND NOS . I TO 3 OF THE ASSESSEES APPEAL. 6. AS AGAINST THE AFORESAID DECISION, THE REVENUE P REFERRED APPEAL BEFORE THE HONBLE CALCUTTA HIGH COURT. THE HONBLE CALCU TTA HIGH COURT IN ITA NO. 302 OF 2011, GA 3200/2011 DECIDED ON 23.11.2011 , HELD AS FOLLOWS: WE HAVE HEARD MR. NIZAMUDDIN AND GONE THROUGH THE IMPUGNED JUDGMENT AND ORDER. WE HAVE ALSO EXAMINED THE POINT FORMULATED FOR WHICH THE PRESENT APPEAL IS SOUGHT TO BE ADMITT ED. IT IS ARGUED BY MR. NIZAMUDDIN THAT THIS COURT NEEDS TO TAKE DECISI ON AS TO WHETHER SECTION 40(A)(IA) IS HAVING RETROSPECTIVE OPERATION OR NOT. THE LEARNED TRIBUNAL ON FACT FOUND THAT THE ASSESSE E HAD DEDUCTED TAX AT SOURCE FROM THE PAID CHARGES BETWEEN THE PER IOD APRIL 1, 2005 AND APRIL 28, 2006 AND THE SAME WERE PAID BY T HE ASSESSEE IN JULY AND AUGUST 2006, I.E. WELL BEFORE THE DUE DATE OF FILING OF THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION. THIS FACTUAL POSITION WAS UNDISPUTED. MOREOVER, THE SUPREME COUR T, AS HAS BEEN RECORDED BY THE LEARNED TRIBUNAL, IN THE CASE OF ALLIED MOTORS PVT. LTD. AND ALSO IN THE CASE OF ALOM EXTRUSIONS L TD., HAS ALREADY DECIDED THAT THE AFORESAID PROVISION HAS RETROSPECT IVE APPLICATION. AGAIN, IN THE CASE REPORTED IN 82 ITR 570, THE SUPR EME COURT HELD THAT THE PROVISION, WHICH HAS INSERTED THE REMEDY T O MAKE THE PROVISION WORKABLE, REQUIRES TO BE TREATED WITH RET ROSPECTIVE OPERATION SO THAT REASONABLE DEDUCTION CAN BE GIVEN TO THE SECTION AS WELL. IN VIEW OF THE AUTHORITATIVE PRONOUNCEMENT OF THE SUPREME COURT, THIS COURT CANNOT DECIDE OTHERWISE. HENCE WE DISMISS THE APPEAL WITHOUT ANY ORDER AS TO COSTS. FURTHER LIBERALIZATION OF PROVISIONS OF SECTION 40( A)(IA) WAS MADE THROUGH AMENDMENT BROUGHT BY THE FINANCE ACT 2012. WITH A VIEW TO LIBERALIZE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT FINANCE ACT 2012 BROUGHT AMENDMENT W.E.F 01.04.2013 AS UNDER. THE FOLLOWING SECOND PROVISO SHALL BE INSERTED IN SUB-CLAUSE ( IA) OF CLAUSE ( A ) OF SECTION 40 BY THE FINANCE ACT, 2012, W.E.F. 1-4-2013 : ITA NO.650/KOL/2012 A.Y. 2006-07 ITO WD-45(2) KOL V. M/S ASHOK TRADING CO. PAGE 12 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 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 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 PAYEE REFERRED TO IN THE SAID PROVISO. SINCE PROVISIONS OF SECTION 40(A)(IA) AS AMENDED BY FINANCE ACT, 2012 IS LINKED TO SECTION 201 OF THE ACT, IN WHICH A PROVIS O WAS INSERTED, IT IS NECESSARY TO LOOK INTO THOSE PROVISIONS WHICH READ THUS: SEC.201: (1) WHERE ANY PERSON, INCLUDING THE PRINC IPAL OFFICER OF A COMPANY (A) WHO IS REQUIRED TO DEDUCT ANY SUM IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT; OR (B) REFERRED TO IN SUB-SECTION (1A) OF SECTION 192, BEING AN EMPLOYER, DOES NOT DEDUCT, OR DOES NOT PAY, OR AFTE R SO DEDUCTING FAILS TO PAY, THE WHOLE OR ANY PART OF THE TAX , AS REQUIRED BY OR UNDER THIS ACT, THEN, SUCH PERSON, SHALL, WITHOUT PREJUDI CE TO ANY OTHER CONSEQUENCES WHICH HE MAY INCUR, BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF SUCH TAX: 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 SE CTION 139; (II) HAS TAKEN INTO ACCOUNT SUCH SUM FOR COMPUTIN G INCOME IN SUCH RETURN OF INCOME; AND ( III) HAS PAID THE TAX DUE ON THE INCOME DECLARED BY HIM IN SUCH RETURN OF INCOME, AND THE PERSON FURNISHES A CERTIF ICATE TO THIS EFFECT FROM AN ACCOUNTANT IN SUCH FORM AS MAY BE PRESCRIBE D: ITA NO.650/KOL/2012 A.Y. 2006-07 ITO WD-45(2) KOL V. M/S ASHOK TRADING CO. PAGE 13 MEMORANDUM EXPLAINING THE PROVISIONS WHILE INTRODUC ING FINANCE BILL, 2012 PROVIDES THE JUSTIFICATION OF THE AMENDMENT TO SECT ION 40(A)(IA) IN THE FOLLOWING WORDS:- IN ORDER TO RATIONALISE THE PROVISIONS OF DISALLOW ANCE ON ACCOUNT OF NON-DEDUCTION OF TAX FROM THE PAYMENTS MADE TO A RE SIDENT PAYEE, IT IS PROPOSED TO AMEND SECTION 40(A)(IA) TO PROVIDE T HAT WHERE AN ASSESSEE MAKES PAYMENT OF THE NATURE SPECIFIED IN T HE SAID SECTION TO A RESIDENT PAYEE WITHOUT DEDUCTION OF TAX AND IS NOT DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER SECTION 201(1) ON A CCOUNT OF PAYMENT OF TAXES BY THE PAYEE, THEN, FOR THE PURPOS E OF ALLOWING DEDUCTION OF SUCH SUM, IT SHALL BE DEEMED THAT THE ASSESSEE HAS DEDUCTED AND PAID THE TAX ON SUCH SUM ON THE DATE O F FURNISHING OF RETURN OF INCOME BY THE RESIDENT PAYEE. THE PROVISIONS OF SEC.40(A)(IA) OF THE ACT ARE MEAN T TO ENSURE THAT THE ASSESSEES PERFORM THEIR OBLIGATION TO DEDUCT TAX A T SOURCE IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. SUCH COMPLIANCE WILL EN SURE REVENUE COLLECTION WITHOUT MUCH HASSLE. WHEN THE OBJECT SOUGHT TO BE ACHIEVED BY THOSE PROVISIONS ARE FOUND TO BE ACHIEVED, IT WOULD BE UN JUST TO DISALLOWANCE LEGITIMATE BUSINESS EXPENSES OF AN ASSESSEE. DESPI TE DUE COLLECTION OF TAXES DUE, IF DISALLOWANCE OF GENUINE BUSINESS EXPENSES A RE MADE THAN THAT WOULD BE UNJUST ENRICHMENT ON THE PART OF THE GOVER NMENT AS THE PAYEE WOULD HAVE ALSO PAID THE TAXES ON SUCH INCOME. IN ORDER T O REMOVE THIS ANOMALY, THIS AMENDMENT HAS BEEN INTRODUCED. IN CASE OF PAYM ENT TO NON RESIDENT, THE GOVERNMENT DOES NOT HAVE ANY OTHER MECHANISM TO REC OVER THE DUE TAXES. HENCE, NO AMENDMENT WAS MADE IN SECTION 40(A)(I). THE LEGISLATURE HAS NOT GIVEN BLANKET DEDUCTION UNDER SECTION 40(A)(IA). TH E DEDUCTION AS PER AMENDED SECTION WILL BE ALLOWED ONLY IF THE - (I) PAYEE HAS FURNISHED HIS RETURN OF INCOME UNDER SECTION 139; (II) PAYEE HAS TAKEN INTO ACCOUNT SUCH SUM FOR COM PUTING INCOME IN SUCH RETURN OF INCOME; AND (III) PAYEE HAS PAID THE TAX DUE ON THE INCOME DEC LARED BY HIM IN SUCH RETURN OF INCOME, ITA NO.650/KOL/2012 A.Y. 2006-07 ITO WD-45(2) KOL V. M/S ASHOK TRADING CO. PAGE 14 AND THE PAYER FURNISHES A CERTIFICATE TO THIS EFFEC T FROM AN ACCOUNTANT IN SUCH FORM AS MAY BE PRESCRIBED. THE QUESTION IS AS TO WH ETHER THE AMENDMENT MADE AS ABOVE IS PROSPECTIVE OR RETROSPECTIVE W.E.F . 1.4.2005 WHEN THE PROVISIONS OF SEC.40(A)(IA) WERE INTRODUCED. KEEPIN G IN VIEW THE PURPOSE BEHIND THE PROVISO INSERTED BY THE FINANCE ACT, 201 2 IN SECTION 40(A)(IA) OF THE ACT, IT CAN BE SAID TO BE DECLARATORY AND CURATIVE IN NATURE AND THEREFORE, SHOULD BE GIVEN RETROSPECTIVE EFFECT FROM 1ST APRIL , 2005, BEING THE DATE FROM WHICH SUB-CLAUSE (IA) OF SECTION 40(A) WAS INSERTED BY THE FINANCE (NO. 2) ACT, 2004. IN CIT VS. ALOM EXTRUSIONS LTD. 319 ITR 306 (SC) , THE HONBLE SUPREME COURT HAD TO DEAL WITH THE QUESTION, WHETHE R OMISSION (DELETION) OF THE SECOND PROVISO TO S. 43B OF THE IT ACT, 1961, B Y THE FINANCE ACT, 2003, OPERATED W.E.F. 1ST APRIL, 2004, OR WHETHER IT OPER ATED RETROSPECTIVELY W.E.F. 1ST APRIL, 1988? PRIOR TO FINANCE ACT, 2003, THE SECOND PROVISO TO S. 43B OF THE IT ACT, 1961 (FOR SHORT, 'THE ACT') RESTRICTED THE DED UCTION IN RESPECT OF ANY SUM PAYABLE BY AN EMPLOYER BY WAY OF CONTRIBUTION TO PR OVIDENT FUND/SUPERANNUATION FUND OR ANY OTHER FUND FOR THE WELFARE OF EMPLOYEES, UNLESS IT STOOD PAID WITHIN THE SPECIFIED DUE DATE. ACCORDING TO THE SECOND PROVISO, THE PAYMENT MADE BY THE EMPLOYER TOWARDS C ONTRIBUTION TO PROVIDENT FUND OR ANY OTHER WELFARE FUND WAS ALLOWABLE AS DED UCTION, IF PAID BEFORE THE DATE FOR FILING THE RETURN OF INCOME AND NECESSARY EVIDENCE OF SUCH PAYMENT WAS ENCLOSED WITH THE RETURN OF INCOME. IN OTHER WO RDS, IF CONTRIBUTION STOOD PAID AFTER THE DATE FOR FILING OF THE RETURN, IT ST OOD DISALLOWED. THIS RESULTED IN GREAT HARDSHIP TO THE EMPLOYERS. THEY REPRESENTED T O THE GOVERNMENT ABOUT THEIR HARDSHIP AND, CONSEQUENTLY, PURSUANT TO THE R EPORT OF THE KELKAR COMMITTEE, THE GOVERNMENT INTRODUCED FINANCE ACT, 2 003, BY WHICH THE SECOND PROVISO STOOD DELETED W.E.F. 1ST APRIL, 2004 , AND CERTAIN CHANGES WERE ALSO MADE IN THE FIRST PROVISO BY WHICH UNIFORMITY WAS BROUGHT ABOUT BETWEEN PAYMENT OF FEES, TAXES, CESS, ETC., ON ONE HAND AND CONTRIBUTION MADE TO EMPLOYEES' PROVIDENT FUND, ETC., ON THE OTHER. ACCORDING TO THE DEPARTMENT, THE OMISSION OF THE SECOND PROVISO GIVING RELIEF TO THE ASSESSEE(S) [EMPLOYER(S)] OPERATED ONLY W.E.F. 1ST APRIL, 2004, WHEREAS, ACCORDING TO THE ITA NO.650/KOL/2012 A.Y. 2006-07 ITO WD-45(2) KOL V. M/S ASHOK TRADING CO. PAGE 15 ASSESSEE(S)-EMPLOYER(S), THE SAID FINANCE ACT, 2003 , TO THE EXTENT INDICATED ABOVE, OPERATED W.E.F. 1ST APRIL, 1988 (RETROSPECTI VELY). THE HONBLE SUPREME COURT HELD THAT THE DELETION OF THE SECOND PROVISO WAS RETROSPECTIVE W.E.F.1.4.2004. THE COURT CONSIDERED THE SCHEME OF THE ACT AND THE HISTORICAL BACKGROUND AND THE OBJECT OF INTRODUCTION OF THE PR OVISIONS OF S. 43B. THE COURT ALSO REFERRED TO THE EARLIER AMENDMENTS MADE IN 1988 WITH INTRODUCTION OF THE FIRST AND SECOND PROVISOS. THE COURT ALSO NO TED FURTHER AMENDMENT MADE IN 1989 IN THE SECOND PROVISO DEALING WITH THE ITEMS COVERED IN S. 43B(B) ( I.E., CONTRIBUTION TO EMPLOYEES WELFARE FUNDS). AFTER CO NSIDERING THE SAME, THE COURT WAS OF THE VIEW THAT IT WAS CLEAR T HAT PRIOR TO THE AMENDMENT OF 2003, THE EMPLOYER WAS ENTITLED TO DEDUCTION ONL Y IF THE CONTRIBUTION STANDS CREDITED ON OR BEFORE THE DUE DATE GIVEN IN THE PRO VIDENT FUND ACT ON ACCOUNT OF SECOND PROVISO TO S. 43B. THE SITUATION CREATED FURTHER DIFFICULTIES AND AS A RESULT OF REPRESENTATIONS MADE BY THE INDUSTRY, THE AMENDMENT OF 2003 WAS CARRIED OUT WHICH DELETED THE SECOND PROVISO AND AL SO MADE FIRST PROVISO APPLICABLE TO CONTRIBUTION TO EMPLOYEES WELFARE FUN DS REFERRED TO IN S. 43B(B). 15. WE FIND NO MERIT IN THESE CIVIL APPEALS FILED BY TH E DEPARTMENT FOR THE FOLLOWING REASONS : FIRSTLY, AS STATED ABOVE, S . 43B (MAIN SECTION), WHICH STOOD INSERTED BY FINANCE ACT, 1983, W.E.F. 1 ST APRIL, 1984, EXPRESSLY COMMENCES WITH A NON OBSTANTE CLAUSE, THE UNDERLYING OBJECT BEING TO DISALLOW DEDUCTIONS CLAIMED MERELY BY MAKI NG A BOOK ENTRY BASED ON MERCANTILE SYSTEM OF ACCOUNTING. AT THE SA ME TIME, S. 43B (MAIN SECTION) MADE IT MANDATORY FOR THE DEPARTMENT TO GRANT DEDUCTION IN COMPUTING THE INCOME UNDER S. 28 IN THE YEAR IN WHICH TAX, DUTY, CESS, ETC., IS ACTUALLY PAID. HOWEVER, PARLIAMENT TOOK CO GNIZANCE OF THE FACT THAT ACCOUNTING YEAR OF A COMPANY DID NOT ALWAYS TA LLY WITH THE DUE DATES UNDER THE PROVIDENT FUND ACT, MUNICIPAL CORPO RATION ACT (OCTROI) AND OTHER TAX LAWS. THEREFORE, BY WAY OF FIRST PROV ISO, AN INCENTIVE/RELAXATION WAS SOUGHT TO BE GIVEN IN RESP ECT OF TAX, DUTY, CESS OR FEE BY EXPLICITLY STATING THAT IF SUCH TAX, DUTY , CESS OR FEE IS PAID BEFORE THE DATE OF FILING OF THE RETURN UNDER THE I T ACT (DUE DATE), THE ASSESSEE(S) THEN WOULD BE ENTITLED TO DEDUCTION. HO WEVER, THIS RELAXATION/INCENTIVE WAS RESTRICTED ONLY TO TAX, DU TY, CESS AND FEE. IT DID NOT APPLY TO CONTRIBUTIONS TO LABOUR WELFARE FUNDS. THE REASON APPEARS TO BE THAT THE EMPLOYER(S) SHOULD NOT SIT ON THE CO LLECTED CONTRIBUTIONS AND DEPRIVE THE WORKMEN OF THE RIGHTFUL BENEFITS UN DER SOCIAL WELFARE LEGISLATIONS BY DELAYING PAYMENT OF CONTRIBUTIONS T O THE WELFARE FUNDS. ITA NO.650/KOL/2012 A.Y. 2006-07 ITO WD-45(2) KOL V. M/S ASHOK TRADING CO. PAGE 16 HOWEVER, AS STATED ABOVE, THE SECOND PROVISO RESULT ED IN IMPLEMENTATION PROBLEMS, WHICH HAVE BEEN MENTIONED HEREINABOVE, AND WHICH RESULTED IN THE ENACTMENT OF FINANCE ACT, 2003, DELETING THE SECOND PROVISO AND BRINGING ABOUT UNIFORMITY IN THE FIRST PROVISO BY EQUATING TAX, DUTY, CESS AND FEE WITH CONTRIBUTIONS TO WELFARE FUNDS. ONCE THIS UNIFORMITY IS BROUGHT ABOUT IN THE FIRST PROVISO, THEN, IN OUR VIEW, THE FINANCE ACT, 2003, WHICH IS MADE APPLICAB LE BY THE PARLIAMENT ONLY W.E.F. 1ST APRIL, 2004, WOULD BECOM E CURATIVE IN NATURE, HENCE, IT WOULD APPLY RETROSPECTIVELY W.E.F. 1ST AP RIL, 1988. SECONDLY, IT MAY BE NOTED THAT, IN THE CASE OF ALLIED MOTORS (P) LTD. ETC. VS. CIT (1997) 139 CTR (SC) 364 : (1997) 224 ITR 677 (SC), THE SCHEME OF S. 43B OF THE ACT CAME TO BE EXAMINED. IN THAT CASE, T HE QUESTION WHICH AROSE FOR DETERMINATION WAS, WHETHER SALES-TAX COLL ECTED BY THE ASSESSEE AND PAID AFTER THE END OF THE RELEVANT PRE VIOUS YEAR BUT WITHIN THE TIME ALLOWED UNDER THE RELEVANT SALES-TAX LAW S HOULD BE DISALLOWED UNDER S. 43B OF THE ACT WHILE COMPUTING THE BUSINES S INCOME OF THE PREVIOUS YEAR ? THAT WAS A CASE WHICH RELATED TO AS ST. YR. 1984-85. THE RELEVANT ACCOUNTING PERIOD ENDED ON 30TH JUNE, 1983 . THE ITO DISALLOWED THE DEDUCTION CLAIMED BY THE ASSESSEE WH ICH WAS ON ACCOUNT OF SALES-TAX COLLECTED BY THE ASSESSEE FOR THE LAST QUARTER OF THE RELEVANT ACCOUNTING YEAR. THE DEDUCTION WAS DISALLO WED UNDER S. 43B WHICH, AS STATED ABOVE, WAS INSERTED W.E.F. 1ST APR IL, 1984. IT IS ALSO RELEVANT TO NOTE THAT THE FIRST PROVISO WHICH CAME INTO FORCE W.E.F. 1ST APRIL, 1988 WAS NOT ON THE STATUTE BOOK WHEN THE AS SESSMENTS WERE MADE IN THE CASE OF ALLIED MOTORS (P) LTD. ETC. (SU PRA). HOWEVER, THE ASSESSEE CONTENDED THAT EVEN THOUGH THE FIRST PROVI SO CAME TO BE INSERTED W.E.F. 1ST APRIL, 1988, IT WAS ENTITLED TO THE BENEFIT OF THAT PROVISO BECAUSE IT OPERATED RETROSPECTIVELY FROM 1S T APRIL, 1984, WHEN S. 43B STOOD INSERTED. THIS IS HOW THE QUESTION OF RETROSPECTIVITY AROSE IN ALLIED MOTORS (P) LTD. ETC. (SUPRA). THIS COURT, IN ALLIED MOTORS (P) LTD. ETC. (SUPRA) HELD THAT WHEN A PROVISO IS INSERTED T O REMEDY UNINTENDED CONSEQUENCES AND TO MAKE THE SECTION WORKABLE, A PR OVISO WHICH SUPPLIES AN OBVIOUS OMISSION IN THE SECTION AND WHI CH PROVISO IS REQUIRED TO BE READ INTO THE SECTION TO GIVE THE SE CTION A REASONABLE INTERPRETATION, IT COULD BE READ RETROSPECTIVE IN O PERATION, PARTICULARLY TO GIVE EFFECT TO THE SECTION AS A WHOLE. ACCORDINGLY, THIS COURT, IN ALLIED MOTORS (P) LTD. ETC. (SUPRA), HELD THAT THE FIRST P ROVISO WAS CURATIVE IN NATURE, HENCE, RETROSPECTIVE IN OPERATION W.E.F. 1S T APRIL, 1988. IT IS IMPORTANT TO NOTE ONCE AGAIN THAT, BY FINANCE ACT, 2003, NOT ONLY THE SECOND PROVISO IS DELETED BUT EVEN THE FIRST PROVIS O IS SOUGHT TO BE AMENDED BY BRINGING ABOUT AN UNIFORMITY IN TAX, DUT Y, CESS AND FEE ON THE ONE HAND VIS-A-VIS CONTRIBUTIONS TO WELFARE FUN DS OF EMPLOYEE(S) ON THE OTHER. THIS IS ONE MORE REASON WHY WE HOLD THAT THE FINANCE ACT, 2003, IS RETROSPECTIVE IN OPERATION. MOREOVER, THE JUDGMENT IN ALLIED MOTORS (P) LTD. ETC. (SUPRA) IS DELIVERED BY A BENC H OF THREE LEARNED JUDGES, WHICH IS BINDING ON US. ACCORDINGLY, WE HOL D THAT FINANCE ACT, ITA NO.650/KOL/2012 A.Y. 2006-07 ITO WD-45(2) KOL V. M/S ASHOK TRADING CO. PAGE 17 2003, WILL OPERATE RETROSPECTIVELY W.E.F. 1ST APRIL , 1988 (WHEN THE FIRST PROVISO STOOD INSERTED). LASTLY, WE MAY POINT OUT T HE HARDSHIP AND THE INVIDIOUS DISCRIMINATION WHICH WOULD BE CAUSED TO T HE ASSESSEE(S) IF THE CONTENTION OF THE DEPARTMENT IS TO BE ACCEPTED THAT FINANCE ACT, 2003, TO THE ABOVE EXTENT, OPERATED PROSPECTIVELY. TAKE A N EXAMPLEIN THE PRESENT CASE, THE RESPONDENTS HAVE DEPOSITED THE CO NTRIBUTIONS WITH THE R.P.F.C. AFTER 31ST MARCH (END OF ACCOUNTING YEAR) BUT BEFORE FILING OF THE RETURNS UNDER THE IT ACT AND THE DATE OF PAYMEN T FALLS AFTER THE DUE DATE UNDER THE EMPLOYEES' PROVIDENT FUND ACT, THEY WILL BE DENIED DEDUCTION FOR ALL TIMES. IN VIEW OF THE SECOND PROV ISO, WHICH STOOD ON THE STATUTE BOOK AT THE RELEVANT TIME, EACH OF SUCH ASSESSEE(S) WOULD NOT BE ENTITLED TO DEDUCTION UNDER S. 43B OF THE AC T FOR ALL TIMES. THEY WOULD LOSE THE BENEFIT OF DEDUCTION EVEN IN THE YEA R OF ACCOUNT IN WHICH THEY PAY THE CONTRIBUTIONS TO THE WELFARE FUNDS, WH EREAS A DEFAULTER, WHO FAILS TO PAY THE CONTRIBUTION TO THE WELFARE FU ND RIGHT UPTO 1ST APRIL, 2004, AND WHO PAYS THE CONTRIBUTION AFTER 1ST APRIL , 2004, WOULD GET THE BENEFIT OF DEDUCTION UNDER S. 43B OF THE ACT. IN OU R VIEW, THEREFORE, FINANCE ACT, 2003, TO THE EXTENT INDICATED ABOVE, S HOULD BE READ AS RETROSPECTIVE. IT WOULD, THEREFORE, OPERATE FROM 1S T APRIL, 1988, WHEN THE FIRST PROVISO WAS INTRODUCED. IT IS TRUE THAT THE P ARLIAMENT HAS EXPLICITLY STATED THAT FINANCE ACT, 2003, WILL OPERATE W.E.F. 1ST APRIL, 2004. HOWEVER, THE MATTER BEFORE US INVOLVES THE PRINCIPL E OF CONSTRUCTION TO BE PLACED ON THE PROVISIONS OF FINANCE ACT, 2003. 16. BEFORE CONCLUDING, WE EXTRACT HEREINBELOW THE RELEV ANT OBSERVATIONS OF THIS COURT IN THE CASE OF CIT VS. J .H. GOTLA (1985) 48 CTR (SC) 363 : (1985) 156 ITR 323 (SC), WHICH READS AS UNDER : 'WE SHOULD FIND OUT THE INTENTION FROM THE LANGUAGE USED BY THE LEGISLATURE AND IF STRICT LITERAL CONSTRUCTI ON LEADS TO AN ABSURD RESULT, I.E., A RESULT NOT INTENDED TO BE SUBSERVED BY THE OBJECT OF THE LEGISLATION FOUND IN THE MANNER INDICATED BEFORE, THEN IF ANOTHER CONSTRUCTI ON IS POSSIBLE APART FROM STRICT LITERAL CONSTRUCTION, TH EN THAT CONSTRUCTION SHOULD BE PREFERRED TO THE STRICT LITE RAL CONSTRUCTION. THOUGH EQUITY AND TAXATION ARE OFTEN STRANGERS, ATTEMPTS SHOULD BE MADE THAT THESE DO NO T REMAIN ALWAYS SO AND IF A CONSTRUCTION RESULTS IN E QUITY RATHER THAN IN INJUSTICE, THEN SUCH CONSTRUCTION SH OULD BE PREFERRED TO THE LITERAL CONSTRUCTION.' 17. FOR THE AFORESTATED REASONS, WE HOLD THAT FINANCE A CT, 2003, TO THE EXTENT INDICATED ABOVE, IS CURATIVE IN NATUR E, HENCE, IT IS RETROSPECTIVE AND IT WOULD OPERATE W.E.F. 1ST APRIL , 1988 (WHEN THE FIRST PROVISO CAME TO BE INSERTED). FOR THE ABOVE R EASONS, WE FIND NO MERIT IN THIS BATCH OF CIVIL APPEALS FILED BY THE D EPARTMENT WHICH ARE HEREBY DISMISSED WITH NO ORDER AS TO COSTS. ITA NO.650/KOL/2012 A.Y. 2006-07 ITO WD-45(2) KOL V. M/S ASHOK TRADING CO. PAGE 18 7. WE ARE OF THE VIEW THAT THE REASONING OF THE HON BLE SUPREME COURT IN THE CASE OF ALOM EXTRUSIONS LTD(SUPRA) WILL EQUALLY TO THE AMENDMENT TO SEC.40(A)(IA) OF THE ACT WHEREBY A SECOND PROVISO W AS INSERTED IN SUB-CLAUSE (IA) OF CLAUSE (A) OF SECTION 40 BY THE FINANCE ACT , 2012, W.E.F. 1-4-2013. THE PROVISIONS ARE INTENDED TO REMOVE HARDSHIP. IT WAS ARGUED ON BEHA LF OF THE REVENUE THAT THE EXISTING PROVISIONS ALLOW DEDUCTIO N IN THE YEAR OF PAYMENT AND TO THAT EXTENT THERE IS NO HARDSHIP. WE ARE OF THE VIEW THAT THE HARDSHIP IN SUCH AN EVENT WOULD BE TAXING AN ASSESSEE ON A HIGH ER INCOME IN ONE YEAR AND TAXING HIM ON LOWER INCOME IN A SUBSEQUENT YEAR . TO THE EXTENT THE ASSESSEE IS MADE TO PAY TAX ON A HIGHER INCOME IN O NE YEAR, THERE WOULD STILL BE HARDSHIP. SINCE THE ISSUE HAS NOT BEEN ADJUDICA TED BY THE CIT(A), WE ARE OF THE VIEW TO RESTORE THE FILE TO CIT(A) FOR VERIF YING THAT WHETHER THE PARTIES TO WHOM THE TRANSPORT CHARGES HAVE BEEN PAID, HAVE SHO WN IN THEIR INCOME TAX RETURNS OR NOT AND PASS THE ORDER ACCORDING TO LAW. HENCE THIS GROUND OF REVENUES APPEAL IS ALLOWED FOR THE STATISTICAL PUR POSE. 8. COMING TO SECOND ISSUE OF REVENUES APPEAL. DURI NG THE YEAR UNDER CONSIDERATION THE ASSESSEE CLAIMED AN EXPENDITURE O F RS.4,00,870/- TOWARDS THE CLEARING & FORWARDING CHARGES. ON SCRUTINY BY THE AO, IT WAS FOUND THAT THE ASSESSEE FAILED TO DEDUCT TDS ON THE EXPENSE OF SAID CHARGES IN TERMS OF SECTION 194C READ WITH SECTION 40(A)(IA). THE DETAI LS OF THE EXPENSES CAN BE SUMMARIZED IN THE FOLLOWING MANNER : SL. NO. NAME OF PARTY AMOUNT PAID 1 M/S MITHILA SHIPPING AGENCY RS.2,69,870/- 2 M/S SIMA CLEARING SERVICES RS.1,06,000/- 3. M/S SAMANWAYA RS. 25,000/- SO THE ABOVE EXPENSES HAS BEEN DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED, ASSESSEE WENT IN APPEAL B EFORE LD.CIT(A) AND DEMONSTRATED THAT THE TDS AGAINST THE BILL OF M/S M ITHILA SHIPPING AGENCY WAS DULY DEDUCTED AND REMAINING OTHER TWO PARTIES, ASSE SSEE SUBMITTED THAT THE MAJOR PAYMENT WAS TOWARDS THE REIMBURSEMENT OF THE EXPENSES AND THEIR SERVICE CHARGES WERE MERE AMOUNT OF RS.6,000/- AND RS.3,000/- RESPECTIVELY. ITA NO.650/KOL/2012 A.Y. 2006-07 ITO WD-45(2) KOL V. M/S ASHOK TRADING CO. PAGE 19 CONSIDERING THE SAME LD.CIT(A) DELETED THE ADDITION . AGGRIEVED, REVENUE FILED APPEAL BEFORE THE TRIBUNAL. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. THE LD. DR SUPPORTED THE ORDER OF THE AO. THE LD. AR SUPPORTED THE ORDER OF THE CIT(A).IT IS OBSERVED THAT IN CASE OF M/S MITHLA SHIPPING AGENCY THE TDS HAS BEEN DEDUCTED AND DEPOS ITED. SO THE TDS PROVISIONS HAVE BEEN COMPLIED WITH. THE NECESSARY D OCUMENTS SUCH AS TDS CERTIFICATE TDS PAID CHALLAN AND TDS RETURN HAD BEE N SUBMITTED WHICH WERE PLACED ON PAGE NO. 34 TO 36 OF THE PAPER BOOK. FOR THE REST OF THE PARTIES, THE MAJOR PAYMENT WAS THE REIMBURSEMENT OF THE EXPENSES AND THE SERVICES CHARGES OF THE PARTIES WERE BELOW THE LIMIT AS SPEC IFIED UNDER THE PROVISIONS OF TDS. THE BILL FOR THE SERVICE CHARGE AND REIMBURSEM ENT OF EXPENSES ARE PLACED ON PAGES 32 AND 33 OF THE PAPER BOOK. HENCE THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 10. COMING TO THIRD ISSUE OF REVENUES APPEAL. DURI NG THE YEAR UNDER CONSIDERATION THE ASSESSEE CLAIMED AN EXPENDITURE O F RS.6,29,940/- TOWARDS THE RENT CHARGES. DURING THE ASSESSMENT PROCEEDINGS , THE ASSESSEE COULD NOT PRODUCE THE DETAILS OR OTHER CORROBORATIVE EVIDENCE TO ESTABLISH THE CLAIM. ON SCRUTINY BY THE AO, IT WAS FOUND THAT THE ASSESSEE ALSO FAILED TO DEDUCT TDS ON THE EXPENSE OF RENT IN TERMS OF SECTION 40(A)(IA ) OF THE ACT. SO THE SAID EXPENSES HAS BEEN DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED BY THIS ORDER OF AO ASSESSEE WENT IN APPE AL BEFORE LD. CIT(A). BEFORE THE LD. CIT(A) THE ASSESSEE PRODUCED AS MANY AS NINE PARTIES TO WHOM THE RENT WAS PAID DURING THE RELEVANT YEAR AND THE ASSESSEE ALSO DEMONSTRATED THAT EACH PARTY WAS PAID RENT LESS THA N A SUM OF RS. 1.20 LAKHS DURING THE YEAR. HENCE THE PROVISION OF TDS DOES NO T ATTRACT TO THIS TRANSACTION. HOWEVER MANY PARTIES TO WHOM THE CONFI RMATION LETTER WAS SENT BY THE AO, GOT RETURNED. SO THE CIT(A) SUSTAINED TH E DISALLOWANCE OF RS. 3,00,040/- FROM WHERE THE CONFIRMATION WAS NOT RECE IVED. HOWEVER THE ADDITION FOR A SUM OF RS. 3,29,900/- HAS BEEN DELET ED. ITA NO.650/KOL/2012 A.Y. 2006-07 ITO WD-45(2) KOL V. M/S ASHOK TRADING CO. PAGE 20 11. WE HAVE HEARD THE RIVAL PARTIES AND PERUSED TH E MATERIAL AVAILABLE ON RECORD. THE LD. DR SUPPORTED THE VIEW OF THE AO. TH E LD. AR SUPPORTED THE ORDER OF CIT(A). IT WAS OBSERVED THAT THE CIT(A) HA S GIVEN RELIEF IN RESPECT OF RENT PAYMENT TO CERTAIN PARTIES ON THE BASIS OF DOC UMENTS PRODUCED BY THE ASSESSEE. HOWEVER THE CIT(A) DID NOT MENTION MERIT FOR THE ALLOWANCE OF THE RENT. FURTHER THE DISALLOWANCE OF THE RENT PAYMENT DUE TO VIOLATION OF THE PROVISION OF SECTION 194C READ WITH SECTION 40(A)(I A) DOES NOT HOLD GOOD AS THE RENT PAYMENT TO EACH PARTY DOES NOT EXCEED RS. 1.20 LAKH. THE LD. AR DREW OUR ATTENTION ON PAGE NO. 21 OF THE PAPER BOOK , WHERE THE DETAILS OF THE RENT PAID TO THE PARTIES HAS BEEN MENTIONED. THE RE NT PAID TO THE DIFFERENT PARTIES IS BELOW THE TAXABLE LIMIT SPECIFIED U/S 19 4I OF THE ACT. IN VIEW OF THE NON- SPEAKING ORDER OF THE CIT(A) , WE ARE OF THE O PINION IN THE INTEREST OF JUSTICE AND FAIR PLAY TO GIVE ONE MORE OPPORTUNITY TO THE ASSESSEE TO PRODUCE THE NECESSARY DOCUMENTS FOR THE VERIFICATION. HENCE WE RESTORE THE FILE TO THE CIT(A) TO CALL UPON THE ASSESSEE FOR THE VERIFICATI ON OF NECESSARY DOCUMENTS AND PASS THE SPEAKING ORDER AS PER LAW. HENCE THIS GROUND OF APPEAL OF REVENUE IS ALLOWED FOR THE STATISTICAL PURPOSES. 12. COMING TO REVENUES NEXT GROUND OF APPEAL REGAR DING THE RECEIPT OF ADVANCE SHOWN FOR AN AMOUNT OF RS.2,35,105/- FROM M /S ANKITA ENTERPRISES. DURING THE YEAR THE ASSESSEE HAS SHOWN ADVANCE FROM THE SUNDRY DEBTORS BUT FAILED TO PRODUCE THE SUPPORTING DOCUMENTS. SO THE AO HAS TREATED THE AS UNEXPLAINED CREDIT UNDER SECTION 68 OF THE ACT AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. AGGRIEVED ASSESSEE PREFERRE D AN APPEAL TO CIT(A) WHO HAS DELETED THE ADDITION MADE BY THE AO BY OBSE RVING THAT THE CONFIRMATION HAS BEEN FILED BY THE ASSESSEE FOR THE SAME TRANSACTION. THE ASSESSEE HAS ALSO SUBMITTED THAT THE SUPPLY AGAINST THE ADVANCE WAS MADE IN THE SUBSEQUENT YEAR. THE LD. AR DREW OUR ATTENTI ON ON PAGE NO. 25 OF THE PAPER BOOK WHERE THE SALES MADE TO M/S ANKITA ENTER PRISES WAS RECORDED LD. AR ALSO SUBMITTED THAT THE LEDGER COPY AND THE CONF IRMATION LETTER FROM M/S ITA NO.650/KOL/2012 A.Y. 2006-07 ITO WD-45(2) KOL V. M/S ASHOK TRADING CO. PAGE 21 ANKITA ENTERPRISES WHICH ARE PLACED ON PAGE NO. 37, 38 OF THE PAPER BOOK. AGGRIEVED, REVENUE IS IN APPEAL BEFORE US. 13. THE LD. DR SUPPORTED THE ORDER OF THE AO AND TH E LD. AR SUPPORTED THE ORDER OF THE CIT(A). WE HAVE HEARD THE RIVAL PA RTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. SINCE THE CONFIRMATIO N FROM THE ASSESSEE HAS BEEN SUBMITTED FOR THE ADVANCE RECEIPT AND THE SUPP LY OF THE GOODS HAS ALSO BEEN MADE IN THE SUBSEQUENT YEAR, WE DO NOT WANT AN Y MERIT IN THE GROUND OF APPEAL OF THE REVENUE. THEREFORE WE DO NOT FIND TO INTERFERE WITH THE ORDER OF CIT(A). HENCE THIS GROUND OF APPEAL IS OF REVENUE I S DISMISSED. 14. IN THE RESULT, REVENUES APPEAL IS PARTLY ALLOWED F OR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT 0 7/10/2015 SD/- SD/- (N.V.VASUDEVAN) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP !- 07 /10/2015 / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT-ITO, WARD-45(2), 3, GOVT. PLACE(W), GR .FL. KOLKATA-01 2. / RESPONDENT- M/S ASHOK TRADING CO. 13, NOORMAL LO HIA LANE, KOL-07 3. * +, - - . / CONCERNED CIT KOLKATA 4.- - .- / CIT (A) KOLKATA 5. 012 33+,,- +, , / DR, ITAT, KOLKATA 6. 267 89 / GUARD FILE. BY ORDER/ - , /TRUE COPY/ / - +, ,