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From the Courts »
  Vatsala Shenoy vs. JCIT (Supreme Court)
  Vatsala Shenoy vs. JCIT (Supreme Court)
 M.K.Overseas Pvt. Ltd. Vs. Pr.Commissioner Of Income Tax-06
 Arshia Ahmed Qureshi Vs. Pr. Commissioner Of Income Tax-21
 CHAUDHARY SKIN TRADING COMPANY Vs. PR. COMMISSIONER OF INCOME TAX-21
  Sushila Devi vs. CIT (Delhi High Court)
  Vatsala Shenoy vs. JCIT (Supreme Court)
 Deputy Director Of Income Tax Vs. Virage Logic International
 Commissioner Of Income Tax-3 International Taxation Vs. Virage Logic International India
 Pr. Commissioner Of Income Tax-06 Vs. Moderate Leasing And Capital Services Pvt. Ltd.
 ITO vs. Vikram A. Pradhan (ITAT Mumbai)

COMMISSIONER OF INCOME TAX Vs. SAMSUNG INDIA ELECTRONICS LTD.
July, 26th 2013
$~3.
*IN THE HIGH COURT OF DELHI AT NEW DELHI
+       INCOME TAX APPEAL NO. 65/2013


                                         Date of decision: 1st July, 2013


        COMMISSIONER OF INCOME TAX -XIII
                                                          ..... Appellant
                          Through Mr. N.P. Sahni, Sr. Standing
                          Counsel.

                          versus

        RAJINDER KUMAR
                                                        ..... Respondent
                          Through Mr. M.P. Devanath & Mr. R.
                          Ramachandran, Advocates.

        CORAM:
        HON'BLE MR. JUSTICE SANJIV KHANNA
        HON'BLE MR. JUSTICE SANJEEV SACHDEVA

SANJIV KHANNA, J. (ORAL):

        Having heard learned counsel for the parties, we frame the

following substantial question of law:

           "Whether the Income Tax Appellate Tribunal was
           right in deleting addition of Rs.78,51,800/- under
           Section 40(a)(ia) of the Income Tax Act, 1961?"

2.      With the consent of the counsel for the parties, we have heard

arguments and proceed to dictate our decision on the aforesaid

question.


ITA No. 65/2013                                                Page 1 of 20
3.      The respondent-assessee is an individual and an architect by

profession. It is an accepted position and it is recorded and noted in

the assessment order itself that the assessee is following cash system of

accounting.

4.      The assessment year involved is 2007-2008.

5.      The Assessing Officer referred to the TDS payable account for

professional payments as on 31st March, 2007 and noticed that an

amount of Rs.8,52,034/- had not been paid by 31st March, 2007. The

assessee was asked to explain why disallowance should not be made

under Section 40(a)(ia) as amended by Finance Act, 2008 with

retrospective effect from 1st April, 2005. The assessee filed written

submissions that they had not claimed any expense on accrual basis

and were following cash system of accounting. However, for better

control and record maintenance, they were maintaining a memorandum

in the books.     This memorandum was of no consequence as the

assessee was claiming expenses on cash system and there were no

sundry creditors or liabilities at the end of the year. In the month of

February, 2007, Rs.8,33,064/- was shown in the TDS account on

account of professional charges amounting to Rs.1,48,49,500/-.

Rs.69,92,000/- was paid in the month of February, 2007 and TDS of

Rs.3,92,221/- thereon was deposited on 7th March, 2007. The balance

amount of Rs.78,51,800/- was paid/released in the month of March,

ITA No. 65/2013                                                Page 2 of 20
2007 and TDS was deducted and was paid on the said amount before

the due date in the month of April, 2007. Deduction, therefore, was

due and made in the month of March, 2007 and the TDS was deposited

in the Government account in April, 2007, i.e., within the stipulated

time.




6.      The Assessing Officer after noticing the submission did not deal

with it but observed that there was violation of Section 40(a)(ia) as

TDS should have been paid on or before 31st March, 2007 and as

expenses of Rs.78,51,800/- had been debited to the professional

charges account in February, 2007, i.e., prior to March, 2007.

7.      The Commissioner of Income Tax (Appeals) upheld the said

addition under Section 40(a)(ia) observing that Section 194J required

deduction of tax at source either at the time of payment or at the time

of credit of such sum to the account of the payee, whichever is earlier.

It did not make any difference whether the assessee was following cash

system or mercantile system. Reference was made to Explanation (c)

to Section 194J which stipulates that credit to suspense account or

account by any other name in the books of accounts required deduction

of TDS.

8.      On further appeal by the respondent-assessee, ITAT by their

order dated 1st August, 2012 has deleted the said addition relying upon

decision dated 23rd November, 2011 of the Calcutta High Court in ITA

ITA No. 65/2013                                                  Page 3 of 20
No. 302/2011 GA No. 3200/2011, Commissioner of Income Tax

versus Virgin Creations. In the said decision, it has been held that the

proviso to Section 40(a)(ia) of the Act amended by Finance Act, 2010

has retrospective effect.

9.      Learned counsel for the appellant submits that the decision of

the Calcutta High Court in the case of Virgin Creations (supra) should

not be applied and the ratio laid down in the said decision is debatable.

Amendments were made to the proviso to Section 40(a)(ia) of the Act

by Finance Act, 2010 and these are not retrospective but applicable to

and from assessment year 2010-11 onwards. He has referred to Full

Bench decision of the tribunal in Bharati Shipyard Limited versus

Deputy Commissioner of Income Tax, (2011) 11 ITR Tribunal 599 in

support. Reference is also made to the decision of the Bombay High

Court in Commissioner of Income Tax versus Shyam Narayan and

Brothers, (2012) 349 ITR 145.

10.     Respondent assessee, on the other hand, relies upon the decision

of the Calcutta High Court in Virgin Creations (supra) and reference is

also made to the decision of the Supreme Court in Allied Motors (P)

Limited versus Commissioner of Income Tax, (1997) 224 ITR 677

and Commissioner of Income Tax, Bombay and Others versus Podar

Cement Private Limited and Others, (1997) 5 SCC 482.

11.     At the outset, we notice and record that the decision of the

ITA No. 65/2013                                                Page 4 of 20
Bombay High Court in Shyam Narayan and Brothers (supra) does not

lay down or propound any ratio applicable to the question of law raised

in the present case. The said decision does not examine or affirm the

ratio by the Full Bench decision of the tribunal in Bharati Shipyard

Limited (supra). Bombay High Court records that the earlier decision

of the tribunal in the case of Bansal Parivahan (India) Private

Limited versus ITO, (2011) 9 ITR Tribunal 565 stands overruled by

Bharati Shipyard Limited (supra), which is a factual assertion. It did

not examine on merits the ratio and reasoning of the tribunal in

Bharati Shipyard Limited (supra) and/or affirm or disapprove the

same. The order of the tribunal in the case of Shyam Narayan and

Brothers (supra) was set aside for re-examination as the tribunal had

followed the decision in the case of Bansal Parivahan (India) Private

Limited (supra) which stood overruled by the Full Bench. Thus, the

said decision does not deal with the legal question raised before us.

12.     The decision of the Calcutta High Court in Virgin Creations

(supra) is a short one and is as under:-

                  "The Court: 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 admitted.
                  It is argued by Mr.Nizamuddin that this court
                  needs to take decision as to whether section
                  40A(ia) is having retrospective operation or not.

                        The learned Tribunal on fact found that the

ITA No. 65/2013                                                    Page 5 of 20
                  assessee had deducted tax at source from the paid
                  charges between the period April 1, 2005 and
                  April 28, 2006 and the same were paid by the
                  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 Court, as
                  has been recorded by the learned Tribunal, in the
                  case of Allied Motors Pvt. Ltd. And also in the
                  case of Alom Extrusions Ltd., has already decided
                  that the aforesaid provision has retrospective
                  application. Again, in the case reported in 82 ITR
                  570, the Supreme Court held that the provision,
                  which has inserted the remedy to make the
                  provision workable, requires to be treated with
                  retrospective 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."

13.     Section 40(a)(ia) of the Act was introduced with effect from 1 st

April, 2005 by Finance (No. 2), 2004 Bill. Explaining the rationale

behind insertion of the said Section, the Memorandum elucidated:-

                  "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 professional
                  services or fees for technical services to residents,
                  and payments to a resident contractor or sub-
                  contractor for carrying out any work (including
                  supply of labour for carrying out any work), on
                  which 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 Chapter XVII-B. It is also proposed
                  to provide that where in respect of payment of any
                  sum, tax has been deducted under Chapter XVII-B

ITA No. 65/2013                                                       Page 6 of 20
                  or paid in any subsequent year, the sum of
                  payment shall be allowed in computing the income
                  of the previous year in which such tax has been
                  paid.

                          The proposed amendment will take effect
                  from the 1st day of April, 2005 and will,
                  accordingly, apply in relation to the assessment
                  year 2005-06 and subsequent years. (clause 11)."
                                                (emphasis supplied)

14.     Thereafter, by Finance Act, 2008 an amendment was made to

Section 40(a)(ia) with retrospective effect from 1st April, 2005.

Section 40(a)(ia) as amended by Finance Act, 2008 was as under:

                  "40. Notwithstanding anything to the contrary in
                  Sections 30 to 38, the following amounts shall not
                  be deducted in computing the income chargeable
                  under the head "profit and gains of business or
                  profession"...
                  (ia) any interest, commission or brokerage, rent,
                  royalty, fees for professional services or fees for
                  technical services payable to a resi-dent, or
                  amounts payable to a contactor or sub-contractor,
                  being resident, for carrying out any work
                  (including supply 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
                  was so deducted during the last month of the
                  previous year, on or before 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 sum,
                  tax has been deducted in any subsequent year, or
                  has been deducted-


ITA No. 65/2013                                                     Page 7 of 20
                  (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 allowed as a deduction in
                  computing the income of the previous year in
                  which such tax has been paid."
                                                 (emphasis supplied)

15.     Section 40(a)(ia) was further amended by Finance Act, 2010

with effect from 1st April, 2010 and the amended provision now reads

as under:

                  "(ia) any interest, commission or brokerage, rent,
                  royalty, fees for professional services or fees for
                  technical services payable to a resi-dent, or
                  amounts payable to a contractor or sub-contractor,
                  being resident, for carrying out any work
                  (including supply 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 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 deducted 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
                  deducted in computing the income of the previous
                  year in which such tax has been paid."
                                                  (emphasis supplied)

16.     The note on clauses and the memorandum explaining the

amendments to Section 40(a)(ia) reproduced in (2010) 321 ITR

Statutes 79 reads:


ITA No. 65/2013                                                      Page 8 of 20
                  "Notes on Clauses:
                  Clause 12 of the Bill seeks to amend section 40 of
                  the Income-tax Act relating to amounts not
                  deductible.

                  Under the existing provisions contained in sub-
                  clause (ia) of clause (a) of the aforesaid section,
                  non-deduction of tax or non-payment of tax after
                  deduction on payment of any sum by way of
                  interest, commission or brokerage, rent, royalty,
                  fees for professional services or fees for technical
                  services payable to a resident or amounts payable
                  to a contractor or sub-contractor, being resident,
                  results in the disallowance of the said sum, in the
                  computation of income of the payer, on which tax
                  is required to be deducted under Chapter XVII-B.

                    It is proposed to amend sub-clause (ia) of clause
                  (a) of the aforesaid section to provide that
                  disallowance under the said sub-clause will be
                  attracted, if, after deduction of tax during the
                  previous year, the same has not been paid on or
                  before the due date of filing of return of income
                  specified in sub-section (1) of section 139.

                  The proviso to the said sub-clause provides that
                  where in respect of any such sum, tax has been
                  deducted in any subsequent year, or has been
                  deducted during the last month of the previous
                  year but paid after the due date of filing of return
                  or deducted during any other month of the
                  previous year but paid after the end of the said
                  previous year, such sum shall be allowed as a
                  deduction in computing the income of the previous
                  year in which such tax has been paid.

                         This    amendment     will   take   effect
                                         st
                  retrospectively from 1 April, 2010, and will,
                  accordingly, apply in relation to the assessment
                  year 2010-11 and subsequent years."


17.     We have noticed the facts of the present case. It is an accepted

ITA No. 65/2013                                                      Page 9 of 20
and admitted position that the assessee was following cash system and

not mercantile system of accountancy. Neither the Assessing Officer

nor the CIT (Appeals) have disputed the said factual position. The

assessment order itself specifically records that the assessee was

following cash system. It is not disputed in the assessment order or in

the first appellate order that the assessee had paid a sum of

Rs.78,51,800/- in the month of March, 2007 and had accordingly

deducted TDS of Rs.4,40,843/- and the same was deposited within the

due date from the date of said deduction in the month of April, 2007.

Prior to that, the assessee had deducted TDS of Rs.3,92,221/- on

professional charges of Rs.69,92,700/- in February, 2007. TDS on the

said amount which was deducted in the month of February was

deposited on 7th March, 2007, within the due date.

18.     The aforesaid facts show that the assessee had made payment of

Rs.78,51,800/- in the month of March, 2007 only and not in the month

of February, 2007. The assessee has throughout stated and it is not

disputed either in the assessment order or in the order passed by the

first appellate authority that they were for convenience maintaining a

Memorandum relating to pending bills but this Memorandum did not

get reflected and was not shown in the annual accounts as sundry

creditors or liabilities, which were payable. It was not booked as an

expense or liability.    The assessment order nowhere records or




ITA No. 65/2013                                              Page 10 of 20
specifically holds that the account of the payee was credited with

Rs.78,51,800/- or with Rs.1,48,49,500/-.      The first appellate order

again does not specifically state so. In such circumstances, we feel a

pragmatic and a practical approach has to be adopted. The respondent

assessee had deducted tax at source when the payment was made in the

month of March, 2007 and thereafter deposited the payment in the

month of April, 2007. It is an accepted position that in case tax was

deductible in the month of March, 2007 the due date of payment was in

April, 2007 and before due date payment, Rs.4,40,843/- deducted as

TDS in the month of March, 2007 was duly paid. It has to be accepted

and it is logical that there would be some time gap between date of

deduction of tax at source and when payment is deposited. Section

40(a)(ia) and the proviso as amended by Finance Act, 2008 with

retrospective effect from 1st April, 2005 notices and acknowledges the

said position and, therefore, clause (A) states that where tax "was"

deductible and was so deducted during the last month of the previous

year but stands paid before the due date specified under sub-section (1)

to Section 139, deduction shall be allowed in the said year.

19.     Proviso applies when tax was deducted in a subsequent year;

when TDS has been deducted during any month of the previous year

but paid after the end of the previous year; or TDS was deducted

during the last month of the previous year but paid after the said due

ITA No. 65/2013                                                Page 11 of 20
date. When proviso applies deduction is to be allowed in the year in

which the payment is made. Clause A of the proviso has to be read

with clause A of the main Section and not in isolation. Clause A of the

main Section and clause A of the proviso will apply in different factual

matrix or situations. Clause A of the main Section applies when the

tax was deductable and was so deducted during the last month of the

assessment year and was paid on or before the due date for filing of the

return under Section 139(1). The proviso applies when tax has been

deducted in any subsequent year or has been deducted as per clause A

thereto during last month of the previous year, but has been paid after

the said due date.       The expression "said due date" cannot mean the

date on which TDS as per the Chapter XVIII B should have been paid.

It refers to the due date for filing of the return under Section 139(1) of

the Act.          Any other interpretation would lead to difficulties,

incongruities and conflict between clause A of the main Section and

clause A of the proviso. Both would be applicable to the same factual

matrix/situation with contradictory stipulations or consequences.

Under clause A of the main Section, the TDS deductable and so

deducted during the last month should be paid on or before the due

date for filing of the return under Section 139(1) but as per the

Revenue under the proviso clause A, TDS should be deducted during

the last month of the previous year but paid before the "said due date"

ITA No. 65/2013                                                 Page 12 of 20
i.e. the date by which TDS is payable under the Act.                  This

interpretation if accepted means that clause A of the proviso and clause

A of the main Section would become irreconcilable and mutually

contradictory. Clause A of the proviso does not postulate the obvious

but seeks to relax the rigor when tax deducted stands paid. This is the

reason why the proviso in clause A does not use the expression "tax

was deductable and was so deducted" but uses the expression "tax has

been deducted ...... during the last month of the previous year". The

expression "said due date" in the clause A to the proviso does not mean

and refer to the date on which tax should have been deposited without

interest or penalty under Chapter XVII-B. This is obvious. Clause A

to the proviso applies when the deduction is post the period specified

by law but in the last month of a previous year. In such cases under the

proviso clause A, TDS should be paid before "the said due date" i.e.

the date on which return under Section 139(1) of the Act is to be filed.

20.     Therefore, when the respondent assesse deducted TDS in March

2007, i.e. last month of the previous year and paid the same before in

April 2007 before the said due date i.e. the date on which return of

Income U/s 139(1) of the Act is to be filed. Section 40(a)(ia) could not

have been invoked.


21.     Reference to Explanation clause (c) which states that credit to


ITA No. 65/2013                                                Page 13 of 20
suspense account or any other account in book would be deemed to be

credit in account of the payee is inappropriate. The said clause in the

explanation is meant to curtail possibility or chance of non-deduction if

an assesse credits a third account/head, instead of crediting the account

of the payee to await deduction of TDS. It would not be appropriate to

apply clause (c) of Explanation to section 194J to factual matrix of the

current case. The amount was credited to the account of the payee,

payment was made and TDS was deducted in March, 2007 and

paid/deposited in April, 2007.

22.     Now, we refer to the amendments which have been made by the

Finance Act, 2010 and the effect thereof. We have already quoted the

decision of the Calcutta High Court in Virgin Creations (supra). The

said decision refers to the earlier decision of the Supreme Court in the

case of Allied Motors (P) Limited (supra) and Commissioner of

Income Tax versus Alom Extrusions Limited, (2009) 319 ITR 306

(SC). In the case of Allied Motors (P) Limited (supra), the Supreme

Court was examining the first proviso to Section 43B and whether it

was retrospective. Section 43B was inserted in the Act with effect

from 1st April 1984 for curbing claims of taxpayers who did not

discharge or pay statutory liabilities but claimed deductions on the

ground that the statutory liability had accrued. Section 43B states that

the statutory liability would be allowed as a deduction or as an expense

ITA No. 65/2013                                                Page 14 of 20
in the year in which the payment was made and would not be allowed,

even in cases of mercantile system of accountancy, in the year of

accrual. It was noticed that in some cases hardship would be caused to

assessees, who paid the statutory dues within the prescribed period

though the payments so made would not fall within the relevant

previous year. Accordingly, a proviso was added by Finance Act,

1987 applicable with effect from 1st April, 1988.                The proviso

stipulated that when statutory dues covered by Section 43B were paid

on or before the due date for furnishing of the return under Section

139(1), the deduction/expense, equal to the amount paid would be

allowed. The Supreme Court noticed the purpose behind the proviso

and the remedial nature of the insertion made. Of course, the Supreme

Court also referred to Explanation 2 which was inserted by Finance

Act, 1989 which was made retrospective and was to take effect from 1st

April, 1984.          Highlighting the object behind Section 43B, it was

observed that the proviso makes the provision workable, gives it a

reasonable interpretation. It was elucidated:

                  "12.    In the case of Goodyear India Ltd. V. State
                  of Haryana this Court said that the rule of
                  reasonable construction must be applied while
                  construing a statute. Literal construction should be
                  avoided if it defeats the manifest object and
                  purpose of the Act.

                  13.    Therefore, in the well-known words of
                  Judge Learned Hand, one cannot make a fortress

ITA No. 65/2013                                                      Page 15 of 20
                  out of the dictionary; and should remember that
                  statutes have some purpose and object to
                  accomplish whose sympathetic and imaginative
                  discovery is the surest guide to their meaning. In
                  the case of R.B. Judha Mal Kuthiala v. CIT, this
                  Court said that one should apply the rule of
                  reasonable interpretation. A proviso which is
                  inserted to remedy unintended consequences and
                  to make the provision workable, a proviso which
                  supplies an obvious omission in the section and is
                  required to be read into the section to give the
                  section a reasonable interpretation, requires to be
                  treated as retrospective in operation so that a
                  reasonable interpretation can be given to the
                  section as a whole.

                  14.      This view has been accepted by a number
                  of High Courts. In the case of CIT v. Chandulal
                  Venichand, the Gujarat High Court has held that
                  the first proviso to Section 43-B is retrospective
                  and sales tax for the last quarter paid before the
                  filing of the return for the assessment year is
                  deductible. This decision deals with Assessment
                  Year 1985-85. The Calcutta High Court in the
                  case of CIT v. Sri Jagannath Steel Corpn. has
                  taken a similar view holding that the statutory
                  liability for sales tax actually discharged after the
                  expiry of the accounting year in compliance with
                  the relevant statute is entitled to deduction under
                  Section 43-B. The High Court has held the
                  amendment to be clarificatory and, therefore,
                  retrospective. The Gujarat High court in the above
                  case held the amendment to be curative and
                  explanatory and hence retrospective. The Patna
                  High court has also held the amendment inserting
                  the first proviso to be explanatory in the case of
                  Jamshedpur Motor Accessories Stores v. Union of
                  India. The special leave petition from this decision
                  of the Patna High Court was dismissed. The view
                  of the Delhi High Court, therefore, that the first
                  proviso to Section 43-B will be available only
                  prospectively does not appear to be correct. As
                  observed by G.P. Singh in his Principles of

ITA No. 65/2013                                                       Page 16 of 20
                  Statutory Interpretation, 4th Edn. At p. 291: "It is
                  well settled that if a statute is curative or merely
                  declaratory of the previous law retrospective
                  operation is generally intended." In fact the
                  amendment would not serve its object in such a
                  situation unless it is construed as retrospective.
                  The view, therefore, taken by the Delhi High Court
                  cannot be sustained."


23.     Section 43B deals with statutory dues and stipulates that the year

in which the payment is made the same would be allowed as a

deduction even if the assessee is following the mercantile system of

accountancy. The proviso, however, stipulates that deduction would

be allowed where the statutory dues covered by Section 43B stand paid

on or before the due date of filing of return of income.                 Section

40(a)(ia) is applicable to cases where an assessee is required to deduct

tax at source and fails to deduct or does not make payment of the TDS

before the due date, in such cases, notwithstanding Sections 30 to 38 of

the Act, deduction is to be allowed as an expenditure in the year of

payment unless a case is covered under the exceptions carved out. The

amended proviso as inserted by Finance Act, 2010 states where an

assessee has made payment of the TDS on or before the due date of

filing of the return under Section 139(1), the sum shall be allowed as

an expense in computing the income of the previous year. The two

provisions are akin and the provisos to Sections 40(a)(ia) and 43B are

to the same effect and for the same purpose.

ITA No. 65/2013                                                      Page 17 of 20
24.     In Podar Cement Private Limited (supra), the Supreme Court

considered whether term ,,owner would include unregistered owners

who had paid sale consideration and were covered by Section 53A of

the Transfer of Property Act. The contention of the assessees was that

the amendments made to the definition of term ,,owner by Finance

Bill, 1987 should be given retrospective effect. It was held that the

amendments were retrospective in nature as they rationalise and clear

the existing ambiguities and doubts. Reference was made to Crawford:

,,Statutory Construction and ,,the principle of Declaratory Statutes,

Francis Bennion: ,,Statutory Interpretation, Justice G.P. Singhs

,,Principles of Statutory Interpretation, it was observed that sometimes

amendments are made to supply an obvious omission or to clear up

doubts as to the meaning of the previous provision. The issue was

accordingly decided holding that in such cases the amendments were

retrospective though it was noticed that as per Transfer of Property

Act, Registration Act, etc. a legal owner must have a registered

document.

25.     In view of the aforesaid discussion in paras 18,19 and 20, it is

apparent that the respondent assesse did not violate the unamended

section 40(a)(ia) of the act. We have noted the ambiguity and referred

their contention of Revenue and rejected the interpretation placed by

them. The amended provisions are clear and free from any ambiguity

ITA No. 65/2013                                               Page 18 of 20
and doubt. They will help curtail litigation. The amended provision

clearly support view taken in paragraphs 17 ­ 20 that the expression

"said due date" used in clause A of proviso to unamended section

refers to time specified in Section 139(1) of the Act. The amended

section 40(a)(ia) expands and further liberalises the statue when it

stipulates that deductions made in the first eleven months of the

previous year but paid before the due date of filing of the return, will

constitute sufficient compliance.

26.     Before we close, we must deal with another contention raised by

the counsel for the Revenue to the effect that Finance Bill, 2010

increases the rate of interest from 12% to 18% for failure to deposit

TDS in time. This increase in rate of interest, it is submitted, is

directly connected and associated with the concession or benefit which

was extended to the assessee by amending the proviso. We do not find

any merit in the said contention. Even prior to the amendment made

by Finance Bill, 2010, Section 40(a)(ia) had stipulated that in case

where the tax was deductable and so deducted during the last month of

the previous year but was paid on or before the due date specified in

Section 139(1) of the Act, deduction/expenditure will be allowed in the

previous year notwithstanding the main Section. The section as well as

the proviso before the amendment in 2010 had ambiguities and doubts.

The proviso as amended by Finance Act, 2008 with retrospective effect

ITA No. 65/2013                                               Page 19 of 20
from 1st April, 2005 was not free from interpretative difficulties and

problems. This aspect is highlighted above. The intention behind

Section 40(a)(ia) is to ensure that TDS is deducted and paid. The

object of introduction of Section 40(a)(ia) is to ensure that TDS

provisions are scrupulously implemented without default in order to

augment recoveries. It is not to penalise an assessee when payment has

been made within the time stated. Failure to deduct TDS or deposit

TDS results in loss of revenue and may deprive the Government of the

tax due and payable. The provision should be interpreted in a fair, just

and equitable manner. It should not be interpreted in a manner which

results in injustice and creates tax liabilities when TDS has been

deposited/paid and the respondent who is following cash system of

accountancy has made actual payment to the third party for services

rendered. If the said object and purpose is kept in view, we do not

think the Assessing Officer was justified in disallowing and in

invoking Section 40(a)(ia) in the present case. The question of law is

accordingly answered in negative, i.e., in favour of the respondent-

assessee and against the Revenue. The appeal is accordingly disposed

of. No costs.

                                      SANJIV KHANNA, J.


                                      SANJEEV SACHDEVA, J.
JULY 01, 2013/VKR

ITA No. 65/2013                                               Page 20 of 20
 
 
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