ACIT, CIRCLE-2(1), CUTTACK vs. PATTNAIK MINERALS PRIVATE LTD., KEONJHAR

1 ITA No .347/ CTK/ 2016 Asse ssment Year : 20 07- 200 8

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK

BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER

ITA No.347/CTK/2016 Assessment Year : 2007-2008

Asst. Commissioner of Vs. Patnaik Minerals Pvt Ltd., Income Tax, Circle 2(1), Bonaikela, Joda, Keonjhar. Cuttack PAN/GIR No. (Appellant) .. ( Respondent)

Assessee by : Shri S.C.Bhadra, AR Revenue by : Shri A.K.Mohapatra, CIT DR

Date of Hearing : 01/11/ 2017 Date of Pronouncement : 2 /11/ 2017

O R D E R Per N.S.Saini, AM This is an appeal filed by the revenue against the order of the

CIT(A), Cuttack dated 29.6.2016 for the assessment year 2007-08.

“01. In the facts and circumstances of the case, the Ld.CIT(A) is not justified in deleting the disallowance of addition made by the AO u/s.40(a)(ia) amounting to Rs.2,50,31,692 - on the ground that assessee has already deducted and deposited the TDS in the previous year before the due date of filing of return of income u/s. 139(1). - especially when the proviso to section 40(a)(ia) was entered by the Finance Act'2010 w.e.f. 01.04.2010.

02.In the facts and circumstances of the case, the CIT(A) is not justified in deleting the disallowance of statutory provisions of section 40(a)(ia) as the section 201(1) and principle laid down therein could not be adopted for the purpose of interpretating section 40(a)(ia), particularly when there is no decision in favour of

2 ITA No .347/ CTK/ 2016 Asse ssment Year : 20 07- 200 8 the assessee by the jurisdictional High Court on the same dispute issue..”

assessee had claimed interest expenditure of Rs.2,99,76,686/- paid to

SREI Infrastructure Finance Ltd.. On perusal of the details of the TDS

made u/s. 194A of the Act on such payments, the Assessing Officer

further found that TDS amounting to Rs.5,61,711/- on payment of

Rs.2,50,31,692/- were deposited into Central Govt. Account beyond the

stipulated due date. The Assessing Officer then analysed the provisions of

Sec. 40(a)(ia) of the Act and show caused the assessee as to why the

amount of interest expenses claimed should not be disallowed as per the

provisions of Section 40(aj(ia) of the Act as the TDS deducted were not

deposited to the Central Govt. Account within the stipulated dates and

were deposited into the Central Govt. Account on 07.06.2007 i.e. beyond

the financial year 2006-07. In reply, the assessee submitted that the

TDS have been duly made from the payments of interest for the months

of October, November, December, January and February of the Financial

Year 2006-07 and were deposited to the Central Govt. Account on

07.06.2007. The assessee referred to the amendment made to Section

40(a)(ia) by the Finance Act, 2010 from 1st April, 2010 where it is held

that disallowance will be made if after deducting tax at source, the

assessee fails to pay the amount of tax on or before the due date

specified in sub-section [1) of Section 139 of the Act. The effect of this

amendment is that the assessee deducting tax either in the last month of

3 ITA No .347/ CTK/ 2016 Asse ssment Year : 20 07- 200 8 the previous year or 11 months of the previous year shall be entitled to

deduction 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) of the

Act. Thereafter, the Assessing Officer concluded that the amended

version of the provision of Section 40(a)(ia) of the Act is applicable from

1st April, 2010 and does not have any retrospective effect and disallowed

the amount of Rs.2,50,31,691/- and added the same to the total income

of the assessee.

Assessing Officer observing as under:

It has been observed that amendments to different proviso to Section 40(a)(ia) of the Act have been made over the years. While in some such amendments, it is mentioned that the same is from the retrospective effect and in some other amendments there has been no mention of applicability of the provisions for prior periods. For example, in the Finance Act, 2008 amendment was made to Clause-(a) in sub-clause(ia) in Section 49 with retrospective affect from 1st April, 2005, such amendment was that "in a case where the tax was deductible and was so deducted during the last month of the previous year, the same should be paid to the government account on or before the due date specified in subsection (1) of Section 139 for claiming deduction under the section." In the amendment brought in Finance Act, 2010, it is mentioned 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 deduction in computing the income of the previous year in which such tax has been paid." It is seen that issue which arose in the financial year 2005-06 as first amended through the finance Act, 2008 and then by action of the Finance Act, 2010. While in Finance Act, 2008, the Amendment was made with retrospective effect from first April, 2005 in Finance Act, 2010, there has been amendment with retrospective effect from first April, 2010. The Hon'ble High Courts have treated the issue to be the same and have given opinion that this amendment to

4 ITA No .347/ CTK/ 2016 Asse ssment Year : 20 07- 200 8 proviso to Section 40(a)(ia) of the Act made to Finance Act, 2010 should also have retrospective operation effect. The Hon’ble Supreme Court in the case of R.B.Jodhamall Kuthiala, 82 ITR 570(SC) have held that the provisions which has been inserted as remedy to make the provision warkable, requires to be treated with retrospective operation so that reasonable deduction can be taken to the Section as well. The Supreme Court while deciding the workability of the other amended provisions have decided in the case of Allied Motors Pvt. Ltd and Alom Extrusions Ltd. that the aforesaid provision has retrospective application. The CIT(A) also referred to the case of Virgin Creations Vs. CIT in ITA No.302 of 2011, the Hon'ble High Court, Calcutta have held that the amendment in Section 40(a)(ia) by the Finance Act, 2010 has retrospective effects from 01.04.2005 and is also applicable for the assessment year 2007-08. In the case of CIT Vs. Om Prakashj Choudhary, ITA No. 412/2013, the Hon'ble High Court Gujrat have held that "from the discussion held herein above, we answer the substantial question of law raised in these appeals in favour of the assessee and against the revenue by holding the amendment made in Section 40(a)(ia) of the Income-tax Act, 1961 by the Finance Act, 2010, as retrospective in operation, having effect from 1st April, 2005 i.e. from the date of insertion of section 40(a)(ia) of the Act." In the case of CIT Vs. Shri Santosh Kumar Shetty (2014) 89 CCH 199, the Hon'ble High Court of Karnataka have held that "we are in the respectful agreement with the view expressed by the Gujarat High Court in giving retrospective operation to the said amendment not withstanding 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 is prospective. The substantial questions of law are answered in favour of the assessee and against the revenue." Similar decisions have been taken in the case of CIT Vs. Sri Scorpio Engineering Pvt. Ltd. in ITA No.551/2015 by the Hon'ble High Court of Kanrataka. After perusing the decisions of the Hon'ble High Courts of India as extracted above which are binding on me, the AO is directed to treat the amendment as retrospective from 01.04.2005 and directed to delete the addition.”

whereas ld A.R. of the assessee supported the order of the CIT(A).

5 ITA No .347/ CTK/ 2016 Asse ssment Year : 20 07- 200 8 6. After considering the rival submissions and perusing the orders of

lower authorities, we find that no specific error in the order of the CIT(A)

could be pointed out by ld D.R. Therefore, we do not find any good

reason to interfere with the order of the CIT(A), which is hereby

confirmed and ground of appeal of the revenue is rejected.

Order pronounced on 2/11/2017. Sd/- sd/- (Pavan Kumar Gadale) (N.S Saini) JUDICIALMEMBER ACCOUNTANT MEMBER Cuttack; Dated 2 /11/2017 B.K.Parida, SPS Copy of the Order forwarded to : 1. The Appellant : Asst. Commissioner of Income Tax, Circle 2(1), Cuttack 2. The Respondent. Patnaik Minerals pvt Ltd., Bonaikela, Joda, Keonjhar 3. The CIT(A)- Cuttack 4. Pr.CIT- Cuttack 5. DR, ITAT, Cuttack BY ORDER, 6. Guard file. //True Copy// SR.PRIVATE SECRETARY ITAT, Cuttack