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PER PAWAN SINGH, JUDICIAL MEMBER; 1. This appeal by revenue under section 253 of the Income-Tax Act (the Act)
is directed against the order of ld. Commissioner of Income-Tax-49, Mumbai (the ld. CIT(A) dated 19.04.2017, which in turn arises from the order under section 154 dated 24.09.2015 passed by Assessing Officer for Assessment Year 2009-10. The revenue has raised the following grounds of appeal:
1(a). On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the disallowance of Rs. 3,15,65,489/- u/s 40(a)(ia) in an order u/s 154 is not correct. 1(b). On the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the 2nd proviso to section 40(a)(ia) has been introduced by the Finance Act, 2012 with effect from A.Y. 2013-2014 and, hence, the benefit of the said proviso is not available to the assessee for the assessment year 2009-2010.
Mum 2017-M/s Simtools Pvt. Ltd.
1(c). On the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that it is not disputed by the assessee that the interest payment of Rs. 3,15,65,486/- to the parties required deduction of tax at source and as no tax was deducted at source on the said interest payment, the omission to disallow the interest payment ix] s 40(a)(ia) was a mistake apparent from record which could be rectified u/s 154. 1(d).On the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the Hon'ble Supreme Court has granted SLP (which is reported in (2016) 242 Taxman 5 (SC)) against the decision of the Hon'ble Delhi Court in the case of CIT v. Ansal Landmark Township Pvt. Ltd. (2015) 234 Taxman 825 (Delhi) wherein the Hon'ble Delhi High Court held that 2nd proviso to section 40 (a)(ia) is declaratory and curative and it has retrospective effect from 01.04.2005.
Brief facts of the case are that the assessee is engaged in the business of real estate construction. In this case, assessment was completed under section 153A r.w.s. 143(3) on 28.03.2013. The Assessing Officer on verification of fact recorded that assessee has paid interest of Rs. 6,64,44,837/- and Rs. 9,98,630/- to M/s Lodha Developers Ltd. (LDL) and Lodha Elevation Buildcon Pvt. Ltd. (LEBPL). The assessee vide its letter dated 19.03.2013 stated that TDS was deducted @ 22.66% on both the interest payment which is Rs. 1,50,56,400/- and Rs. 2,26,290/- respectively. The assessee further informed that LDL availed lower TDS certificate for 4.53% of Rs. 3,58,77,981/-. The TDS amount of LDL after considering the lower TDS deduction was calculated to Rs. 85,52,440/- and thus the difference of TDS of Rs. 65,03,960/- was reversed on 01.04.2009, out of total balance of TDS, LDL of Rs. 85,52,440/-, the assessee paid TDS of Rs. 16,25,990/- and balance of Rs. 69,26,450/- was reversed, similarly the assessee reversed the entire TDS for LEBPL of Rs. 2,26,290/-. The Assessing Officer took the view that assessee has not paid TDS on interest payment of Rs. 2 Mum 2017-M/s Simtools Pvt. Ltd. 3,05,66,856/- and Rs. 9,98,630/-. For not making payment of TDS expenses.
The assessee contended that amendment made in section 201 by Finance Act 2012 w.e.f. 01.07.2012 and that the amendment is retrospective applicability. The assessee also in alternative submitted that the interest expenses has not been debited to P&L A/c and not claimed, therefore, it cannot be considered for disallowance under section 40a(ia) of the Act.
However, the Assessing Officer was of the view that new proviso regarding exception with reference to amendment made in section 201 was brought on statute book from 01.04.2013 and thus applicable for Assessment Year 2013-14 and that said section is prospective in nature and not retrospective as claimed by assessee and that assessee cannot take benefit of amendment in Assessment Year 2009-10. For second contention of the assessee that the interest expenses could not be disallowed as the same was not debited to P&L A/c was not correct. Thus, the Assessing Officer took the view that interest expenses of Rs. 3,15,65,486/- on which TDS has not been paid was to be disallowed and work-in-progress was to be reduced accordingly.
Therefore, the Assessing Officer passed the rectification order and rectified the assessment order dated 28.03.2013 under section 153A r.w.s. 143(3).
On appeal before the ld. CIT(A), the disallowance was deleted. The ld. CIT(A) deleted the disallowance holding that disallowance made in order under section 154 is not based on any incriminating material found in the course of search and such disallowance could not have been made under 3 Mum 2017-M/s Simtools Pvt. Ltd. section 153/143(3). The ld. CIT(A) also took the view that second proviso to section 40a(ia) was introduced by Finance Act 2010 is a curative amendment and has retrospective effect as held by Tribunal in Dr. Adi R Nazir v ACIT in ITA No. 1056/M/2011, DCIT v Anand Marakala [2014] 48 taxmann.com 402 (Bangalore), Capital Pharma v ITO [2014] 50 taxmann.com 411 (Bangalore), Rajeev Kumar Agarwal v Addl. CIT 45 taxmann.com 555 (Agra), by Hon’ble Gujarat High Court in CIT v Valibhai Khanbhai Mankad 28 taxmann.com 119 (Gujarat HC) & by Hon’ble Delhi High Court in Ansal land Mark Township v CIT in ITA No. 160 & 161/2015 (Del.HC). Aggrieved by the order of ld. CIT(A), the revenue has filed the present appeal before us.
We have heard the submission of ld. Departmental Representative (DR) for the revenue and Authorized Representative (AR) of the assessee and perused the material available on record. The ld. DR for the Revenue supported the order of Assessing Officer. The ld. DR for the revenue further submits that Special Leave Petition of the revenue against the decision of Hon’ble Delhi High Court in Ansal Land Mark Township (P.) Ltd. is pending in Hon’ble Supreme Court. On the other hand, the ld. AR of the assessee submits that the ground of appeal
raised by revenue is covered by the decision of Hon’ble Apex Court in CIT vs. Calcutta Export Company [2018] 93 taxmann.com
51. (SC). The ld. AR further submits that the Hon’ble Supreme Court held that amendment made by Finance Act, 2010 to 4. ITA No. 4825 Mum 2017-M/s Simtools Pvt. Ltd. provisions of section 40a(ia) is curative in nature and should be given retrospective operation from the date of inception. The ld. AR of the assessee in alternative submission submits that the assessment was completed under section 143/143(3) and in absence of any incriminating material found during the search, the Assessing Officer has no jurisdiction to make disallowance in the assessment order passed under section 153C.
The disallowance made in the order under section 154 is not based on any incriminating material found during the course of search. The assessment order under section 143(1) was passed on 24.03.2011 and rectification order could only be made upto 31.03.2015, the order was passed on 24.09.2015.
Thus, the order is not sustainable on both the counts i.e. not based on incriminating material as well as beyond the time limit prescribed for rectification.
We have considered the rival submission of the parties and have gone through the orders of authorities below. The Assessing Officer rectified the assessment order vide its order dated 24.09.2015 holding that in new proviso regarding exception with the reference to the amendment to section 201 has been inserted by Finance Act, 2010 w.e.f. 01.04.2013 which is applicable from Assessment Year 2013-14 and that the amendment is prospective in nature and not retrospective as claimed by assessee. The assessee cannot claim benefit of the amended provision for Assessment Year 2009-10 as the same were not applicable in that year. Other contention 5 Mum 2017-M/s Simtools Pvt. Ltd. of assessee that expenses cannot be disallowed as the same was not debited to the P&L A/c is also not correct as there is no such provision in section 40a(ia).
The ld. CIT(A) deleted the disallowance on his observation that assessment under section 143(1)(a) was completed on 04.03.2011 and the rectification order could be passed only up to 31.03.2015. The ld CIT (A) also held that there was no incriminating material found during the search for making addition in assessment under section 153C/143(3) and in absence of incriminating material the addition/disallowance was without jurisdiction.
The ld. CIT(A) also took the view that the amendment made by Finance Act, 2010 to the second proviso is retrospective or not and consequently whether tax was deductable at source under Chapter XVIIB or not is a debatable issue. We have noted that the Hon’ble Apex Court in a recent decision in case of CIT vs. Calcutta Export Company (supra) that the amendment made by Finance Act 2010, to the proviso of section 40(a)(ia) is curative in nature and it should be given retrospective operation from the date of insertion i.e. with effect from assessment year 2005-06.
We have noted that the ld CIT(A) have passed the impugned order on three counts, firstly that assessment under section 143(1)(a) was completed on 04.03.2011 and the rectification order could be passed only up to 31.03.2015, passed on 24.09.2015 is barred by limitation, secondly the addition/ disallowance was not based on incriminating material founds 6 Mum 2017-M/s Simtools Pvt. Ltd. during the search and thirdly the issue is debatable. As have recorded that the Hon’ble Supreme Court recently in of CIT vs. Calcutta Export Company (supra) held that the amendment made by Finance Act 2010, to the proviso of section 40(a)(ia) is curative in nature and it should be given retrospective operation from the date of insertion i.e. with effect from assessment year 2005-06. Considering the above factual and legal discussion, we do not find any illegality in the order of ld CIT(A), which we affirm. No contrary fact or law is brought to our notice to take other view. In the result the grounds of appeal
raised by the revenue are dismissed. 8. In the result, appeal of the Revenue is dismissed. Order pronounced in the open court on 30/01/2019.