ITO, Wd-41(2), Kolkata, Kolkata V. Shri Sajjan Kumar Sharma, Kolkata

ITA 687/KOL/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4582 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-09-2016
• Appeal Filed By: Department
• Bench Allotted: SMC
• Next Hearing Date: 23-08-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 17-04-2014
• Court: TRIBUNAL
• Department Lawyers: AMITABH BHATTACHARYA
• Keywords: Retrospective amendment
• Section: 194C; 139

Judgement Text

ITA NO.687/KOL/2014-SHRI SAJJAN KUMAR SHARMA A.Y.20 07-08 1 IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN, JM ] I.T.A NO.687/KOL/2014 ASSESSMENT YEAR : 2007- 08 I.T.O., WARD-41(2) -VS.- SHRI SAJJAN KUM AR SHARMA KOLKATA KOLKATA (PAN:AQJPS 6509 D) (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI AMITABH BHA TTACHARYA, JCIT FOR THE RESPONDENT : NONE DATE OF HEARING : 23.08.2016. DATE OF PRONOUNCEMENT : 02.09.2016. ORDER THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 31.12.2013 OF CIT(A)-XXX, KOLKATA, RELATING TO AY 2007-08. 2. THE ASSESSEE IS AN INDIVIDUAL. HE DERIVES INCOME FROM RENDERING SERVICES. FOR AY 2007-08, THE AO COMPLETED ASSESSMENT FOR AY 2007 -08 U/S.143(3) OF THE INCOME TAX ACT, 1961 (ACT) ON 31.12.2009 DETERMINING THE T OTAL INCOME OF THE ASSESSEE AT RS.6,34,660/-. AFTER CONCLUSION OF THE ASSESSMENT PROCEEDINGS THE AO CAME ACROSS TWO TAX DEDUCTED AT SOURCE (TDS) PAYMENTS OF RS.20, 226/- AND RS.21,849/- RESPECTIVELY U/S.194C(2) OF THE ACT, DEDUCTED IN TH E MONTHS OF JANUARY AND FEBRUARY OF THE RELEVANT PREVIOUS YEARS WHICH WERE DEPOSITED IN THE NEXT FINANCIAL YEAR TO BE EXACT ON 16.6.2007. ACCORDING TO THE AO AS PER THE PROVISIONS OF SEC.40(A)(IA) OF THE ACT, THE TAX DEDUCTED AT SOURCE OUGHT TO HAVE BEEN PAID ON OR BEFORE MARCH, 2007. SINCE THE PAYMENTS WERE MADE ONLY ON 16.6.2007, THE AO WAS OF THE VIEW THAT A SUM OF RS.41,25,000/- WHICH IS THE CORRESPONDING PAYMEN T RELATABLE TO TDS WHICH WAS PAID OUGHT TO HAVE BEEN DISALLOWED U/S.40(A)(IA) OF THE ACT AND OUGHT TO HAVE BEEN ADDED TO THE TOTAL INCOME OF THE ASSESSEE. THE AO INVOKED THE PROVISIONS OF SEC.154 OF THE ACT AND PASSED AN ORDER DATED 10.11.2010 DIS ALLOWING THE SUM OF RS.41,25,000/- U/S.40(A)(IA) OF THE ACT AND ADDING THE SAID SUM TO THE TOTAL INCOME OF THE ASSESSEE. ITA NO.687/KOL/2014-SHRI SAJJAN KUMAR SHARMA A.Y.20 07-08 2 3. THE PLEA OF THE ASSESSEE BEFORE THE AO WAS THAT AS REQUIRED U/S. 194C OF THE ACT, TAX WAS DEDUCTED, BUT WAS PAID TO CREDIT OF CE NTRAL GOVT. BEFORE 30.9.2008 I.E., BEFORE THE LAST DATE SPECIFIED FOR FILING THE RETUR N OF INCOME U/S. 139(1) OF THE ACT. AS PER THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT, AS IT EXISTED PRIOR TO ITS SUBSTITUTION BY THE FINANCE ACT, 2010, ANY INTEREST, COMMISSION ON WHICH TAX IS DEDUCTIBLE AT SOURCE U/S. 194H AND 194A OF THE ACT, AND WHERE SUC H TAX HAS NOT BEEN DEDUCTED OR AFTER DEDUCTED HAS NOT BEEN PAID; (A) IN A CASE WHERE THE TAX WAS DEDUCTIBLE AND WA S 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 (B) IN ANY OTHER CASE, ON OR BEFORE THE LAST DAY OF THE PREVIOUS YEAR WILL ATTRACT DISALLOWANCE U/S.40(A)(IA) OF THE ACT. 4. THE PROVISO TO SECTION 40(A)(IA) OF THE ACT AS IT EXISTED AFTER SUBSTITUTION BY THE FINANCE ACT, 2008 WITH RETROSPECTIVE EFFECT FRO M 1.4.2005 READS AS FOLLOWS:- PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, T AX 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 YEA R BUT PAID AFTER THE END OF THE SAID PREVIOUS YEAR, SUCH SUM SHALL B E ALLOWED AS A DEDUCTION IN COMPUTING THE INCOME OF THE PREVIOUS Y EAR IN WHICH SUCH TAX HAS BEEN PAID. ; 5. ACCORDING TO THE AO, AS PER THE ABOVE PROVISIONS AS IT EXISTED FOR A.Y. 2007- 08, THE ASSESSEE OUGHT TO HAVE PAID THE TAX DEDUCTE D AT SOURCE ON OR BEFORE THE LAST DAY OF THE PREVIOUS YEAR. SINCE THE ASSESSEE FAILED TO PAY THE TAX ON OR BEFORE THE LAST DAY OF THE PREVIOUS YEAR I.E., 31.3.2008, THE AO WAS OF THE VIEW THAT THE COMMISSION AND INTEREST EXPENSES ON WHICH TAX DEDUCTED AT SOURCE W AS NOT PAID WITHIN THE TIME LIMIT ALLOWED AS ABOVE, SHOULD BE DISALLOWED AND ADDED TO THE TOTAL INCOME. THE AO ACCORDINGLY MADE THE IMPUGNED DISALLOWANCE U/S.40(A )(IA) OF THE ACT. ITA NO.687/KOL/2014-SHRI SAJJAN KUMAR SHARMA A.Y.20 07-08 3 6. ON APPEAL BY THE ASSESSEE, THE CIT(APPEALS) DELETED THE ADDITIONS MADE BY THE AO BY HOLDING THAT IF THE TAX DEDUCTED AT SOURCE IS PAID ON OR BEFORE THE DUE DATE FOR FILING THE RETURN OF INCOME U/S.139(1) OF THE INCOM E TAX ACT, 1961 (ACT), THAN NO DISALLOWANCE U/S.40(A)(IA) OF THE ACT COULD BE MADE . IN HOLDING SO, THE CIT(A) HELD THAT THE AMENDMENT TO THE PROVISIONS OF SEC.40(A)(I A) OF THE ACT BY THE FINANCE ACT, 2010 WHEREBY IT WAS LAID DOWN THAT IF THE TAX DEDUC TED AT SOURCE IS PAID ON OR BEFORE THE DUE DATE FOR FILING THE RETURN OF INCOME U/S.13 9(1) OF THE ACT THAN NO DISALLOWANCE CAN BE MADE U/S.40(A)(IA) OF THE ACT, IS RETROSPECT IVE IN OPERATION AND OPERATES FROM 1.4.2005 THOUGH IT IS SAID TO BE RETROSPECTIVE ONLY FROM 1.4.2010. 7. AGGRIEVED, THE REVENUE HAS PREFERRED THE PRESENT A PPEAL BEFORE THE TRIBUNAL. 8. I HAVE HEARD THE RIVAL SUBMISSIONS. IT IS NOT IN D ISPUTE BEFORE ME THAT THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF VIRGIN C REATIONS THIS TRIBUNAL IN THE CASE OF SRI SANTOSH KUMAR SHETTY IN ITA NO.1194/BANG/2012 BY ORDER DATED 26.7.2013 , HAS TAKEN A VIEW THAT AMENDMENT TO PROVISIONS OF SE CTION 40(A)(IA) OF THE ACT BY THE FINANCE ACT, 2010 WILL OPERATE RETROSPECTIVELY W.E. F. 1.4.2005. AS PER THE AFORESAID AMENDMENT, TAX DEDUCTED AT SOURCE, IF IT IS PAID ON OR BEFORE THE DUE DATE FOR FILING OF RETURN OF INCOME, THEN NO DISALLOWANCE U/S. 40(A)(I A) OF THE ACT CAN BE MADE. 9. THE LEGISLATIVE HISTORY OF THE PROVISIONS OF SEC.40 (A)(IA) OF THE ACT IS AS FOLLOWS: SECTION 40 HAS CERTAIN CLAUSES PROVIDING F OR THE AMOUNTS WHICH ARE NOT DEDUCTIBLE. SUB-CLAUSE (IA) OF CLAUSE (A) OF SECTIO N 40 WAS INSERTED BY THE FINANCE (NO.2) ACT, 2004 WITH EFFECT FROM 1ST APRIL, 2005 R EADING 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 SERVICE S PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONTRACTOR O R SUB- CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WO RK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WO RK), ON OR, AFTER DEDUCTION, HAS NOT BEEN PAID DURING THE P REVIOUS YEAR, OR IN THE SUBSEQUENT YEAR BEFORE THE EXPIRY O F THE TIME PRESCRIBED UNDER SUB-SECTION (1) OF SECTION 200 : ITA NO.687/KOL/2014-SHRI SAJJAN KUMAR SHARMA A.Y.20 07-08 4 PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TAX HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR OR, HAS BEEN DEDUCTED IN THE PREVIOUS YEAR BUT PAID IN ANY SUBSE QUENT YEAR AFTER THE EXPIRY OF THE TIME PRESCRIBED UNDER SUB- SECTION (1) OF SECTION 200, SUCH SUM SHALL BE ALLOW ED AS A DEDUCTION IN COMPUTING THE INCOME OF THE PREVIOUS Y EAR IN WHICH SUCH TAX HAS BEEN PAID. EXPLANATION. FOR THE PURPOSES OF THIS SUB-CLAUSE, - (I)COMMISSION OR BROKERAGE SHALL HAVE THE SAME ME ANING AS IN CLAUSE (I) OF THE EXPLANATION TO SECTION 194H; (II)FEES FOR TECHNICAL SERVICES SHALL HAVE THE SA ME MEANING AS IN EXPLANATION 2 TO CLAUSE (VII) OF SUB-SECTION (1) OF SECTION 9; (III)PROFESSIONAL SERVICES SHALL HAVE THE SAME ME ANING AS IN CLAUSE (A) OF THE EXPLANATION TO SECTION 194J; (IV)WORK SHALL HAVE THE SAME MEANING AS IN EXPLAN ATION III TO SECTION 194C; 10. THE MEMORANDUM EXPLAINING THE PROVISIONS IN THE FIN ANCE BILL EXPLAINED THE RATIONALE OF THE INSERTION OF THE NEW PROVISION IN FOLLOWING WORDS :- WITH A VIEW TO AUGMENT COMPLIANCE OF TDS PROVISION S, 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 DAY OF APRIL, 2005 AND WILL, ACCORDINGLY, APPLY IN RELATION TO TH E ASSESSMENT YEAR 2005- 2006 AND SUBSEQUENT YEARS. [CLAUSE 11] ITA NO.687/KOL/2014-SHRI SAJJAN KUMAR SHARMA A.Y.20 07-08 5 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 (INCLUDING SUPP LY OF LABOUR FOR CARRYING OUT ANY WORK), ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B AND SUCH TAX HAS NOT BEEN PAID,- (A) IN A CASE WHERE THE TAX WAS DEDUCTIBLE AND WA S 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 (B) IN ANY OTHER CASE, ON OR BEFORE THE LAST DAY OF THE PREVIOUS YEAR. PROVIDED THAT WHERE IN RESPECT OF ANY SUCH S UM, 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 YEA R BUT PAID AFTER THE END OF THE SAID PREVIOUS YEAR, SUCH SUM SHALL B E ALLOWED AS A DEDUCTION IN COMPUTING THE INCOME OF THE PREVIOUS Y EAR IN WHICH SUCH TAX HAS BEEN PAID. ; 12. THE FINANCE ACT, 2008 BROUGHT OUT AMENDMENT TO SECTION 40(A)(IA) W..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 PERIOD OF THE PREVIOUS YEAR IN WHICH TAX WAS DEDUCTIBLE. THE FIRST CATEGORY OF DISALLOWANCES INC LUDED THE CASES IN WHICH TAX WAS DEDUCTIBLE AND WAS SO DEDUCTED DURING THE LAST MONT H OF THE PREVIOUS YEAR BUT THERE WAS FAILURE TO PAY SUCH TAX ON OR BEFORE THE DUE DA TE SPECIFIED IN SUB-SECTION (1) OF SECTION 139 OF THE ACT. IN OTHER WORDS, IF ANY AMOU NT ON WHICH TAX WAS DEDUCTIBLE DURING LAST MONTH OF THE PREVIOUS YEAR, THAT IS MAR CH 2005, BUT WAS PAID BEFORE 31ST OCTOBER, 2005, BEING THE DUE DATE U/S 139(1), THE D EDUCTIBILITY OF THE AMOUNT WAS KEPT INTACT. THE SECOND CATEGORY INCLUDED CASES OTHER TH AN THOSE GIVEN IN CATEGORY FIRST. TO PUT IT SIMPLY, IF TAX WAS DEDUCTIBLE AND WAS SO DED UCTED DURING THE FIRST ELEVEN MONTHS ITA NO.687/KOL/2014-SHRI SAJJAN KUMAR SHARMA A.Y.20 07-08 6 OF THE PREVIOUS YEAR, THAT IS, UP TO FEBRUARY, 2005 , THE DISALLOWANCE WAS TO BE MADE IF THE ASSESSEE FAILED TO PAY IT BEFORE 31ST MARCH, 20 05. 13. THEN CAME THE AMENDMENT TO SECTION 40(A)(IA) B Y THE FINANCE ACT, 2010 WITH RETROSPECTIVE EFFECT FROM 1ST APRIL, 2010. THE PROV ISION 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 (INCLUDING SUPP LY OF LABOUR FOR CARRYING OUT ANY WORK), ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B AND SUCH TAX HAS NOT BEEN DEDUCTED O R; AFTER 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. 14. FROM THE ABOVE PROVISION AS AMENDED BY THE FIN ANCE ACT, 2010 WITH RETROSPECTIVE EFFECT FROM 1ST APRIL, 2010 IT CAN BE SEEN THAT THE ONLY DIFFERENCE WHICH THIS AMENDMENT HAS MADE IS DISPENSING WITH THE EARL IER TWO CATEGORIES OF DEFAULTS AS PER THE FINANCE ACT, 2008, AS DISCUSSED IN THE EARL IER PARA, CAUSING DISALLOWANCE ON THE BASIS OF THE PERIOD OF THE PREVIOUS YEAR DURING WHICH TAX WAS DEDUCTIBLE. THE FIRST CATEGORY OF DISALLOWANCES INCLUDED THE CASES IN WHI CH TAX WAS DEDUCTIBLE AND WAS SO DEDUCTED DURING THE LAST MONTH OF THE PREVIOUS YEAR BUT THERE WAS FAILURE TO PAY SUCH TAX ON OR BEFORE THE DUE DATE SPECIFIED IN SUB-SECT ION (1) OF SECTION 139. THE FINANCE ACT, 2010 HAS NOT TINKERED WITH THIS POSITION. THE SECOND CATEGORY OF THE FINANCE ACT, 2008 WHICH REQUIRED THE DEPOSIT OF TAX BEFORE THE C LOSE OF THE PREVIOUS YEAR IN CASE OF DEDUCTION DURING THE FIRST ELEVEN MONTHS, AS A PRE- CONDITION FOR THE GRANT OF DEDUCTION IN THE YEAR OF INCURRING EXPENDITURE, HAS BEEN ALTE RED. THE HITHERTO REQUIREMENT OF THE ASSESSEE DEDUCTING TAX AT SOURCE DURING THE FIRST E LEVEN MONTHS OF THE PREVIOUS YEAR AND PAYING IT BEFORE THE CLOSE OF THE PREVIOUS YEAR UP TO 3 1ST MARCH OF THE PREVIOUS YEAR AS A REQUIREMENT FOR GRANT OF DEDUCTION IN THE YEAR OF INCURRING SUCH EXPENDITURE, ITA NO.687/KOL/2014-SHRI SAJJAN KUMAR SHARMA A.Y.20 07-08 7 HAS BEEN EASED TO EXTEND SUCH TIME FOR PAYMENT OF T AX UP TO DUE DATE U/S 139(1) OF THE ACT. AS PER THE NEW AMENDMENT, THE DISALLOWANCE WIL L BE MADE IF AFTER DEDUCTING TAX AT SOURCE, THE ASSESSEE FAILS TO PAY THE AMOUNT OF TAX ON OR BEFORE THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139 OF THE ACT. THE EFFECT OF THIS AMENDMENT IS THAT NOW THE ASSESSEE DEDUCTING TAX EITHER IN THE L AST MONTH OF THE PREVIOUS YEAR OR FIRST ELEVEN MONTHS OF THE PREVIOUS YEAR SHALL BE E NTITLED TO DEDUCTION OF THE EXPENDITURE IN THE YEAR OF INCURRING IT, IF THE TAX SO DEDUCTED AT SOURCE IS PAID ON OR BEFORE THE DUE DATE U/S 139(1). THIS IS THE ONLY DI FFERENCE WHICH HAS BEEN MADE BY THE FINANCE ACT, 2010. 15. THE QUESTION AS TO WHETHER THE AMENDMENT BY TH E FINANCE ACT, 2010 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 WIT H A VIEW TO REMOVE THE UNNECESSARY HARDSHIP CAUSED TO THE ASSESSEE 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 AS SESSMENT YEAR 2010- 2011 CANNOT BE HELD TO BE RETROSPECTIVE FROM ASSESSMENT YEAR 20 05-2006. 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. 16. PRIOR TO THE DECISION OF THE SPECIAL BENCH, ID ENTICAL 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 DISALLOWANCE OF EXPENSES U/S.40(A )(IA)CLAIMED AS DEDUCTION WHILE COMPUTING INCOME FROM BUSINESS BEING EMBROIDERY CHA RGES, DYEING CHARGES, INTEREST ON LOAN AND FREIGHT CHARGES WITHOUT DEDUCTING TAX A T SOURCE. THE EMBROIDERY CHARGES WERE PAID BETWEEN 22ND MAY, 2004 TO 30.11.2004. TA X 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. FREIGHT OUTWARD CHARGES WERE P AID WITHOUT DEDUCTION OF TAX AT SOURCE. INTEREST ON LOANS WERE CREDITED TO THE CRE DITORS ACCOUNT ON 31.3.2005 TO THE ITA NO.687/KOL/2014-SHRI SAJJAN KUMAR SHARMA A.Y.20 07-08 8 EXTENT THEY WERE 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 FINANC E ACT, 2010 WITH RETROSPECTIVE EFFECT FROM 1ST APRIL, 2010 WHEREBY AMOUNT OF TAX D EDUCTED AT THE TIME OF MAKING PAYMENT IN RESPECT OF EXPENDITURE REFERRED TO IN SE C.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 DEDUCTION. IN OTHER WORDS IT WAS ARGUED THAT THE AMENDMENT BY THE FINANCE ACT, 2010 TO THE PROVI SIONS 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 THE FACT THAT THOUGH THE LD. D.R. SUBMITTED THAT THE DECISIONS OF THE COORDINATE BENCHES ARE NOT BINDING AND THE KOLKATA BENCHES MAY TAKE A DIFFERENT VIEW, SINCE MUMBAI BENCH AFTER ANALYZING THE PROVISIONS OF SEC.40(A)(IA) SINCE ITS INCEPTION AND VARIOUS AM ENDMENTS MADE TO THE SAME INCLUDING THE SUGGESTION MADE BY THE INDUS TRY IN THE FORM OF REPRESENTATION IN THEIR PRE-BUDGET MEMORANDUM TO THE 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 TAXES AT SOURCE AND BY PAYING 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 MOTORS PVT.LTD. (SUPRA) AND MOM EXTRUSIONS LTD. (SUPRA) AND THE SAM E THEREFORE WOULD APPLY RETROSPECTIVELY W.E.F. 1ST 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 ITA NO.687/KOL/2014-SHRI SAJJAN KUMAR SHARMA A.Y.20 07-08 9 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 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. 17. AS AGAINST THE AFORESAID DECISION THE REVENUE PREFERRED APPEAL BEFORE THE HONBLE CALCUTTA HIGH COURT. THE HONBLE CALCUTTA HIGH COU RT 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 AL LIED MOTORS PVT. LTD. AND ALSO IN THE CASE OF ALOM EXTRUSIONS LTD., 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. 18. IT CAN BE SEEN FROM THE ABOVE DECISION OF THE HONBLE CALCUTTA HIGH COURT THAT AMENDMENT TO THE PROVISIONS OF SEC.40(A)(IA) OF THE ACT, BY THE FINANCE ACT, 2010 AS AFORESAID WAS HELD TO BE RETROSPECTIVE FROM 1.4.200 5. IF THE AMENDMENT IS CONSIDERED ITA NO.687/KOL/2014-SHRI SAJJAN KUMAR SHARMA A.Y.20 07-08 10 AS RETROSPECTIVE FROM 1.4.2005, THE EFFECT WILL BE THAT PAYMENTS OF TDS TO THE CREDIT OF THE GOVERNMENT ON OR BEFORE THE LAST DATE FOR FILIN G RETURN OF INCOME U/S.139(1) OF THE ACT FOR THE RELEVANT AY HAVE TO BE ALLOWED AS DEDUC TION. ADMITTEDLY IN THE CASE OF THE ASSESSEE PAYMENTS WERE SO MADE BEFORE THE SAID DUE DATE AND IN TERMS OF THE DECISION OF THE HONBLE CALCUTTA HIGH COURT NO DISA LLOWANCE COULD BE MADE BY THE AO U/S. 40(A)(IA) OF THE ACT. 19. IT WAS ALSO BROUGHT TO MY NOTICE THAT THE HON BLE HIGH COURT OF KARNATAKA IN ITA NO.590/2013 BY JUDGMENT DATED 15.7.2014 , HAS TAKEN IDENTICAL VIEW AS WAS TAKEN BY THE HONBLE CALCUTTA HIGH COURT. IN VIEW OF THE ABOVE, I AM OF THE VIEW THAT THE TAX DEDUCTED AT SOURCE BY THE ASSESSEE WHICH HAVE A DMITTEDLY BEEN PAID ON OR BEFORE THE DUE DATE FOR FILING THE RETURN OF INCOME FOR AY 07-08, HAVE TO BE CONSIDERED AS HAVING BEEN PAID WITHIN TIME AND THEREFORE THE PROV ISIONS OF SEC.40(A)(IA) OF THE ACT CANNOT BE INVOKED TO DISALLOW THE PAYMENTS. THE OR DER OF THE CIT(A) IS THEREFORE CONFIRMED AND THE APPEAL BY THE REVENUE IS DISMISSE D. 20. IN THE RESULT, THE APPEAL BY THE REVENUE IS DISMIS SED. ORDER PRONOUNCED IN THE COURT ON 02.09.2016. SD/- [ N.V.VASUDEVAN ] JUDICIAL MEMBER DATED : 02.09.2016. [RG PS] COPY OF THE ORDER FORWARDED TO: 1.SHRI SAJJAN KUMAR SHARMA, 8, DILIP GANGULY SARANI , DUNLOP, KOLKATA-700035. 2. I.T.O., WARD-41(2), KOLKATA. 3. CIT(A)-XXX, KOLKATA. 4. CIT-XIV, KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER A SSTT.REGISTRAR, ITAT, KOLKATA BENCHES