ITO,Ward-1, Bijapur V. M/s Anilkumar and Co., Bijapur

ITA 78/BANG/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57536 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 28-02-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 28-01-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUSAN THOMAS JOSE JT
• Assessee Lawyers: P C CHADAGA ITP
• Keywords: Retrospective amendment; Non-deduction of tax; Tax effect

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE K., JUDICIAL MEMBER ITA NO.78/BANG/2011 ASSESSMENT YEAR : 2006-07 THE INCOME TAX OFFICER, WARD 1, BIJAJPUR. VS. M/S. ANILKUMAR & CO., COTTON MERCHANT & COMMISSION AGENT, INDI ROAD, BIJAPUR. PAN: AACFA 2641K APPELLANT RESPONDENT APPELLANT BY : SMT. SUSAN THOMAS JOSE, JT.CIT(DR) RESPONDENT BY : SHRI P.C. CHADAGA, I.T.P. DATE OF HEARING : 28.02.2012 DATE OF PRONOUNCEMENT : 28.02.2012 O R D E R PER N.K. SAINI, ACCOUNTANT MEMBER THIS APPEAL BY THE DEPARTMENT IS AGAINST THE ORDER DATED 16.12.2010 OF THE CIT(APPEALS), BELGAUM. 2. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEA L: 1. THE ORDER OF THE CLT(A) DIRECTING TO DELETE AD DITION MADE TOWARDS PRESSING AND GINNING CHARGES AMOUNTING TO ITA NO. 78/BANG/2011 PAGE 2 OF 11 RS.11,80,822/- U/S.40(A)(IA) IS OPPOSED TO LAW AND FACTS OF THE CASE. 2. THE CIT(A) FAILED TO CONSIDER PROVISIONS OF SEC TION 194C(1), AS PER WHICH ASSESSEE IS LIABLE TO DEDUCT TAX AT SOURCE DURING EVERY MONTH OF PAYMENT, FOR THE PERIOD 1/4/2 005 TO 28/2/2006 AT THE TIME OF CREDIT OR ACTUAL PAYMENT W HICHEVER IS EARLIER. 3. THE CLT(A) FAILED TO NOTE THAT, EVEN ADVANCES P AID TO CONTRACTORS IS LIABLE FOR TDS AS LAID DOWN IN CLAUS E (XI) OF BOARD'S CIRCULAR NO. 681 DATED 8.4.1994 AND AS A CO NSEQUENCE THE TAX SHOULD HAVE BEEN REMITTED WITHIN SEVEN DAYS OF NEXT MONTH AS SPECIFIED IN RULE 30(1)(B). 4. THE CIT(A) ERRED IN DELETING THE ADDITION MADE U/S.40(A)(IA) BASED ON CLAUSE (A) OF THE SAID SECTI ON WHICH IS APPLICABLE ONLY IN RESPECT OF AMOUNTS CREDITED DURI NG LAST MONTH OF PREVIOUS YEAR FOR WHICH TIME IS AVAILABLE TILL D UE DATE OF FILING RETURN U/S.139(1) WHEREAS, IN THE FACTS OF THE PRES ENT CASE, CLAUSE (B) OF SECTION 40(A)(IA) IS APPLICABLE, AS PER WHIC H DEDUCTION IS ALLOWABLE ONLY IF TAX IS PAID BEFORE LAST DAY OF PR EVIOUS YEAR. 5. THE CIT(A) FAILED TO TAKE NOT OF CLAUSE (B) OF PROVISO TO SEC, 40(A)(IA), WHICH IS VERY MUCH APPLICABLE TO FA CTS OF THE CASE, AS PER WHICH AMOUNTS ON WHICH TDS DEDUCTIBLE DURING ANY OTHER MONTH OF PREVIOUS YEAR BUT PAID AFTER THE END OF TH E SAID PREVIOUS YEAR IS ALLOWABLE AS DEDUCTION ONLY IN NEXT YEAR. 6. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE UR GED AT THE TIME OF HEARING, THE ORDER OF THE CIT(A) DELETING A DDITION MADE U/S.40(A)(IA) AMOUNTING TO RS.11 ,80,822/- MAY BE C ANCELLED AND THAT OF THE ASSESSING OFFICER RESTORED. 3. FROM THE ABOVE GROUNDS, IT IS GATHERED THAT THE ONLY GRIEVANCE OF THE DEPARTMENT RELATES TO THE DELETION OF ADDITION OF R S.11,80,822 MADE BY THE AO BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT IN SHORT ]. 4. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSE SSEE FILED ITS RETURN OF INCOME DECLARING A LOSS OF RS.1,63,960 ON 31.10.200 6 WHICH WAS ITA NO. 78/BANG/2011 PAGE 3 OF 11 PROCESSED U/S. 143(1) OF THE ACT. LATER ON, THE CA SE WAS SELECTED FOR SCRUTINY. DURING THE COURSE OF ASSESSMENT PROCEEDI NGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD GOT PART OF T HE COTTON GINNED AND PRESSED BY OUTSIDE AGENCIES AND CREDITED THE GINNIN G AND PRESSING CHARGES TO THE FOLLOWING TWO PARTIES AMOUNTING TO T HE FIGURES MENTIONED AGAINST THEIR NAMES: (1) ANAND GINNING FACTORY RS. 9,43,057 (2) NANDAVI GINNING FACTORY RS. 2,37,765 ------------------- TOTAL RS.11,80,822 ------------------- ACCORDING TO THE AO, TAX WAS DEDUCTIBLE IN THE ABOV E CASES AT THE TIME OF CREDIT OF THE CONTRACTORS ACCOUNT AND THE AMOUNT S O DEDUCTED WAS TO BE PAID TO THE GOVERNMENT ACCOUNT BEFORE THE END OF TH E PREVIOUS YEAR FOR THE AMOUNTS TO BE ELIGIBLE FOR DEDUCTION U/S. 40(A)(IA) OF THE ACT. THE AO POINTED OUT THAT THE ASSESSEE HAD DEDUCTED TAX OF R S.11,80,822 ONLY ON 31.03.2006 AND CREDITED TO THE GOVERNMENT ACCOUNT O N 30.04.2006 I.E., AFTER THE END OF THE PREVIOUS YEAR. ACCORDINGLY TH E AMOUNT IN QUESTION WAS DISALLOWED BY INVOKING THE PROVISIONS OF SECTION 40 (A)(IA) OF THE ACT. 5. THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A PPEALS) WHO DELETED THE ADDITION BY OBSERVING IN PARA 4.2 OF THE IMPUGN ED ORDER AS UNDER: 4.2 SIMILAR ADDITIONS WERE MADE BY THE ASSESSING OFFICER FOR THE ASSESSMENT YEAR 2005.06 IN APPELLANT'S OWN CASE AND THE COMMISSIONER OF INCOME TAX (APPEALS) IN ITA NO.12/B JP /2007.08 DATED 29.05.2008 ALLOWED APPELLANT'S APPEA L. BEING AGGRIEVED WITH THE ORDER OF THE COMMISSIONER OF INC OME TAX (APPEALS), THE DEPARTMENT HAS CONTESTED BEFORE THE HON'BLE ITAT AND THE HONBLE ITAT IN ITA NO.1097/BANG/2008 DATED 30.08.2010 CONFIRMED THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) WITH FOLLOWING OBSERVATIONS - ITA NO. 78/BANG/2011 PAGE 4 OF 11 'AS RIGHTLY HELD BY THE CIT(A) VIDE PARA 5 OF THE APPELLATE ORDER, THE ACCOUNTS OF THE FOUR PARTIES W ERE FINALIZED AT THE END OF THE YEAR AFTER TAKING INTO ACCOUNT VARIOUS FACTORS AND THE ASSESSEE COULD ONLY THEREAF TER ARRIVE AT THE CORRECT AMOUNT ON WHICH TDS WAS REQUI RED TO BE MADE. IN VIEW OF THE AMENDMENT IN THE FINANCE ACT, 2008 WITH EFFECT FROM 1.04.2005, WHEREIN IT IS VERY CLEARLY STATED THAT IN A CASE WHERE TAX WAS DEDUCTIBLE AND WAS DEDUCTED DURING THE LAST MONTH OF THE PREVIOUS YEAR ON OR BEFORE THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139, THE DISALLOWANCE CANNOT BE MADE U/S. 40(A)IA). THEREFORE, THE DISALLOWANCES MADE BY THE AO TO THE EXTENT OF RS.41,14,270/- IN RESPECT OF COMMISSION A ND RS.L,80,599/- IN RESPECT OF BROKERAGE HAVE BEEN RIG HTLY DELETED BY THE CIT(A). THE CIT(A) HAD CONFIRMED THE ADDITION MADE IN RESPECT OF PAYMENT MADE TO M/S. YESHWANT SAHAKARI GINNING & PRESSING FACTORY TO THE EXTENT OF RS.2,44,880/- SINCE NO TDS WAS MADE IN RE SPECT OF THIS MADE. THE ASSESSEE HAS ACCEPTED THIS DISAL LOWANCE AS CONFIRMED BY THE CIT(A). BEFORE PARTING, IT IS PERTINENT TO MENTION THAT S ECTION 40(A)(IA) HAS BEEN AMENDED BY FINANCE ACT, 2010 W.E .F 1.04.2010. THE RELEVANT PORTION OF THE SECTION, AFT ER THE AMENDMENT, READS AS FOLLOWS - (THE AMENDED PORTION IS UNDERLINED) '(IA) ANY INTEREST, COMMISSION OR BROKERAGE, (RENT, ROYALTY) FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES PAYABLE TO A RESIDENT, OR AMOUNT S 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 OR, AFTER DEDUCTION, (HAS NOT BEEN PA ID ON OR BEFORE THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139) . THE PROVISION, PRIOR TO THE AMENDMENT, IS ALREADY EXTRACTED (SUPRA, AT PARA 9 AT PAGES 7 AND 8). AFTE R THE NEW AMENDMENT, IT IS CLEAR THAT THE PROVISION 40(A)(IA) WILL NOT HAVE APPLICATION IF THE TAX DEDUCTED ON EXPENDITURE SOUG HT TO BE DISALLOWED, HAS BEEN PAID TO THE GOVERNMENT ACCOUNT ON OR BEFORE THE DUE DATE SPECIFIED UNDER SUB-SECTION (1) OF SEC TION 139. IN THE INSTANT CASE, IT IS AN ADMITTED FACT THAT TAX HAS B EEN DEDUCTED ON 31 ST MARCH, 2005 AND THE SAME HAS BEEN PAID OVER TO THE ITA NO. 78/BANG/2011 PAGE 5 OF 11 GOVERNMENT ACCOUNT IN THE MONTH OF MAY, 2005 WELL BEFORE THE DUE DATE OF FILING OF THE RETURN PRESCRIBED U/S. 13 9(1) OF THE ACT. THEREFORE, THE DECISION OF THE HON'BLE SUPREME COUR T IN THE CASE OF ALLIED MOTORS (P) LTD., V. CIT ITR 677 WILL COME TO THE RESCUE OF THE ASSESSEE. 6. NOW THE DEPARTMENT IS IN APPEAL. DURING THE COU RSE OF HEARING, THE LD. DR SUBMITTED THAT NOW THE ISSUE IS COVERED AGAI NST THE ASSESSEE AND IN FAVOUR OF THE DEPARTMENT VIDE ORDER DATED 09.09.201 1 OF THE ITAT MUMBAI SPECIAL BENCH B IN ITA NO.2404/MUM/09 IN THE CAS E OF M/S. BHARATI SHIPYARD LTD. V. DCIT, CIRCLE 3(1), MUMBAI (COPY OF THE SAID ORDER WAS FURNISHED WHICH IS PLACED ON RECORD). 7. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT SIMILAR ISSUE HAD BEEN DECIDED BY THIS BENCH OF THE TRIBUNAL IN ASSES SEES FAVOUR IN ITA NO.1097/BANG/2008 FOR THE A.Y. 2005-06 IN ASSESSEE S OWN CASE VIDE ORDER DATED 30.8.2010, COPY OF THE SAID ORDER WAS F URNISHED. HOWEVER, HE WAS FAIR ENOUGH TO CONCEDE THAT NOW THE ISSUE STAND S COVERED IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE VIDE ORDER DAT ED 09.09.2011 BY THE ITAT MUMBAI SPECIAL BENCH B IN ITA NO.2404/MUM/09 IN THE CASE OF M/S. BHARATI SHIPYARD LTD. V. DCIT, CIRCLE 3(1), MU MBAI (SUPRA) . 8. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RE CORD. IN THE PRESENT CASE IT IS NOT IN DISPUTE THAT SIMILAR ISSUE HAS BE EN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL, HOWEVER, RECENTLY SIMILAR CONTROVERSY HAS BEEN SETTLED BY THE ITAT MUMBAI SPECIAL BENCH B IN ITA NO.2404/MUM/09 IN THE CASE OF M/S. BHARATI SHIPYARD LTD. V. DCIT, CIR CLE 3(1), MUMBAI (SUPRA) WHEREIN BY CONSIDERING THE AMENDMENT BY THE FINANCE ACT, 2008 AND THE ITA NO. 78/BANG/2011 PAGE 6 OF 11 FINANCE ACT, 2010 IN SECTION 40(A)(IA) OF THE ACT, THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE DEPARTMENT BY OBSERVING IN PARAS 15 TO 21 AND 54 OF THE AFORESAID REFERRED TO ORDER DATED 09.09.2011 AS UNDER:- 15. FAILURE OF THE ASSESSEE TO DEDUCT TAX AT SOURC E IPSO FACTO CAUSES DISALLOWANCE, BOTH AS PER THE PRE AND POST-A MENDMENT OF SECTION 40(A)(IA) BY THE FINANCE ACT, 2008. POSITIO N WAS CHANGED BY THE FINANCE ACT, 2008 AS REGARDS THE CASES WHERE DEDUCTION OF TAX AT SOURCE IS MADE BUT THERE IS DELAY IN THE PAY MENT. 16. AS PER THE SCHEME OF SECTION 40(A)(IA) FROM ITS INSERTION, SIMILAR TO SECTION 40(A)(I), DISALLOWANCE WAS MADE ON THE FAILURE OF THE ASSESSEE TO PAY TAX DEDUCTED DURING THE PREV IOUS YEAR, OR IN THE SUBSEQUENT YEAR BEFORE THE EXPIRY OF THE TIME P RESCRIBED U/S 200(1). SUB-SECTION (1) OF SECTION 200 PROVIDES THA T ANY PERSON DEDUCTING ANY SUM IN ACCORDANCE WITH THE PROVISIONS OF THIS CHAPTER SHALL PAY WITHIN THE PRESCRIBED TIME THE SU M SO DEDUCTED TO THE CREDIT OF THE CENTRAL GOVERNMENT OR AS THE B OARD DIRECTS. RULE 30 OF THE INCOME-TAX RULES, 1962 PRESCRIBES TI ME FOR PAYMENT TO GOVERNMENT ACCOUNT OF THE TAX DEDUCTED A T SOURCE. DIFFERENT TIME LIMITS HAVE BEEN PRESCRIBED FOR DEPO SITING TAX DEDUCTED AT SOURCE UNDER VARIOUS SECTIONS. IN SOME CASES SUCH TAX DEDUCTED AT SOURCE IS REQUIRED TO BE DEPOSITED ON T HE SAME DAY, IN OTHERS ON OR BEFORE 7 DAYS FROM THE END OF THE MONT H IN WHICH THE DEDUCTION IS MADE ETC. HENCE IN NO CASE THE TIME LI MIT FOR DEPOSITING THE AMOUNT OF TAX DEDUCTED AT SOURCE DUR ING THE FINANCIAL YEAR IS BEYOND 30TH APRIL, OF THE NEXT FI NANCIAL YEAR. THIS IS THE MANDATE OF SECTION 200(1) READ WITH RUL E 30. REVERTING TO SECTION 40(A)(IA) AS ORIGINALLY INSERT ED, ANY TAX DEDUCTED AT SOURCE DURING THE PREVIOUS YEAR RELEVAN T TO ASSESSMENT YEAR 2005-2006 WAS OBLIGED TO BE PAID EI THER UPTO 31ST MARCH, 2005 AND IN CERTAIN CASES WHERE THE TIM E IS AVAILABLE U/S 200(1), LATEST BY 30TH APRIL, 2005 DEPENDING UP ON THE PROVISION UNDER WHICH TAX IS DEDUCTED. FAILURE TO A BIDE BY SUCH TIME LIMITS CAUSED DISALLOWANCE U/S 40(A)(IA) AS PE R BY THE FINANCE (NO.2) ACT, 2004. 17. THE FINANCE ACT, 2008 BROUGHT OUT AMENDMENT TO SECTION 40(A)(IA) W.R.E.F. 1.4.2005 BY RELAXING EARLIER POS ITION TO SOME EXTENT. 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 DUR ING THE LAST MONTH OF THE PREVIOUS YEAR BUT THERE WAS FAILURE TO PAY SUCH TAX ON OR BEFORE THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION ITA NO. 78/BANG/2011 PAGE 7 OF 11 139 OF THE ACT. IN OTHER WORDS, IF ANY AMOUNT ON WH ICH TAX WAS DEDUCTIBLE DURING LAST MONTH OF THE PREVIOUS YEAR, THAT IS MARCH 2005, BUT WAS PAID BEFORE 31ST OCTOBER, 2005, BEING THE DUE DATE U/S 139(1), THE DEDUCTIBILITY OF THE AMOUNT WAS KEP T 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 DEDUCTED DURING THE FIRST ELEVEN MONTHS 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, 2005. THE CASE OF THE ASSESSEE FALLS IN THIS CATEGORY AS IT DEDUCTED TAX AT SOURCE IN THE PERIOD ENDING FEB. 2005, BUT DEPOSITED SUCH TAX IN APRIL/J UNE 2005. THIS RESULTED INTO DISALLOWANCE OF THE EXPENDITURE. 18. IT CAN THUS BE SEEN THAT THE TIME LIMIT ORIGINA LLY PROVIDED BY SECTION 40(A)(IA) WITH EFFECT FROM 01.04.2005 WAS R ELAXED TO SOME EXTENT BY WAY OF THE AMENDMENT CARRIED OUT BY THE FINANCE ACT, 2008. THIS AMENDMENT BY THE FINANCE ACT, 2008 WAS SPECIFICALLY MADE WITH RETROSPECTIVE EFFECT FROM 01 .04.2005, BEING THE DATE OF INSERTION OF SECTION 40(A)(IA). I T IS RELEVANT TO NOTE THAT PROVISO TO SECTION 40(A)(IA) WAS ALSO CON SEQUENTLY AMENDED TO PROVIDE THAT WHERE IN RESPECT OF ANY SUC H SUM, TAX HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR, OR HAS BE EN DEDUCTED DURING THE LAST MONTH OF THE PREVIOUS YEAR BUT PAID AFTER THE SAID DUE DATE; OR DURING ANY OTHER MONTH OF THE PREVIOUS YEAR BUT PAID AFTER THE END OF THE SAID PREVIOUS YEAR, SUCH SUM S HALL BE ALLOWED AS A DEDUCTION IN COMPUTING THE INCOME OF THE PREVI OUS YEAR IN WHICH SUCH TAX HAS BEEN PAID. 19. THEN CAME THE AMENDMENT TO SECTION 40(A)(IA) BY THE FINANCE ACT, 2010 WITH RETROSPECTIVE EFFECT FROM 1ST 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 SER VICES PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONTRACTOR OR S UB-CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WORK (INCLUDIN G SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK), ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B AND SUCH TAX HAS NOT BE EN DEDUCTED OR; AFTER DEDUCTION, HAS NOT BEEN PAID ON OR BEFORE THE DUE DATE 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 SPECI FIED IN SUB- SECTION (1) OF SECTION 139, 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. ITA NO. 78/BANG/2011 PAGE 8 OF 11 20. FROM THE ABOVE PROVISION AS AMENDED BY THE FINA NCE ACT, 2010 WITH RETROSPECTIVE EFFECT FROM 1ST APRIL, 2010 IT CAN BE SEEN THAT THE ONLY DIFFERENCE WHICH THIS AMENDMENT HAS M ADE IS DISPENSING WITH THE EARLIER TWO CATEGORIES OF DEFAU LTS AS PER THE FINANCE ACT, 2008, AS DISCUSSED IN PARA 17 OF THIS ORDER, CAUSING DISALLOWANCE ON THE BASIS OF THE PERIOD OF THE PREV IOUS YEAR DURING WHICH TAX WAS DEDUCTIBLE. THE FIRST CATEGORY OF DISALLOWANCES INCLUDED THE CASES IN WHICH TAX WAS D EDUCTIBLE AND WAS SO DEDUCTED DURING THE LAST MONTH OF THE PREVIO US YEAR BUT THERE WAS FAILURE TO PAY SUCH TAX ON OR BEFORE THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139. THE FI NANCE ACT, 2010 HAS NOT TINKERED WITH THIS POSITION. THE SECON D CATEGORY 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 PRE-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 THE CLOSE OF THE PREVIOUS YEAR UP TO 31ST MARCH OF THE PREVIOUS YEAR AS A REQUIREMENT FOR GRANT OF DEDUCTION IN THE YEAR OF INCURRING SUCH EXPENDITURE, HAS BEEN EASED TO EXTEND SUCH TIM E 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 AFTER D EDUCTING TAX AT SOURCE, THE ASSESSEE FAILS TO PAY THE AMOUNT OF TAX ON OR BEFORE THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTIO N 139 OF THE ACT. THE EFFECT OF THIS AMENDMENT IS THAT NOW THE ASSESS EE DEDUCTING TAX EITHER IN THE LAST MONTH OF THE PREVIOUS YEAR O R FIRST ELEVEN MONTHS OF THE PREVIOUS YEAR SHALL BE ENTITLED TO DE DUCTION 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 DIFFERENCE WHICH HAS BEEN MADE BY THE FINANCE ACT, 2010. 21. NON-DEDUCTION OF TAX AT SOURCE FROM THE SPECIFI ED PAYMENTS CONTINUES TO GIVE REASON FOR DISALLOWANCE U/S 40(A) (IA) UNDER THE AMENDED PROVISION, AS WAS THERE DURING THE PREVALEN CE OF THE FINANCE (NO. 2) ACT, 2004 AND THE FINANCE ACT, 2008 . FURTHER THE DISALLOWANCE HAS ALSO BEEN MAINTAINED IN THE PR OVISION IN ITS CURRENT FORM WHERE THE ASSESSEE, AFTER DEDUCTION OF TAX AT SOURCE, FAILS TO PAY IT WITHIN THE SPECIFIED TIME. PARTIAL CHANGE HAS BEEN MADE IN THE SPECIFIED TIME FOR PAYMENT AS A SINE QUA NON FOR DEDUCTION IN THE YEAR OF INCURRING THE EXPENDITURE. STILL FURTHER, THE MANDATE OF PROVISO CONSEQUENTLY PROVIDING THE R EMEDIAL RELIEF BY GRANTING DEDUCTION IN THE SUBSEQUENT YEAR IN WHICH TAX HAS BEEN PAID, ALSO EXISTS. ITA NO. 78/BANG/2011 PAGE 9 OF 11 . 54. WE ARE NOT IMPRESSED WITH THESE SUBMISSION FOR RULING THE LATEST AMENDMENT TO SECTION 40(A)(IA) AS HAVING RET ROSPECTIVE OPERATION FROM 1.4.2005. PRIMARILY WE FIND THAT NON E OF THESE SUBMISSIONS REALLY DEAL WITH THE RETROSPECTIVE OR P ROSPECTIVE EFFECT OF THE AMENDMENT MADE BY THE FINANCE ACT, 20 10. RATHER THESE DEPICT THE HARDSHIPS CAUSED TO THE ASSESSEE B Y THE VERY INSERTION OF SECTION 40(A)(IA). ALL THESE HARDSHIPS , SUCH AS GENUINE EXPENDITURE SUFFERING DISALLOWANCE, TAX EFFECT OF A ROUND 45% AS AGAINST NON-DEDUCTION OF TAX AT SOURCE AT THE RATE OF 1% OF THE EXPENDITURE AND THE DIFFICULTY IN ABSORBING THE DED UCTION IN THE SUBSEQUENT YEARS DUE TO INADEQUACY OF PROFITS ETC., CONTINUE EVEN AFTER THE AMENDMENT TO THE PROVISION BY THE FINANCE ACT, 2010. IT CAN BE SEEN THAT THE FINANCE ACT, 2010 HAS NOT REPE ALED THE PROVISION OF SEC. 40(A)(IA) THAT IT COULD BE CLAIME D THAT THE HARDSHIPS ENUMERATED ABOVE WHICH WERE CAUSED BY THE FINANCE (NO. 2) ACT, 2004 HAVE BEEN DONE AWAY WITH. THE LAT EST AMENDMENT HAS SIMPLY EXTENDED THE TIME LIMIT FOR DE POSIT OF TAX DEDUCTED AT SOURCE IN CERTAIN CASES. WE HAVE NOTED ABOVE THAT THE OTHER CONSEQUENCES OF SECTION 40(A)(IA) ARE STILL P RESENT IN THE PROVISION. THAT APART, IT IS SIMPLE AND PLAIN THAT IF THE EXPENDITURE IS NOT GENUINE OR NOT INCURRED FOR THE PURPOSE OF B USINESS, IT WOULD NOT AT ALL QUALIFY FOR DEDUCTION AT THE VERY THRESHOLD AND THE RESULTANT APPLICATION OF SECTION 40(A)(IA) WOUL D BE AUTOMATICALLY RULED OUT. WE ARE EQUALLY UNCONVINC ED WITH THE CONTENTION OF SUBSTANTIAL COMPLIANCE OF THE PROVISI ONS ON LATE DEPOSIT OF TAX DEDUCTED AT SOURCE. THERE CAN BE EIT HER COMPLIANCE OR NON-COMPLIANCE OF A PARTICULAR PROVISION. GIVEN THE TIME LIMIT FOR THE DEPOSIT OF TAX DEDUCTED AT SOURCE, IF IT IS DEPOSITED BY THE TIME PRESCRIBED IT IS A CASE OF COMPLIANCE OF THE P ROVISION AND IF IT IS LATE DEPOSIT EVEN BY A SINGLE DAY, IT IS NON- COMPLIANCE. WE CANNOT SAY THAT BY DEPOSITING SUCH TAX BELATEDLY, T HE ASSESSEE SUBSTANTIALLY COMPLIED WITH THE PROVISIONS OF SECTI ON 40(A)(IA). IF WE STRETCH THIS ARGUMENT A LITTLE FURTHER AND SUPPO SE THAT INSTEAD OF DEPOSITING THE TAX DEDUCTED AT SOURCE IN JULY 20 05 IN THE ABOVE EXAMPLE, THE ASSESSEE DEPOSITS A DAY AFTER THE DUE DATE U/S 139(1) OF THE ACT, WOULD IT STILL MEAN THAT THE ASSESSEE H AS SUBSTANTIALLY COMPLIED WITH THE PROVISION SO AS TO ESCAPE THE MIS CHIEF OF SECTION 40(A)(IA)? THE ANSWER IS IN NEGATIVE. THE F INANCE ACT, 2010 HAS EXTENDED THE TIME LIMIT FOR DEPOSITING TAX DEDUCTED AT SOURCE BY THE DUE DATE U/S 139(1) OF THE ACT FROM T HE EARLIER LESSER TIME AVAILABLE FOR COMPLIANCE. IF THE TAX IS DEPOSITED BY THE ITA NO. 78/BANG/2011 PAGE 10 OF 11 DUE DATE, IT WOULD MEAN ESCAPE FROM THE CLUTCHES OF SECTION 40(A)(IA) FOR ASSESSMENT YEAR 2010-2011, BUT IF IT IS DEPOSITED EVEN THE NEXT DAY BEYOND THE DUE DATE, NATURAL CONS EQUENCES WOULD FOLLOW AND IT WOULD CALL FOR DISALLOWANCE U/S 40(A)(IA) IN THE YEAR OF INCURRING THE EXPENDITURE. IN THE LIKE MANNER, IN THE YEAR UNDER APPEAL, IF THE TAX DEDUCTED AT SOURCE UP TO FEBRUARY, 2005 HAD BEEN DEPOSITED UP TO 31ST MARCH, IT WOULD HAVE AMOUNTED TO COMPLIANCE OF THE PROVISION, BUT THE LA TE DEPOSIT EVEN ON 1ST APRIL, 2005 WOULD AMOUNT TO NONCOMPLIAN CE WARRANTING INTERFERENCE BY SECTION 40(A)(IA) ENTAIL ING DISALLOWANCE OF EXPENDITURE IN THE ASSESSMENT YEAR 2005-06. HOWEVER THE FACT THAT THE ASSESSEE DEPOSITED IT BEY OND THE PRESCRIBED PERIOD, WOULD AMOUNT TO COMPLIANCE OF TH E PRESCRIPTION OF THE PROVISO, ENTITLING THE ASSESSEE TO DEDUCTION IN THE A.Y. 2006-07. 9. SINCE THE FACTS IN THE PRESENT CASE ARE SIMILAR TO THE FACTS INVOLVED IN THE CASE OF M/S. BHARATI SHIPYARD LTD. V. DCIT, CIRCLE 3(1), MUMBAI (SUPRA) DECIDED BY THE ITAT MUMBAI SPECIAL BENCH B IN ITA NO.2404/MUM/09 VIDE ORDER DATED 09.09.2011, SO RESP ECTFULLY FOLLOWING THE AFORESAID REFERRED TO ORDER OF THE SPECIAL BENCH OF THE TRIBUNAL, WE SET ASIDE THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) AN D RESTORE THAT OF THE ASSESSING OFFICER. THUS THE ISSUE IS DECIDED IN FA VOUR OF THE REVENUE AND AGAINST THE ASSESSEE. 10. IN THE RESULT, THE APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 28 TH DAY OF FEBRUARY, 2012. SD/- SD/- ( GEORGE GEORGE K. ) ( N.K. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 28 TH FEBRUARY , 2012. DS/- ITA NO. 78/BANG/2011 PAGE 11 OF 11 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.