ANAMICA CONDUCTORS, Jaipur V. JCIT, Jaipur

ITA 818/JPR/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5178 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 02-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S DANGUR CIT DHK
• Assessee Lawyers: G M MEHTA
• Keywords: Retrospective amendment; Question of law; Non-deduction of tax

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH HKKXPAN] YS[KK LNL; ,OA JH YFYR DQEKJ] U;KF;D LN L; DS LE{K BEFORE: SHRI BHAGCHAND, AM & SHRI LALIET KUMAR, JM VK;DJ VIHY LA-@ ITA NO. 818/JP/2014 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2011-12 ANAMIKA CONDUCTORS, B-129, RAJENDRA MARG, BAPU NAGAR, JAIPUR. CUKE VS. JOINT COMMISSIONER OF INCOME TAX, RANGE-6, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AABCA 5681 P VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI G.M. MEHTA (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI R.S. DANGUR (ADDL.CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 16/08/2016 MN?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 22/08/2016 VKNS'K@ ORDER PER: LALIET KUMAR, J.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 14/10/2014 PASSED BY THE LD CIT(A)-II, JAIPUR FOR T HE A.Y. 2011-12. THE SOLE GROUND TAKEN BY THE ASSESSEE IN APPEAL IS AS U NDER:- 1 THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACT S IN SUSTAINING ADDITION OF RS. 8,36,376/- MADE U/S 40(A)(IA) OF IT ACT ON ACCOUNT OF ACTUAL INTEREST PAYMENT TO THE FINANCIAL INSTITUTIONS THOUGH PROVIS IONS ARE APPLICABLE ON THE SUMS WHICH REMAINED PAYABLE A T THE END OF THE YEAR. ITA 818/JP/2014_ ANAMIKA CONDUCTORS VS JCIT 2 2. THE LD ASSESSING OFFICER WHILE PASSING THE ASSESSM ENT ORDER HAS OBSERVED AS UNDER:- 4.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS SEEN THAT THE ASSESSEE HAD MADE THE INTEREST PAYMENTS TO FOLLOWING PARTIES (NBFCS) ON WHICH TDS WAS NOT DEDUCTED BY IT: SL. NO. NAME OF PARTY TO WHOM INTEREST PAID AMOUNT 1 INDIA BULLS CREDIT SERVICE LTD. 4,66,125/- 2. TATA CAPITAL LTD. 2,48,538/- 3. BAJAJ FINSERVE 39,586/- 4. MAGMA FINCORP LTD. 84,127/- TOTAL 8,38,376/- FROM THE ABOVE DETAILS, IT IS SEEN THAT THE ASSESSE E WAS LIABLE TO DEDUCT THE TDS AND DEPOSIT THE SAME INTO G OVT. ACCOUNT ON THE ABOVE PAYMENTS IN TERMS OF PROVISION S OF SECTION 194A. HOWEVER, THE ASSESSEE FAILED TO COMPLY WITH THE RESPECTIVE PROVISIONS OF THE ACT. THEREFORE, IN TERMS OF SECTION 40(A)(IA), THE EXPENSES OF RS. 8,38,376/- A RE NOT LIABLE TO BE ALLOWED. CONSIDERING THE SAME, THE ASSE SSEE WAS ASKED TO SHOW CAUSE VIDE LETTER DATED 30/10/2013, AS TO WHY THE PROVISIONS OF SECTION 40(A)(IA) SHOULD NOT BE I NVOKED WHICH WOULD RESULT IN DISALLOWANCE OF ABOVE MENTIONED INTEREST EXPENSES. 3. THE LD CIT(A) HAS UPHELD THE ORDER PASSED BY THE L D ASSESSING OFFICER BY GIVING THE FOLLOWING FINDINGS: ITA 818/JP/2014_ ANAMIKA CONDUCTORS VS JCIT 3 3.3.1 I HAVE PERUSED THE FACTS OF THE CASE, THE A SSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT. SECTION 40(A) (IA) OF THE ACT READS AS UNDER: '...ANY INTEREST, COMMISSION OR BROKERAGE, RENT, RO YALTY, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SER VICES PAYABLE TO A RESIDENT OR AMOUNTS PAYABLE TO A CONTR ACTOR OR SUB-CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT AN Y WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WO RK), ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVI L-B AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION, HAS NOT BEEN PAID ON OR BEFORE THE DUE DATE SPECIFIED IN SU B-SECTION (1) OF SECTION 139...': 3.3.2 IN THE CASE OF MERILYN SHIPPING & TRANSPORTS V . ADDL. CIT [2012] 20 TAXMANN.COM 244 (VISAKHATATNAM) IT WAS HEL D BY SPECIAL BENCH OF ITAT, VISHAKHAPATNAM, THAT THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT WOULD APP LY ONLY TO THE AMOUNT WHICH REMAINED PAYABLE AT THE END OF T HE RELEVANT FINANCIAL YEAR AND COULD NOT BE INVOKED TO DISALLOW THE AMOUNT WHICH HAD ACTUALLY BEEN PAID DURING THE PREVIOUS YEAR WITHOUT DEDUCTION OF TAX AT SOURCE. THE ORDER OF THE SPECIAL BENCH HAS SINCE BEEN PUT UNDER INTER IM SUSPENSION BY THE ANDHRA PRADESH HIGH COURT. 3.3.3 THE HON'BLE CALCUTTA HIGH COURT AND HON'BLE GU JARAT HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX, KO LKATA- XI V. CRESCENT EXPORTS SYNDICATE [2013] 33 TAXMANN. COM 250 (CALCUTTA) AND COMMISSIONER OF INCOME-TAX-IV V. SIKANDARKHAN N TUNVAR [2013] 33 TAXMANN.COM 133 (GUJARAT) RESPECTIVELY, HAVE HELD THAT SECTION 40(A )(IA) OF ITA 818/JP/2014_ ANAMIKA CONDUCTORS VS JCIT 4 THE ACT WOULD COVER NOT ONLY THE AMOUNTS WHICH ARE PAYABLE AT THE END OF THE PREVIOUS YEAR BUT ALSO WH ICH ARE PAYABLE AT ANY TIME DURING THE YEAR. 3.3.4 THE HON'BLE HIGH COURTS HAVE FURTHER HELD THAT THE INTENTION OF THE LEGISLATION WAS TO DISALLOW CERTAIN TYPES OF EXPENSE, SUBJECT TO PROVISIONS OF CHAPTER XVII-B WH ICH WERE PAYABLE AT ANY TIME DURING THE YEAR BUT NO TAX WAS DEDUCTED AT SOURCE OR IF DEDUCTED WAS NOT PAID WITHIN THE STIPULATED TIME. THERE IS NO SUCH CONDITION THAT AM OUNT SHOULD REMAIN PAYABLE AT THE END OF THE YEAR. 3.3.5 THE HON'BLE ALLAHABAD HIGH COURT IN CIT V. VEC TOR SHIPPING SERVICE (P.) LTD. [2013] 38 TAXMANN.COM 77 (ALLAHAB AD) HAS AFFIRMED THE DECISION OF THE SPECIAL BENCH IN M ERILYN SHIPPING THAT FOR DISALLOWANCE UNDER SECTION 40(A)(I A) OF THE ACT, THE AMOUNT SHOULD BE PAYABLE AND NOT WHICH HAS BEEN PAID DURING THE YEAR. HOWEVER, THE DECISIONS OF THE HON'BLE GUJARAT AND CALCUTTA HIGH COURTS (SUPRA) WER E NOT BROUGHT TO THE ATTENTION OF THE HON'BLE ALLAHABAD H IGH COURT. 3.3.6 IN THE CASE OF ACIT, CIRCLE 4(2), MUMBAI V. RI SHTI STOCK AND SHARES PVT. LTD. IN ITA NO. 112/MUM/2012, HON'BLE I TAT, MUMBAI IN ITS ORDER DATED 2-8-2013 HAS EXAMINED THE DECISION OF THE HON'BLE ALLAHABAD HIGH COURT (SUPRA ) AS REGARDS TO SECTION 40(A)(IA) OF THE ACT AND CONCLUD ED THAT THE SAME WAS AN 'ORBITER DICTA' WHILE THE DECISIONS O F THE ITA 818/JP/2014_ ANAMIKA CONDUCTORS VS JCIT 5 HON'BLE GUJARAT AND CALCUTTA HIGH COURT (SUPRA) WERE 'RATIO DECIDENDI. THE ITAT ACCORDINGLY APPLIED THE VIEW TAKE N BY THE HON'BLE GUJARAT AND CALCUTTA HIGH COURT AS RATI O DECIDENDI PREVAILS OVER AN ORBITER DICTA. 3.3.7 CIRCULAR NO.10/DV/2013, DATED, 16-12-2013, IS SUED BY THE CBDT, STATES THAT '4. AFTER CAREFUL EXAMINATION OF THE ISSUE, THE BO ARD IS OF THE CONSIDERED VIEW THAT THE PROVISION OF SECTION 40(A) (IA) OF THE ACT WOULD COVER NOT ONLY THE AMOUNTS WHICH ARE PAYABLE AS ON 31ST MARCH OF A PREVIOUS YEAR BUT ALS O AMOUNTS WHICH ARE PAYABLE AT ANY TIME DURING THE YE AR. THE STATUTORY PROVISIONS ARE AMPLY CLEAR AND IN THE CONTEXT OF SECTION 40(A)(IA) OF THE ACT THE TERM 'PAYABLE' WOULD INCLUDE 'AMOUNTS WHICH ARE PAID DURING THE PREVIOUS YEAR'. 4. NOW THE ASSESSEE IS IN APPEAL BEFORE US. IT WAS SU BMITTED BY THE LD AR OF THE ASSESSEE THAT THE ISSUE IS COVERED BY THE JUDGMENT OF THE HONBLE SPECIAL BENCH OF VISHAKHAPATNAM ITAT IN THE CASE OF MERILYN SHIPPING & TRANSPORTS VS ADDL. CIT (2012) 20 TAXMANN .COM 244 (VISHAKHAPATNAM). THE LD AR FURTHER RELIED ON THE D ECISION IN THE CASE OF VECTOR SHIPPING SERVICES (P) LTD. (2013) 357 ITR 64 2 (ALL) AND OTHER JUDGMENTS, THEREFORE, HE PRAYED THAT THE APPEAL IS REQUIRED TO BE ALLOWED AND IN THE ALTERNATIVE, IT WAS SUBMITTED THAT THE LO AN CREDITORS REFERRED HEREINABOVE HAD PAID THE DUE TAX AFTER DEDUCTING IT ON THE INTEREST INCOME, SO DISALLOWANCE CANNOT BE MADE IN VIEW OF THE AMENDED PROVISIONS OF SECTION 40(A)(IA) OF THE INCOME TAX AC T, 1961 (IN SHORT THE ITA 818/JP/2014_ ANAMIKA CONDUCTORS VS JCIT 6 ACT). IT WAS CONTENDED THAT THE HONBLE DELHI HIGH C OURT IN THE CASE OF CIT VS ANSAL LAND MARK TOWNSHIP P. LTD. (2015) 377 ITR 635 (DEL) HAS HELD THAT INSERTION OF SECOND PROVISO TO SECTION 40 (A)(IA) IS DECLARATORY AND CURATIVE IN NATURE, WHICH IS EFFECTIVE FROM 01 ST APRIL, 2005. IN VIEW OF WHICH, IT WAS SUBMITTED THAT SINCE THE CREDITORS HAD ALREADY DEPOSITED THE DUE TAX, THEREFORE, NOTHING IS PAYABLE AND THE PROV ISION OF SECTION 40(A)(IA) OF THE ACT ARE ATTRACTED. 5. ON THE OTHER HAND, THE LD DR HAS SUBMITTED WRITTE N SUBMISSIONS TO THE FOLLOWING EFFECTS:- IN A RECENT DECISION DATED 29.04.2015, THE HONBLE P & H HIGH COURT IN THE CASE OF P.M.S DIESELS VS CIT (2015) 277 CTR 0491 (P&H) AFTER CONSIDERING THE CASES OF CIT VS. M/S VE CTOR SHIPPING SERVICES (P) LTD. (2013) 262 CTR (ALL) 545, V.M. SA LGAOCAR BROS. (P) LTD., ETC. VS. CIT ETC. (20000 243 ITR 383 (SC), ACIT VS. MERILYN SHIPPING & TRANSPORTERS 136 ITD 23 (SB) (VISHAKHAPATNAM), TUBE INVESTMENTS OF INDIA LTD. AN D ANOTHER VS. ACIT, (TDS) AND OTHERS, (2010) 325 ITR 610 (MAD) HEL D THAT: THE PROVISION OF SECTION 40(A) (IA) OF THE INCOME T AX ACT. 1961, ARE APPLICABLE NOT ONLY TO THE AMOUNT WHICH IS SHOW N AS PAYABLE IN THE DATE OF BALANCE SHEET, BUT IT IS APPLICABLE TO SUCH EXPENDITURE, WHICH BECOME PAYABLE AT ANY TIME DURIN G THE RELEVANT PREVIOUS YEAR AND WAS ACTUALLY PAID WITHIN THE PREVIOUS YEAR. IN THE RESULT THE QUESTION IS DECIDED IN FAVO UR OF REVENUE AND AGAINST THE ASSESSEE. ITA 818/JP/2014_ ANAMIKA CONDUCTORS VS JCIT 7 THE SAME VIEW WAS TAKEN BY THE HONBLE CALCUTTA HIGH C OURT IN THE CASE OF CIT VS. CRESCENT EXPORT SYNDICATE, (2013) 21 6 TAXMAN 258 (CALCUTTA) WHEREIN IT WAS HELD THAT. IT IS NOTICEABLE THAT SECTION 40(A) IS APPLICABLE I RRESPECTIVE OF THE METHOD OF ACCOUNTING FOLLOWED BY AN ASSESSEE. T HEREFORE, BY USING THE TERM PAYABLE LEGISLATURE INCLUDED TH E ENTIRE ACCRUED LIABILITY. IF ASSESSEE WAS FOLLOWING MERCAN TILE SYSTEM OF ACCOUNTING, THEN THE MOMENT AMOUNT WAS CREDITED TO THE ACCOUNT OF PAYEE ON ACCRUAL OF LIABILITY, TDS WAS R EQUIRED TO BE MADE BUT IF ASSESSEE WAS FOLLOWING CASH SYSTEM OF A CCOUNTING, THEN ON MAKING PAYMENT TDS WAS TO BE MADE AS THE LI ABILITY WAS DISCHARGED BY MAKING PAYMENT. THE TDS PROVISION S ARE APPLICABLE BOTH IN THE SITUATION OF ACTUAL PAYMENT AS WELL OF THE CREDIT OF THE AMOUNT. IT BECOMES VERY CLEAR FROM TH E FACT THAT THE PHRASE, ON WHICH TAX IS DEDUCTIBLE AT SOURCE U NDER CHAPTER 15B, WAS NOT THERE IN THE BILL BUT INCORPORATED IN THE ACT. THIS WAS NOT WITHOUT ANY PURPOSE. THE HONBLE HIGH COURT OF HIMACHAL PRADESH IN THE CA SE OF PLAM GAS SERVICE VS CIT, (2014) 83 CCH 0123 HPHC I (2015) 370 ITR 0740 (HP) HELD THAT: LASTLY, INSOFAR AS THE PLEA TAKEN BY THE APPELLANT THAT NO DISALLOWANCE CAN BE MADE UNDER SECTION 40(A)(IA), A S THE FREIGHT CHARGES HAD BEEN PAID AND WERE NOT PAYABLE. SUFFICE IT TO STATE THAT THE PROVISIONS OF SECTION 40 (A)(IA) OF THE AC T WERE APPLICABLE NOT ONLY TO THE AMOUNT WHICH WERE SHOWN AS OUTSTANDING ON THE CLOSING OF THE RELEVANT PREVIOUS YEAR, BUT TO THE ENTIRE EXPENDITURE WHICH BECAME LIABLE FOR PAYM ENT AT ANY POINT OF TIME DURING THE YEAR UNDER CONSIDERATION A ND WHICH WAS ALSO PAID BEFORE THE CLOSING OF THE YEAR AS RIGHTLY HELD BY THE AUTHORITIES BELOW. THE HONBLE ITAT, LUCKNOW BENCH IN THE CASE OF DCIT VS AMA MEDICAL & DIAGNOSTIC CENTRE (20140 40 CCH 0581 LUCK NOW TRIB I (2014) 63 SOT 0136 (LUCKNOW) ((URO)) HELD THAT: ITA 818/JP/2014_ ANAMIKA CONDUCTORS VS JCIT 8 ITAT ARE OF THE VIEW THAT THE HONBLE JURISDICTIONA L HIGH COURT HAS NOT EXAMINED THE IMPUGNED ISSUE I.E. WHETHER DI SALLOWANCE U/S 40(A)(IA) OF THE ACT COULD BE MADE ONLY IN RESP ECT OF SUCH AMOUNT WHICH ARE PAYABLE ON THE 31 ST MARCH OF EVERY YEAR UNDER CONSIDERATION WHEREAS THE HONBLE GUJARAT HIG H COURT AND HONBLE CALCUTTA HIGH COURT HAVE DEALT WITH ISSUE I N DETAIL IN THE LIGHT OF VARIOUS JUDICIAL PRONOUNCEMENT AND HAVE CA TEGORICALLY HELD THAT SECTION 40(A)(IA) WOULD COVER NOT ONLY TO THE AMOUNT WHICH ARE PAYABLE AS ON 31 ST MARCH OF A PARTICULAR YEAR BUT ALSO WHICH ARE PAYABLE AT ANY TIME DURING THE YEAR. ITAT CONSIDERED OPINION THAT THE VIEW EXPRESSED OR THE RATIO LAID D OWN BY THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILY N SHIPPING & TRANSPORTS HAS BEEN OVERRULED. THEREFORE, IT CANNOT BE SAID THAT SINCE THE HONBLE JURISDICTIONAL HIGH COURT HAS APP ROVED THE VIEW TAKEN BY THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING & TRANSPORTS, THE SAME HAS TO BE F OLLOWED BY THE TRIBUNAL SITUATED WITHIN THE JURISDICTION OF HO NBLE ALLAHABAD HIGH COURT. THE HONBLE JURISDICTIONAL HIGH COURT H AS NOT EXAMINED THE IMPUGNED ISSUE AT ALL AND SIMPLE PASSI NG REFERENCE WAS MADE WITH REGARD TO THE ORDER OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPI NG & TRANSPORTS AND THE RELIEF WAS GRANTED TO THE ASSESS EE ON MERIT. THEREFORE, THE RATIO LAID DOWN IN THE CASE OF MERIL YN SHIPPING & TRANSPORTS, WHICH HAS BEEN SUSPENDED BY HONBLE AND HRA PRADESH HIGH COURT, HAS NOT BEEN APPROVED BY THE HO NBLE ALLAHABAD HIGH COURT. THEREFORE, SUBORDINATE JUDICI AL FORUM ARE NOT REQUIRED TO FOLLOW THE RATIO ORDER LAID DOWN IN THE CASE OF MERILYN SHIPPING & TRANSPORTS (SUPRA), AS IT WAS OV ERRULED BY THE OTHER HIGH COURT, (PARA 8*) IN THE RECENT JUDGMENT OF THE HONBLE KERALA HIGH C OURT IN THE CASE OF THOMAS GEORGE MUTHOOT VS CIT KOTTAYAM 2015 ( 63 TAXMAN.COM 99) (KERALA) IT HAS BEEN CLEARLY HELD TH AT THE SECOND PROVISION TO SECTION 40(A)(IA) INTRODUCED WITH EFFECT FROM 01.04.2013 IS ONLY PROSPECTIVE. IT IS FURTHER BEEN HELD THAT THE FACT ITA 818/JP/2014_ ANAMIKA CONDUCTORS VS JCIT 9 THAT THE RECIPIENT HAS SUBSEQUENTLY PAID TAX WILL NO T ABSOLVE PAYEE FROM CONSEQUENCE OF DISALLOWANCE U/S 40(A)(IA). BASED ON THE FACTS AS DISCUSSED ABOVE AND IN VIEW OF THE DECISIONS DISCUSSED AS ABOVE, ADDITIONS MADE BY THE ASSESSING OFFICER U/S. 40(A)(IA), ON ACCOUNT OF PAYMENT OF INTEREST TO NBFCS AND CONFIRMED BY LD. CIT(A) ARE SUSTAINABLE. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. WITHO UT ADJUDICATING THE ISSUE OF PAID AND PAYABLE, AS MUCH WATER HAS FLOWN AF TER THE JUDGMENT IN THE CASE OF MERILYN SHIPPING & TRANSPORTS VS ADDL. C IT (SUPRA) WAS PASSED BY THE SPECIAL BENCH OF VISHAKHAPATNAM ITAT, IN AS MUCH AS THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF PMS DIESELS VS CIT (2015) 277 CTR 0491 (P&H) HAS ELABORATELY DISCUSSED THE ISSUE OF PAID AND PAYABLE. THE HONBLE PUNJAB & HARYANA HIGH COURT HAS HELD THAT THE DEDUCTION OF TDS TAX IS MANDATORY AND NON-DEDUCTION OF TAX LEADS TO THE CONSEQUENCES AS PROVIDED UNDER THE ACT. HOWEVER, AS PRESENT APPEAL CAN BE DECIDED ON THE BASIS OF THE FINDING OF THE HON'B LE DELHI HIGH COURT IN THE CASE OF CIT VS ANSAL PLAZA MARK TOWNSHIP P. LTD. (SUPRA) WHERE THE HON'BLE HIGH COURT HAS HELD AS UNDER:- 13. TURNING TO THE DECISION OF THE AGRA BENCH OF TH E INCOME- TAX APPELLATE TRIBUNAL IN RAJEEV KUMAR AGARWAL V. A SST. CIT (SUPRA), THE COURT FINDS THAT IT HAS UNDERTAKEN A ITA 818/JP/2014_ ANAMIKA CONDUCTORS VS JCIT 10 THOROUGH ANALYSIS OF THE SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT AND ALSO SOUGHT TO EXPLAIN THE RATIONALE BEHIND ITS INSERTION. IN PARTICULAR, THE COUR T WOULD LIKE TO REFER TO PARAGRAPH 9 OF THE SAID ORDER WHICH READS AS UNDER (PAGE 485 OF 34 ITR (TRIB)) : 'ON A CONCEPTUAL NOTE, THE PRIMARY JUSTIFICATION FOR SUCH A DISALLOWANCE IS THAT SUCH A DENIAL OF DEDUCTION IS TO COMPENSATE FOR THE LOSS OF REVENUE BY CORRESPONDING INCOME NOT BEING TAKEN INTO ACCOUNT IN COMPUTATION OF TAXABLE INCOME IN THE HANDS OF THE RECIPIENTS OF THE PAYMENTS. SUCH A POLICY MOTIVATED DEDUCTION RESTRICTIONS SHOULD, THEREFORE, NOT COME INTO PLAY WHEN AN ASSESSEE IS ABLE TO ESTABLISH THAT THERE IS NO ACTUAL LOSS OF REVENUE. THIS DISALLOWANCE DOES DEINCENTIVISE NOT DEDUCTING TAX AT SOURCE, WHEN SUCH TAX DEDUCTIONS ARE DUE BUT SO FAR AS THE LEGAL FRAMEWORK IS CONCERNED, THIS PRO VISION IS NOT FOR THE PURPOSE OF PENALISING FOR THE TAX DEDUCTION AT SOURCE LAPSES. THERE ARE SEPARATE PENAL PROVISIONS TO THAT EFFECT. DEINCENTIVISING A LAPSE AND PUNISHING A LAPSE ARE TWO DIFFERENT THINGS AND HAVE DISTINCTLY DIFFEREN T, AND SOMETIMES MUTUALLY EXCLUSIVE, CONNOTATIONS. WHEN WE APPRECIATE THE OBJECT OF SCHEME OF SECTION 40(A)(IA), AS ON THE STATUTE, AND TO EXAMINE WHETHER OR NOT, ON A 'FAIR, JUST AND EQUITABLE' INTERPRETATI ON OF LAW AS IS THE GUIDANCE FROM THE HON'BLE DELHI HIGH COURT ON INTERPRETATION OF THIS LEGAL PROVISION, IN O UR HUMBLE UNDERSTANDING, IT COULD NOT BE AN 'INTENDED CONSEQUENCE' TO DISALLOW THE EXPENDITURE, DUE TO NON- DEDUCTION OF TAX AT SOURCE, EVEN IN A SITUATION IN WHICH CORRESPONDING INCOME IS BROUGHT TO TAX IN THE HANDS OF THE RECIPIENT. THE SCHEME OF SECTION 40(A)(IA), AS WE SEE IT, IS AIMED AT ENSURING THAT AN EXPENDITURE SHOULD NOT BE ALLOWED AS DEDUCTION IN THE HANDS OF AN ASSESSEE IN A SITUATION IN WHICH INCOME EMBEDDED IN SUCH EXPENDITURE HAS REMAINED UNTAXED DUE TO TAX WITHHOLDING LAPSES BY THE ASSESSEE. IT IS ITA 818/JP/2014_ ANAMIKA CONDUCTORS VS JCIT 11 NOT, IN OUR CONSIDERED VIEW, A PENALTY FOR TAX WITHHOLDING LAPSE BUT IT IS A SORT OF COMPENSATORY DEDUCTION RESTRICTION FOR AN INCOME GOING UNTAXED DUE TO TAX WITHHOLDING LAPSE. THE PENALTY FOR TAX WITHHOLDING LAPSE PER SE IS SEPARATELY PROVIDED FOR IN SECTION 271C, AND, SECTION 40(A)(IA) DOES NOT ADD TO THE SAME. THE PROVISIONS OF SECTION 40(A)(IA), AS THEY EXISTED PRIOR TO INSERTION OF SECOND PROVISO THERETO, WENT MUCH BEYOND THE OBVIOUS INTENTIONS OF THE LAWMAKERS AND CREATED UNDUE HARDSHIPS EVEN IN CASES IN WHICH THE ASSESSEE'S TAX WITHHOLDING LAPSES DID NOT RESULT IN ANY LOSS TO THE EXCHEQUER. NOW, THAT THE LEGISLATURE HAS BEEN COMPASSIONATE ENOUGH TO CURE THESE SHORTCOMINGS OF PROVISION, AND THUS OBVIATE THE UNINTENDED HARDSHIPS, SUCH AN AMENDMENT IN LAW, IN VIEW OF THE WELL-SETTLED LEGAL POSITION TO THE EFFECT THAT A CURATIVE AMENDMENT TO AVOID UNINTENDED CONSEQUENCES IS TO BE TREATED AS RETROSPECTIVE IN NATURE EVEN THOUGH IT MAY NOT STATE SO SPECIFICALLY, THE INSERTION OF SECOND PROVISO MUST BE GIVEN RETROSPECTIVE EFFECT FROM THE POINT OF TIME WHEN THE RELATED LEGAL PROVISION WAS INTRODUCED. IN VIEW OF THESE DISCUSSIONS, AS ALSO FOR THE DETAILED REASONS SET OUT EARLIER, WE CANNOT SUBSCRIBE TO THE VIEW THAT IT COULD HAVE BEEN AN 'INTENDED CONSEQUENCE' TO PUNISH THE ASSESSEES FOR NON- DEDUCTION OF TAX AT SOURCE BY DECLINING THE DEDUCTION IN RESPECT OF RELATED PAYMENTS, EVEN WHEN THE CORRESPONDING INCOME IS DULY BROUGHT TO TAX. THAT WILL BE GOING MUCH BEYOND THE OBVIOUS INTENTION OF THE SECTION. ACCORDINGLY, WE HOLD THAT THE INSERTION OF SECOND PROVISO TO SECTION 40(A)(IA) IS DECLARATORY AND CURATIVE IN NATURE AND IT HAS RETROSPECTIVE EFFECT FROM APRIL 1, 2005, BEING THE DATE FROM WHICH SUB-CLAUSE (IA) OF SECTION 40(A) WAS INSERTED BY THE FINANCE (NO. 2) ACT, 2004.' ITA 818/JP/2014_ ANAMIKA CONDUCTORS VS JCIT 12 14. THE COURT IS OF THE VIEW THAT THE ABOVE REASONIN G OF THE AGRA BENCH OF THE INCOME-TAX APPELLATE TRIBUNAL AS REGARDS THE RATIONALE BEHIND THE INSERTION OF THE SECON D PROVISO TO SECTION 40(A)(IA) OF THE ACT AND ITS CONCLUSION THAT THE SAID PROVISO IS DECLARATORY AND CURATIVE AND H AS RETROSPECTIVE EFFECT FROM APRIL 1, 2005, MERITS ACCEPTANCE. 15. IN THAT VIEW OF THE MATTER, THE COURT IS UNABLE TO FIND ANY LEGAL INFIRMITY IN THE IMPUGNED ORDER OF THE INCOME- TAX APPELLATE TRIBUNAL IN ADOPTING THE RATIO OF THE DECI SION OF THE AGRA BENCH, INCOME-TAX APPELLATE TRIBUNAL IN (RAJ EEV KUMAR AGARWAL V. ASST. CIT). 16. NO SUBSTANTIAL QUESTION OF LAW ARISES IN THE FACTS A ND CIRCUMSTANCES OF THE PRESENT CASE. THE APPEAL IS DISMISSED. SINCE THE AR OF THE ASSESSEE HAS SUBMITTED THAT THE AMOUNT OF TAX REQUIRED TO BE DEDUCTED, HAS BEEN PAID BY THE CREDI TOR IN VIEW OF 2 ND PROVISO OF SECTION 40(A)(IA) OF THE ACT. THIS ISSUE SHOULD BE DECIDED IN FAVOUR OF THE ASSESSEE. 6.1 WE HAVE ALSO GONE THROUGH JUDGMENT IN THE CASE OF CIT VS ANSAL PLAZA MARK TOWNSHIP P. LTD. (SUPRA) , IN FACT THE ASS ESSEE HAS NOT RAISED THIS ISSUE BEFORE THE LD ASSESSING OFFICER AS WELL A S BEFORE THE LD. CIT(A). THIS ISSUE HAS A FACTUAL DETERMINATION AND VERIFICA TION, THEREFORE, IT WILL BE IN THE INTEREST OF JUSTICE TO REMAND THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER TO VERIFY THE TRUTHFULNESS ON THE SUBMISSION MADE BY THE LD AR WHEREBY IT WAS CONTENDED THAT THE CREDITORS HAD ALREADY ITA 818/JP/2014_ ANAMIKA CONDUCTORS VS JCIT 13 DEPOSITED THE TAX ON THE INTEREST AMOUNT. IN THE LI GHT OF THE FACT, THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSES ONLY. IT IS MADE CLEAR THAT IF THE CREDITORS HAVE DEPOSITED THE TAX ON THE INTEREST AC CRUED IN THEIR FAVOUR AFTER HAVING RECEIVED FROM THE ASSESSEE, WHICH WAS NO T DEDUCTED BY THE ASSESSEE, IN THAT EVENTUALITY BENEFIT BE EXTENDED T O THE ASSESSEE IN TERMS OF AMENDED SECTION 40(A)(IA) OF THE ACT. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES ONLY. ORDER PRONOUNCED IN THE OPEN COURT ON 22/08/2016. SD/- SD/- HKKXPAN YFYR DQEKJ (BHAGCHAND) (LALIET KUMAR) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 22 ND AUGUST, 2016 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- ANAMIKA CONDUCTORS, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- THE JCIT, RANGE-6, JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 818/JP/2014) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR