आयकर अपीलीय अधिकरण, मुंबई
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCHES ‘F’ MUMBAI
सर्वश्री आय.पी. बंसल, न्याययक सदस्य एवुं श्री राजेन्र, , लेखा सदस्य के समक्ष
BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND
SHRI RAJENDRA , ACCOUNTANT MEMBER
ITA NO.1456/MUM/2013(A.Y. 2009-10)
The ACIT 18(2),
Room No. 115, 1ST Floor,
Piramal Chambers,
Parel, Mumbai 400012
(Appellant )
Appellant by
Respondent by
Date of hearing
Date of pronouncement
Vs.
:
:
M/s. Unity SNB Joint Venture,
1252,Pushpanjali Apartment,
Old Prabhadevi Road,
Prabhadevi, Mumbai 400025
PAN: AAAAU1619E
(Respondent)
Shri Rajesh Ranjan Prasad
None
24/03/2015
24/03/2015
ORDER
PER I.P.BANSAL, J.M:
This is an appeal filed by the Revenue and it is directed against order passed
by Ld. CIT(A)-I, Mumbai dated 7/12/2012 for assessment year 2009-10. Grounds
of appeal read as under:
1. "On the facts and circumstances of the case and in law, the Ld.CIT(A)
erred in deleting the disallowance of Rs.12,39,1I,8271- without appreciating
the fact that the amendment to the provisions of section 40( a)(ia) of the Act
was applicable to the assessee since the bills were raised on the contractor
throughout the financial year but booked all the bills raised by its subcontract on 31.03.2009.”
2
ITA NO.1456/MUM/2013(A.Y. 2009-10)
2. On the facts and circumstances of the case and in law, the LdCIT(A) erred
in deleting the disallowance without considering the decision of the Hon'ble
Andhra Pradesh High Court granting interim suspension of the order of
Hon'ble ITAT, Spl.Bench, Visakhapatnam in the case of M/s.Merilyn
Shipping & Transports, Visakhapatnam for A. Y .2005-06 where in the
similar issue of applicability of the amendment in the provisions of section
40(a)(ia) of the Act was contested
3. For these and other reasons it is submitted that the order of the CIT(A)
may be set-aside and that of the AO restored"
2. Disallowance of Rs.12,39,1l,827/- was made under section 40(a)(ia) of the
Income Tax Act, 1961 (the Act) on the plea that TDS payments under section
194C was not made within the due date. During the course of appellate
proceedings Ld. CIT(A) required the AO to explain the disallowance as according
to assessee disallowance was wrongly made. In para 4.5 Ld. CIT(A) has returned a
finding that AO has stated that on the disallowed amount TDS has been deducted
and paid on 26/09/2009 i.e. before the due date of filing the return and on these
facts Ld. CIT(A) has given relief to the assessee by following the order of ITAT
Mumbai in the case of Piyush C. Mehta vide order dated 1114/2012 in ITA
No.1321/Mum/2009, the relevant observations from the said order has been
reproduced in the order of Ld. CIT(A) in para 4.5 and in this manner Ld. CIT(A)
has granted relief to the assessee. The Department is aggrieved, hence, has filed
aforementioned grounds of appeal.
3. Notice of hearing was sent to the assessee but none represented on behalf of
the assessee on the fixed date of hearing. As Ld. CIT(A) has followed Mumbai
Tribunal decision while allowing the relief we proceed to decide the present appeal
on merits ex-parte, qua the assessee after hearing Ld. DR.
3
4.
ITA NO.1456/MUM/2013(A.Y. 2009-10)
Ld. DR submitted the letter of AO dated 19/08/2014 in which AO has
defended the addition on the ground that according to explanatory note to the
provisions of Finance Act,2010 issued by CBDT for section 40(a)(ia), it has been
clearly mentioned that the provision would be applicable from 01/04/2010 and will
be applicable to assessment year 2010-11 and subsequent years. Thus the only case
of the Department in the present case is that the benefit of payment upto due date
of filing the return cannot be extended to assessment earlier to assessment years
2010-11. The present year being 2009-10 such benefit has wrongly been granted
by Ld. CIT(A) and his order should be set aside and that of AO be restored.
5.
We have carefully heard Ld. DR in the light of the material placed before
us. Firstly, there is no dispute to the fact that assessee has paid TDS on the
impugned amount on 26109/2009 which falls within the due date of filing the
return. It will also be relevant to reproduce the findings recorded by Ld. CIT(A)
which will give clarity to the facts.
"4.5 I have carefully considered the facts of the case, arguments of the
Assessing Officer and the written submissions of the Authorized
Representative of the appellant. The fact is that appellant claimed subcontract charges of Rs. 33, 43, 18,934/- in the Profit & Loss Account. Out of
this the Assessing Officer has held that in the case of following RA bills
TDS has been deducted and paid into the government account in time.
The bills are RA Bill No. 4
RA Bill N05.
RA bill No. 6
-
- Rs. 4,90,00,031/-(Part)
- Rs. 8,29,87,749/- Rs.21,04,07,107/-
4
ITA NO.1456/MUM/2013(A.Y. 2009-10)
The Assessing Officer stated that in the case of balance payment of Rs.12,
39,11,827/- being sub-contract charges TDS has been deducted and has been
paid on 26.9.2009. The Assessing Officer stated that the due date of payment
for TDS in respect of this amount was 31.3.2009. Since the RA Bill No. 4
bill is dated November, 2008 the AO argued that as per section 40(a)(ia) the
due date of payment was 31.3.2009. Since the appellant has paid the taxes to
the Government account only by 26.9.2009, before filing the return they
have to be disallowed as per the provisions of section 40(a) (ia). He has
disallowed amount ofRs. 12,39,11,8271-.
As has been discussed earlier appellant has claimed that his case is covered
by the decision of Calcutta High Court in the case of Virgin Creations ITA
No. 302 of 2011. I find that the only issue is to be decided is whether in the
case of the appellant, disallowance can be made under the provisions of
section 40(a)(ia) taking into consideration the fact that the appellant has
deposited the tax deducted during the financial year before filing the return
of income within the time prescribed under section 139(1). In this case
appellant has deposited the tax deducted at source into Government account
before filing of return within time allowed under section 139(1). The issue is
squarely covered by the decision of Mumbai Tribunal in the case of Golden
Stables Lifestyle Centre Pvt. Ltd. in ITA No. 51451M/09 dt. 13.9.2010 and
the decision of Mumbai ITAT in the case of Piyush C. Mehta in ITA No.
13211M/09 dt. 11.4.2012. In the order of Piyush C. Mehta the Jurisdictional
ITAT has followed Kolkatta High Court in the case of Virgin Creation ITA
No. 302 of2011 and has concluded as under:
18. The question now is as to whether to follow the decision. of the
Hon'ble Special bench which has taken the view that Amendment by
the Finance Act, 2010 to the provisions of Sec.4 0 (a) (ia) of the Act is
prospective and not retrospective from 1.4.2005 or the decision of the
Hon 'ble Calcutta High Court taking a contrary view. On the above
question, the learned counsel for the Assesee brought to our notice the
decision of the ITAT Delhi in the case of Tej International (P) Ltd
v.DCIT (2000) 69 TTJ (Del) 650, wherein it was held that in the
hierarchical judicial system that we have in India, the wisdom of the
court belowcl"las to yield to the higher wisdom of the Court above,
and therefore, once an authority higher than this Tribunal has
expressed its esteemed views on a an issue, normally, the decision of
5
ITA NO.1456/MUM/2013(A.Y. 2009-10)
the higher judicial authority is to be followed. The Bench has further
held that the fact that the judgment of the higher judicial forum is
from a non- jurisdictional High court does not really alter this
position, as laid down by the Hon'ble Bombay High Court in the case
of CIT v. Godavaridevi Saraf 113 ITR 589(Bom) .
19. In view of the above, we hold following the decision of the
Hon'ble' Calcutta High Court that Amendment to the provisions of
Sec.40(a)(ia) of the Act, by the Finance Act, 2010 is retrospective
from 1.4.2005. nsequently, any payment of tax deducted at source
during previous years relevant to and from AY 05-06 can be made to
the Government on or before the due date for filing return of income
u/s.139(J) of the Act. If payments are made as aforesaid, then no
deduction U/S 40(a)(ia) of the Act can be made. Admittedly in the
present case the Assessee had deposited the tax deducted at source on
or before the due date for filing return of income u/s.139(J) of the. Act
and, therefore the impugned disallowance deserves to be deleted. We
order accordingly and allow the appeal by the Assessee".
In other words the ITAT has held that the decision of Bharati Shipyard Ltd.
by Special Bench Mumbai has been reversed by the decision of Virgin
Creations by Kolkotta High Court. It is concluded by ITA T that the order of
the High Court will prevail over the decision of Special Bench. It is also
observed by the ITAT that the amendment being remedial in nature could
apply retrospectively and will cover even matter of A. Y 2005-06. The
Assessing Officer has been given opportunity to rebut this contention of the
appellant. He has also filed a remand report. No other different view of
judicial authority is brought to my notice. Hence it is concluded that the
sub-contract payments made by the appellant amounting to
Rs.12,39,11,8271- are not hit by the provisions of section 40(a)(ia) as
deducted tax has been paid to the Government account before filing of
return of income. Respectfully following the decision of Calcutta High
Court and also decision of jurisdictional IT AT in the cases cited supra the
disallowance u/s. 40(a)(ia) amounting to Rs. 12,39, 11,827/- is deleted. "
5.1 In view of above discussion, the only question we have to decide is that
whether Ld. CIT(A) has committed any error in deleting the disallowance by
following the decision of IT AT Mumbai in the case of Piyush C. Mehta(supra) in
6
ITA NO.1456/MUM/2013(A.Y. 2009-10)
which it has followed the decision of Hon'ble Calcutta High Court in the case of
Virgin Creation (supra). In our opinion Ld. CIT(A) did not commit any error as
not only the aforementioned decisions support the view taken by Ld. CIT(A) but
Hon'ble Karnataka High Court in the case of CIT vs. Santosh Kumar Shetty vide
their decision dated 15/07/2014 in ITA No.590 of 2013 alongwith other appeal
(2014) 89 CCH 199 (Kar) has held that amendment to section 40(a)(ia) by the
Finance Act 2010 is retrospective. The Revenue had taken a plea that Finance Act,
2010 expressly states that such provision would come into w.e.f. 114/2010,
therefore, it was not permissible by Tribunal or Courts to give it a retrospective
effect prior to date. To such arguments of Department it was held that the
amendment was curative in nature i.e. it allows additional time upto to due date of
filing of return in respect of even those instances where TDS had been deducted
during the first eleven months of the previous year, therefore, amendment is
retrospective in operation notwithstanding that Parliament had expressly stated that
it comes into effect from 114/2010 and Revenues' appeal was dismissed. Their
Lordships have discussed this issue at length and also the various decisions of
Hon'ble High Court and after careful consideration they have rejected the similar
contention of Revenue which has been raised before us. For the sake of
completeness these observations of their Lordships of Karnataka High Court are
reproduced below:
"5. The argument of the Revenue is, when the Finance Act, 2010, expressly
states that the said provision would come into effect from 01.04.2010, it is
not permissible for the Tribunals or the Courts to give it a retrospective
effect prior to the date and therefore, it is submitted that the order passed by
the Tribunal holding it as retrospective notwithstanding the fact that the
parliament made its intention clear by declaring that it comes into effect
from 01.04.2010. Therefore, the impugned orders are liable to be set aside.
7
ITA NO.1456/MUM/2013(A.Y. 2009-10)
6. This question came up for consideration before the Gujarat High Court in
the case of Commissioner of Income Tax, Ahmedabad -IV Vs. Om Prakash R
Chaudhary in Tax Appeal Nos.41212013 and connected matter, which came
to be decided on 22.11.2013, after referring to the judgments of Alide
Motors (P.) Ltd. Vs. CIT reported in AIR 1997 SC 1361 and CIT Vs. Alom
Extrusions Limited reported in (2009) 319 ITR 306, has held as under:
"15.4: Thus, considering relevant legislative changes made by the
Parliament from time to time and. some of the decisions relevant to consider
the question of retrospectively raised in these present appeals, the focal
question, therefore, would be whether the amendment brought about by way
of Finance Act 2010 in Section 40 (a)(ia) with effect from 1st April 2010
could be said to be clarificatory in nature for attending to unintended
consequences, and therefore, is having retrospective effect from 1st April
2005.
16: A closer examination needs to be done as to whether the amended
provision aims to expand the prevailing position and whether the same
being in the nature of curative, retrospectively of the same is permissible as
is being contended for and on behalf of the assessee. At this stage, therefore,
the true effect of such amendment needs to be discerned.
16.1: It is demonstrated before us that the TDS provision caused unintended
inexplicable situation whereby the assessee who deducted the tax at source
from the payments made by it for and on behalf of the Government and then
if misses out the time limit of depositing the same with the Treasury within
the time prescribed, the amount spent for its business purposes on account
of the late deposit of such tax would result into disallowance of entire
expenditure under Section 40(a)(ia). The said proviso thereby caused
immense hardship. The amendment under consideration made by the
Finance Act 2010 relaxes the rigors of such prevision by permitting payment
of Tax till the filing of return as provided under sub-section (1) of Section
139 of the Act.
16.2: One can notice that the object of brining about provision of Section
40(a)(ia) in the year 2005 - 06 was to augment compliance of TDS
provision. TDS either not deducted or deducted but not paid in respect of
payment of interest, commission or brokerage etc., before the expiry of time
prescribed under sub-section (1) of Section 200 and in accordance with the
other provisions of Chapter XVIL such amount shall not be deducted in
8
ITA NO.1456/MUM/2013(A.Y. 2009-10)
computing the 'income' chargeable under the head 'Profit & Gains' of
business or profession. Such provision starts with non obstante clause which
states that notwithstanding anything contained in Section 30 to 38 of the
Income-tax Act, if the tax deducted at source is not paid within prescribed
time [under Section 200 (1)}, no amount could be deducted while computing
the income, under Chapter IV of the 'computation of business income'.
16.3: Thereafter, by way of amendment of Finance Act, 2008, further
amendment was made whereby TDS deductible and deducted in the last
month of previous year if was not paid till the due date of filing of return
under sub-section (1) of Section 139 and in any other case, on or before the
last day of the previous year, Section 40(a)(ia) provided for the
disallowance of expenses like interest, commission, brokerage, etc.
16.4: Since, this had created anomaly whereby tax deducted in the last
month was permitted payment till filing of return as per sub-section (1) of
Section 139 whereas for the TDS deducted during the rest of the months,
period was provided only till 31st March of the previous year, Finance Act,
2010 was brought. To bring parity, to remedy unintended consequences and
to make the provision workable, it proposed to amend the said provision and
provided inter alia that no disallowance would be made if after deduction of
tax during the previous year, the same has been paid on or before the due
date of filing of return of income as specified in sub-section (1) of Section
139. 1 'his has been given retrospective effect from 1st April 2010.
16.5: Of course. the Legislature has given the effect from a specified date
and applied the same to A. Y. 2010-11 and subsequent years, this provision
being curative in nature, its effect needs to be read retrospectively in
operation. It’s very purpose would not be sub-served, if the effect is limited
to A. y. 2010-11 and subsequent years only. Strict construction if leads to a
result not intended to be fulfilled by the object of legislation and another
construction is possible apart from literal construction, then that
construction needs to be preferred as held in a decision in case of CIT V.
Alom Extrusion Limited [Supra).
16.6: We also cannot be oblivious of submissions not denied by the other
side that various representations were made to the Finance Minister to
bring about suitable amendment as the assessee otherwise was losing
genuine deduction of expenditure on this count as also reflected in the
9
ITA NO.1456/MUM/2013(A.Y. 2009-10)
speech of Finance Minister so also in the memorandum explaining the
provision of the Finance Bill.
16. 7: Giving plain or natural meaning to the amendment as contended by
the Department, if is likely to create a, situation enhancing the hardship and
advance discrimination, purposive and. reasonable interpretation is
required to be given by the Court. When plain interpretation frustrates the
very legislative intent, the Court is expected to bear in mind the legislative
intent from the language used in the statue with the help of permissible tools
of interpretation of statute.
17: The core issue as to whether the amendment made by the Finance Act
2010 to Section 40[a](ia) of the Act is retrospective from the date of
insertion of the provision i.e., 1st April 2005 therefore needs to be answered
in affirmation. It can be seen that the amendment made by the Finance Act
2010 allows additional time upto the due date of filing of the return in
respect of even those instances where TDS has been deducted during the
first eleven months of the previous year. The additional time till the due date
of filing of the return, in case of TDS made during the last month of the
previous year was already available by the amendment made by Finance Act
2008. Thus, it is apparent that the relaxation made by the amendment made
under the Finance Act, 2010 brings the law in parity with the
aforementioned situation and accordingly, for the TDS deducted all
throughout the year, time is extended from payment till the filing of return. It
is thus apparent that when the amendment introduced by the Finance Act,
2008 of relaxing the time for deposit of TDS was made retrospective from .
the year 2005 [lst April 2005], the amendment by Finance Act 2010 with
regard to other limb of time limit for payment of TDS has to be held,
retrospective not from 1st April 20 I 0 only. If we recall at this stage the
speech of Finance Minister while introducing this provision by way of
Finance Act, 20 I 0, this' amendment essentially has been brought for
relaxing the current provision on disallowance of expenditure. The tax, if is
deducted at any time during the financial year and paid before the date of
filing of the return, the Legislature intended to allow deduction on such
expenditure with an intention to permit additional time for most deductors
upto September of the next financial year.
17.1: We draw further support from the fact that the rigor of payment of
interest is also enhanced by increasing the interest charged on tax deducted,
if any deposit by the specified date i.e., up to the filing of the return is not
10
ITA NO.1456/MUM/2013(A.Y. 2009-10)
made from 12% to 18% per annum in the provision of Section 201( 1 A).
Prior to the said amendment of Finance Act, 2010 under Section 201(IA),
assessee was liable to pay simple interest at one per cent for every month or
part of month, in case of failure to deduct tax on payment of deducted tax,
increase is made correspondingly from one per cent to one and half per cent
for every month or part of month for discouraging delay in deposit.
As rightly contended by the respondents arithmetical discrepancy can be
well judged from the fact that the rates of TDS may vary between 1 % to
10%, whereas, legitimate business expenditure denied is 100%- resulting
into taxation of gross receipts coupled with levy of interest and penalty,
which would mean that the possibility cannot be ruled out of business of the
tax payer getting closed down permanently, if there is absence of any scope
of claiming any expenses in the next year.
7. Similar is the view expressed by the Delhi High Court in the cases of CIT
Vs. Oracle Software India Limited reported in 293 ITR page 253,
H.S.Mohindra Traders Vs. I.T.G., Ward 39 (2), New Delhi and Calcutta
High Court in the case of CIT Vs. Virgin Creations.
8. We are in the respectful agreement with the view expressed by the Gujarat
High Court in giving retrospective operation to the said amendment
notwithstanding that the parliament has expressly stated that it comes into
effect from 01.04.2010. The said amendment is curative in nature. The
tribunal committed an error in holding it as prospective. The substantial
questions of law is answered in favour of the assessee and against the
revenue.
9. Insofar as I.T.A Nos. 319/2009 and 333/2012 are concerned, it is
submitted that they are entitled to the benefit even under the old provisions.
Therefore, notwithstanding that the said provisions is now substituted by
more liberal provision, they are also entitled to the benefit.
We find no merits in these appeals and the same are dismissed.”
11
5.2
ITA NO.1456/MUM/2013(A.Y. 2009-10)
In view of above discussions we hold that Ld. CIT(A) did not commit any
error in granting the impugned relief to the assessee. We decline to interfere and
this appeal of the Revenue is dismiss.
6.
In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in the open Court on 24/03/2015
आदे श की घोषणा खल
ु े न्यायालय में 24/03/2015 को की गई ।
Sd/-
Sd/-
(राजेन्र, /RAJENDRA )
(आय.पी. बंसल / I.P. BANSAL)
लेखा सदस्य /ACCOUNTANT MEMBER
मुंबई Mumbai;
न्याययक सदस्य / JUDICIAL MEMBER
ददनांक Dated 24/03/2015
आदे श की प्रतिललपप अग्रेपिि/Copy of the Order forwarded to :
1.
अपीलार्थी / The Appellant
2.
प्रत्यर्थी / The Respondent.
3.
आयकर आयक्
ु त(अपील) / The CIT(A)-
4.
5.
6.
आयकर आयक्
ु त / CIT
वर्भागीय प्रयतयनधि, आयकर अपीलीय अधिकरण, मंुबई / DR,
ITAT, Mumbai
गार्व फाईल / Guard file.
आदे शानसार/ BY ORDER,
सत्यावपत प्रयत //True Copy//
उप/सहायक पुंजीकार
र्.यन.स./Vm, Sr. PS
(Dy./Asstt. Registrar)
आयकर अपीलीय अधिकरण, मुंबई / ITAT, Mumbai
12
1
2
3
4
5.
6.
7.
8
9
Details
Date
Draft dictated on
24/03/2015
Draft Placed before author
24/03/2015
Draft proposed & placed
before the Second Member
Draft discussed/approved by
Second Member
Approved Draft comes to the
Sr.PS/PS
Kept for pronouncement on
File sent to the Bench Clerk
Date on which the file goes to
the Head clerk
Date of Dispatch of order
ITA NO.1456/MUM/2013(A.Y. 2009-10)
Initials
Designation
Sr.PS/PS
Sr.PS/PS
JM/AM
JM/AM
Sr.PS/PS
Sr.PS/PS
Sr.PS/PS