Income Tax Appellate Tribunal - Jaipur
M/S. Fortune Infonet, Jaipur vs Income Tax Officer, Ward 6(1), Jaipur on 20 November, 2018
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES "A", JAIPUR
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BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM
vk;dj vihy la-@ITA No. 866/JP/2018
fu/kZkj.k o"kZ@Assessment Year :2011-12
M/s Fortune Infonet, cuke Income Tax Officer,
452/3, Raja Park, Jaipur. Vs. Ward 6(1), Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AABFF 7779 C
vihykFkhZ@Appellant izR;FkhZ@Respondent
fu/kZkfjrh dh vksj ls@ Assessee by : Shri Sandeep Jhanwar (CA)
jktLo dh vksj ls@ Revenue by : Shri J.C. Kulhari (JCIT)
lquokbZ dh rkjh[k@ Date of Hearing : 19/11/2018
mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 20/11/2018
vkns'k@ ORDER
PER: VIJAY PAL RAO, J.M. This appeal by the assessee is directed against the order dated 29/05/2017 of ld. CIT(A)-2, Jaipur for the A.Y. 2011-12.
2. Since the appeal of the assessee was filed on 05/7/2018 which is apparently beyond the period of limitation prescribed U/s 253 of the Income Tax Act, 1961 (in short the Act), therefore, the ld AR of the assessee was asked to explain the delay in filing the present appeal. The ld AR of the assessee has submitted that since the assessee did not receive the impugned order, therefore, the assessee applied for certified copy of the same, which was supplied to the assessee only on 08/5/2018 and 2 ITA 866/JP/2018_ M/s Fortune Infonet Vs ITO therefore, the appeal is within the period of limitation. He has also filed an affidavit of the assessee in support of this explanation that prior to 08/5/2018, the assessee did not receive the impugned order. On our direction, the ld DR has also verified the fact from the record and has accepted the fact that the order sent to the address given in Form No. 35, was returned back unserved. However, non-receipt of the said order is attributable to the assessee and therefore the assessee cannot take a plea that there was no service of order. He has submitted that there was a deemed service of the order when it was sent on 16/6/2017 at the address given in Form No. 35. He has objected to the maintainability of the appeal being barred by limitation.
3. Having considered the rival submissions as well as the relevant material on record we note that in response to the letter for issuing a certified copy of the impugned order, the Administrative Officer in the office of ld. CIT(A) has informed the assessee vide letter dated 08th May, 2018 that earlier the order was sent through speed post dated 16/6/2017, however, the same was received back unserved. The said order was sent at the address given in the Form No. 35. We find that the address in the Form No. 35 was given by the assessee of his authorized representative, however, subsequently there is a change of the authorized representative of the assessee, therefore, it is apparent that the order sent to the earlier 3 ITA 866/JP/2018_ M/s Fortune Infonet Vs ITO authorized representative was not received. Consequently, we find that the assessee has explained the reasonable cause for not receiving the impugned order sent through speed post dated 16/6/2017 and finally the impugned order was given to the assessee as a certified copy issued on 08/5/2018. Accordingly, we admit the appeal of the assessee for adjudication on merits.
4. In the present appeal, the assessee has raised following grounds of appeal:
"1. Under the facts and circumstances of the case, the ld. CIT(A) has erred in partially upholding the following disallowances made by the ld. A.O. on lump sum basis.
S. No. Expenditure head Total Expenses Expenses
expenses disallowed by allowed by
A.O. the CIT(A)
1. Business promotion 2,20,751/- 58,297(20%) 29,149(10%)
Expense
2. Office Expenses 81,876 16,375(20%) 8,187(10%)
2. Under the facts and circumstances of the case, the ld. CIT(A) has erred in not properly appreciating the ground of assessee related to disallowance of Rs. 40,000/- made out of travelling expenses.
3. Under the facts and circumstances of the case, the ld. CIT(A) has erred in not deleting the disallowance of Rs. 11,90,195/- in respect of interest paid by applying the provisions of Section 40(a)(ia).
4. The assessee craves the right to add, amend, alter or modify any of the ground of the appeal."
4 ITA 866/JP/2018_ M/s Fortune Infonet Vs ITO
5. Ground No. 1 of the appeal is regarding the disallowance of 20% of certain expenses made by the Assessing Officer, which was restricted by the ld. CIT(A) to 10%.
6. We have heard the ld AR of the assessee as well as the ld DR and considered the relevant material on record. The Assessing Officer while completing the assessment has made disallowance of 20% of the expenditure on account of business promotion expenses and office expenses for want of supporting evidence and full details. The Assessing Officer has stated in the assessment order that the assessee could not furnish complete details in respect of the expenses claimed and further it was not fully supported by the evidence as some of the vouchers were self made. The ld. CIT(A) while considering the issue has restricted the disallowance to 10% in para 2.3 as under:
"2.3 I have perused the facts of the case, the assessment order and the submissions of the appellant. The disallowance has been made by the Assessing Officer as the assessee could not furnish complete details in respect of the expenses, it was also noted that in some cases the vouchers were self made. In view of the same 20% of the expenditure was disallowed. However, the same is found to be on the higher side and disallowance at 10% on this expenditure is upheld. The ground of appeal is partly allowed."
Thus, there is no denial of the fact that the assessee has failed to produce complete details and evidence to substantiate the claim of expenditure as 5 ITA 866/JP/2018_ M/s Fortune Infonet Vs ITO some of the vouchers were self made. Having regard to the facts and circumstances, when the assessee has not substantiated the claim with supporting evidence, we find that the disallowances restricted by the ld.
CIT(A) to 10% is just and proper and does not require any interference.
Accordingly we reject the ground No. 1 of the assessee's appeal.
7. Ground No. 2 of the appeal is regarding the disallowance of Rs.
40,000/- on account of travelling expenses.
8. We have heard the ld AR as well as the ld DR and considered the relevant material on record. The Assessing Officer has made ad hoc disallowance of Rs. 40,000/- on account of travelling expenses on the ground that the claim is not fully supported with evidence and further the assessee could not furnish complete details and bills and vouchers as the vouchers produced by the assessee were self made in respect of some of the petty expenses. We find that the ld. CIT(A) has not adjudicated this issue as the issue of disallowance of 20% of the expenditure was adjudicated by the ld. CIT(A) which was restricted to 10%, however, despite a specific ground raised by the assessee, the same has not been adjudicated. The ld AR of the assessee has submitted that the Assessing Officer has made an ad hoc disallowance without any basis and further the assessee has produced all vouchers except the self made vouchers for 6 ITA 866/JP/2018_ M/s Fortune Infonet Vs ITO petty expenses, therefore, ad hoc disallowance made by the Assessing Officer is not sustainable.
9. On the other hand, the ld DR has relied upon the order of the Assessing Officer as well as the ld. CIT(A) and submitted that the ld. CIT(A) has considered this issue alongwith other disallowances made by the Assessing Officer in respect of business promotion expenses and office expenses.
10. Having considered the rival submissions as well as the relevant material on record we find that the Assessing Officer has made an ad hoc disallowance for want of complete details of bills and vouchers and some of the vouchers were self made. We find that the Assessing Officer accepted the fact that the self made vouchers were produced by the assessee in respect of the petty expenses and therefore, the major expenditure was supported by the assessee with proper vouchers. Accordingly, in absence of any specific defect in the claim of the assessee except the self made vouchers for petty expenses, the ad hoc disallowance made by the Assessing Officer is not justified. The Assessing Officer has considered this issue in para 3.3 as under:
"3.3 Tours and Travels expenses: The assessee has claimed expenses on a/c of tours and travels at Rs. 4,32,544/-. From the details filed and records produced it is noticed that the assessee could not furnish complete details 7 ITA 866/JP/2018_ M/s Fortune Infonet Vs ITO of bills and vouchers and in some cases the vouchers produced were self made for petty expenses. As such the expenses claimed are not fully supported with evidence and looking to the quantum of expenses claimed I consider it appropriate to disallow a lump sum of Rs. 40,000/- out of the expenses claimed and the same is added to the total income of the assessee."
As it is apparent from the order of the Assessing Officer, the Assessing Officer has not conducted any proper enquiry or has given a finding that the claim of the assessee is excessive or bogus. Accordingly, in the facts and circumstances of the case, we delete the ad hoc disallowance of Rs.
40,000/- made by the Assessing Officer.
11. Ground No. 3 of the appeal is regarding the disallowance made U/s 40(a)(ia) of the Act in respect of the interest paid to various Non-banking Financial Companies (NBFCs). The Assessing Officer has disallowed an amount of Rs. 11,90,195/- paid to NBFCs on the loan borrowed by the assessee for want of deduction of TDS.
12. The assessee challenged the action of the Assessing Officer before the ld. CIT(A). The ld. CIT(A) has accepted the fact that the amount of Rs.
20,000/- paid to Rashi Perepharals Pvt. Ltd. is subjected to TDS and therefore, the disallowance made by the Assessing Officer in respect of the said payment was deleted. As regards the payment to the other NBFCs, the ld. CIT(A) has confirmed the disallowances made by the Assessing Officer 8 ITA 866/JP/2018_ M/s Fortune Infonet Vs ITO by rejecting the contention of the assessee that second proviso to Section 40(a)(ia) of the Act is prospective in nature and not retrospective.
13. We have heard the ld AR of the assessee as well as the ld DR and considered the relevant material on record. The Assessing Officer has made disallowance of interest by invoking the provisions of Section 40(a)(ia) of the Act, details of the same are as under:
Sl.No. Name of the NBFC Interest paid
1. Bajaj Auto Finance Ltd. 234064
2. Barclays Finance 162898
3. HDB Financial Services 64598
4. Tata Capital Ltd. 84811
5. Religare Finance 287806
6. India Bulls 336018
7. Rashi Perepharals Pvt. Ltd. 20000
Total 1190195
We further note that the assessee produced copy of Form 26A in respect of NBFCs at serial No. 1 to 6 of the above table. This fact has not been disputed by the ld. CIT(A), therefore, the assessee produced the record to show that these NBFCs have considered the amount of interest in question in their income and filed return of income. Thus, once the recipient has included the amount in the income and filed the return of income then as per second proviso to Section 40(a)(ia) of the Act, no disallowance is called for U/s 40(a)(ia) of the Act. However, the ld. CIT(A) has rejected the contention of the assessee by observing that the decisions relied upon by the assessee are challenged in the Hon'ble Supreme Court by the 9 ITA 866/JP/2018_ M/s Fortune Infonet Vs ITO department. At the outset we note that this issue has been considered by this Tribunal in a series of decisions as well as by the various Hon'ble High Courts. The ld AR of the assessee has also filed copies of decisions including the decision of this Tribunal in the case of ACCME (Urvashi Pumps) Eng. (P.) Ltd. Vs. JCIT (OSD) (2018) 90 taxmann.com 189 (Jp Trib). The Tribunal in the said decision has considered and decided this issue as under:
"7. We have considered the rival submissions as well as relevant material on record. The assessee contended before the ld. CIT(A) that the interest paid to 3 NBFCs namely Reliance Capital Limited, Barclays Bank and Cholamandalam DBC Finance Limited was included in the return of income filed by these Non Banking Financial Companies therefore, in view of the second proviso to section 40(a)(ia) of the Act no disallowance is called for in respect of this amount on which the recipient have paid the taxes. The assessee urged that the second proviso to section 40(a)(ia) is remedial in nature and therefore, the said amendment will have retrospective effect. We find that Hon'ble Delhi High Court in case of CIT vs. Naresh Kumar (supra) while dealing with an identical issue has held in para 15 to 29 as under:-
"15. Question whether the amendment is retrospective or prospective is vexed and rigid rule can be applied universally. Various rules of interpretation have developed in order to determine whether or not, an amendment is retrospective or prospective. Fiscal statutes imposing liabilities are governed by normal presumption that they are not retrospective. The cardinal rule is that the law to be applied, is that which is in force on the first day of the assessment year, unless otherwise mandated expressly or provided by necessary implication. The aforesaid dictum is based upon the principle that a new provision creating a liability or an obligation,
10 ITA 866/JP/2018_ M/s Fortune Infonet Vs ITO affecting or taking away vested rights or attaching new disability is presumed to be prospective. However, it is accepted that Legislatures have plenary power to make retrospective amendments, subject to Constitutional restrictions.
16. Based upon the aforesaid broad dictum, Judges and jurists have drawn distinction between procedural and substantive provisions. Substantive provisions deal with rights and the same are fundamental, while procedural law is concerned with the legal process involving actions and remedies. Amendments to substantive law are treated as prospective, while amendments to procedural law are treated as retrospective. This distinction itself is not free from difficulties as right to appeal has been held to be a substantive law, but law of limitation is regarded as procedural. There is an interplay and interconnect between what can be regarded as substantive and procedural law [see CITv. Shrawan Kumar Swarup & Sons [1998] 232 ITR 123(All.)].
17. There are decisions, which hold that process of litigation or enforcement of law is procedural. Similarly, machinery provision for collection of tax, rather than tax itself is procedural. Read in this context, it can be strongly argued that Section 40(a)(ia) at least to the extent of the amendment is procedural as by enacting Section 40(a)(ia) the Legislature did not want to impose a new tax but wanted to ensure collection of TDS and the amendments made streamline and remedy the anomalies noticed in the said procedure by allowing deduction in the year when the expenditure is incurred provided TDS is paid before the due date for filing of the return. Remedial statutes are normally not retrospective, on the ground that they may affect vested rights. But these statutes are construed liberally when justified and rule against retrospectivity may be applied with less resistance [See Bharat Singh v. Management of New Delhi Tuberculosis Centre [1986] 2 SCC 614 and Workmen Firestone Tyre & Rubber Co. of India (P.) Ltd. v. Management AIR 1973 SC 1227.
18. It is interesting to note that earlier English decisions have held that an enactment fixing a penalty or maximum penalty for offence is merely procedural for the purpose of determining retrospectivity [See DPP v. Lamb [1941] 2 KB 89) and R v. Oliver [1944] 29 Cr. App.
137. This view, however, has been criticized in Reherd Athlumney, In re [1898] 2 QB 547 on the ground that higher or greater punishment impairs existing rights or obligation;--
"No rule of construction is more firmly established than this; that a retrospective operation is not to be given to a statute so as to impair an existing right or obligation, otherwise than as regards 11 ITA 866/JP/2018_ M/s Fortune Infonet Vs ITO matters of procedure, unless that effect cannot be avoided without doing violence to the language of the enactment. If the enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed as prospective only."
19. The word "fairly" used in the aforesaid quotation is important and relevant, but for application of another rule of interpretation. G.P. Singh in "Principles of Statutory Interpretation", 13th Edition, 2012 at page 538 under the sub-heading "Recent statements of the rule against Retrospectivity" has greatly emphasized the principle of fairness and observed that classification of statute either substantive or procedural does not necessarily determine whether the enactment or amendment has retrospective operation, e.g., law of limitation is procedural but its application to past cause of action may result of reviving or extinguishing a right, and such operation cannot be said to be procedural. Similarly, when requisites of an action under the new statute, draws from a time incident to its passing, rule against retrospectivity may not be applicable.
20. In the said text, reference has been made to formulation by Dixon, C.J. in Maxwell v. Murphy [1957] 96 CLR 261 holding:--
"The general rule of the common law is that a statute changing the law ought not, unless the intention appears with reasonable certainty, to be understood as applying to facts or events that have already occurred in such a way as to confer or impose or otherwise affect the rights or liabilities which the law had defined be reference to the past events. But given the rights and liabilities fixed by reference to the past facts, matters or events, the law appointing or regulating the manner in which they are to be enforced or their enjoyment is to be secured by judicial remedy is not within the application of such a presumption".
21. Identically, in Secretary of State for Social Security v. Tunnicliffe [1991] 2 All ER 712 (CA), Staughton, L.J. has expressed the said principle in the following words:--
"The true principle is that Parliament is presumed not to have intended to alter the law applicable to past events and transactions in a manner which is unfair to those concerned in them unless a contrary intention appears. It is not simply a question of classifying an enactment as retrospective or not retrospective. Rather it may well be a matter of degree- the greater the unfairness, the more it is to be expected that Parliament will make it clear if that is intended".
12 ITA 866/JP/2018_ M/s Fortune Infonet Vs ITO
22. House of Lords in L' office Cherifien des Phosphates v. Yamashita Shinnihon Steamship Co. Ltd. [1994] 1 All ER 20 has said the question of fairness has to be answered by taking into account various factors, viz., value of the rights which the statute affects; extent to which that value is diminished or extinguished by the suggested retrospective effect of the statute; unfairness of adversely affecting the rights; clarity of the language used by Parliament and the circumstances in which the legislation was created. These factors have to be weighed together to provide an answer whether the consequences of reading the statute with suggested degree of retrospectivity is unfair; that the words used by the Parliament could not have been intended to mean what they might appear to say. This principle was applied while interpreting a new provision in Arbitration Act in this case observing that the delay attributable to the claimant in pursuing a claim before enactment of the new provision, could be taken into consideration for dismissal.
23. Principle of "fairness" has not left us untouched and was applied by the Supreme Court in Vijay v. State of Maharashtra [2006] 6 SCC 289 in the following words:--
"...The negotiation is not a rigid rule and varies with the intention and purport of the legislation, but to apply it in such a case is a doctrine of fairness. When a new law is enacted for the benefit of the community as a whole, even in absence of a provision the statute may be held to be retrospective in nature."
24. In Allied Motors (P.) Ltd. v. CIT [1997] (224) ITR 677/91 Taxman 205 (SC) it was held that the new proviso to Section 43B should be given retrospective effect from the inception on the ground that the proviso was added to remedy unintended consequences and supply an obvious omission. The proviso ensured reasonable interpretation and retrospective effect would serve the object behind the enactment.
25. In State through C.B.I Delhi v. Gian Singh AIR 1999 SC 3450 extreme penalty of death was diluted to alternative option of imprisonment for life recording that the legislative benevolence could be extended to an accused, who awaits judicial verdicts against his sentence. Earlier in Rattan Lal v. State of Punjab AIR 1965 SC 444 reference was made to Section 6 of the Probation of Offenders Act, 1958 and it was observed that if the Act was not given retrospective operation, it would lead to anomalies and thus could not be the intention of the Legislature.
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26. Principle of matching which is disturbed by Section 40(a)(ia) of the Act, may not materially be of consequence to the Revenue when the tax rates are stable and uniform or in cases of big assessees having substantial turnover and equally huge expenses as they have necessary cushion to absorb the effect. However, marginal and medium taxpayers, who work at low G.P. rate and when expenditure which becomes subject-matter of an order under Section 40(a)(ia) is substantial, can suffer severe adverse consequences as is apparent from the case of Naresh Kumar. Transferring or shifting expenses to a subsequent year, in such cases, will not wipe off the adverse effect and the financial stress. Nevertheless the Section 40(a)(ia) has to be given full play keeping in mind the object and purpose behind the section. At the same time, the provision can be and should be interpreted liberally and equitable so that an assessee should not suffer unintended and deleterious consequences beyond what the object and purpose of the provision mandates. Case of Naresh Kumar is not one of rare cases, but one of several cases as we find that Section 40(a)(ia) is invoked in large number of cases.
27. One important consideration in construing a machinery section is that it must be so construed so as to effectuate the liability imposed by the charging section and to make the machinery workable.
However, when the machinery section results in unintended or harsh consequences which were not intended, the remedial or correction action taken is not to be disregarded but given due regard.
28. It is, in this context, that we had in Rajinder Kumar's case (supra) observed as under:
'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.) Ltd(supra) and Commissioner of Income Tax v. Alom Extrusions Ltd, [2009] 319 ITR 306 (SC). In the case of Allied Motors (P.) Ltd. (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 in the year in which the payment was made and 14 ITA 866/JP/2018_ M/s Fortune Infonet Vs ITO 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 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 15 ITA 866/JP/2018_ M/s Fortune Infonet Vs ITO 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 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.
24. In Podar Cement (P.) Ltd. (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 16 ITA 866/JP/2018_ M/s Fortune Infonet Vs ITO Interpretation", Justice G.P. Singh's "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 assessee 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 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 statute 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.'
29. In view of the aforesaid discussion, we do not find any merit in the present appeals filed by the Revenue and they are dismissed." We further note that the Coordinate Bench of this Tribunal in case of Rajesh Yadav in ITA No. 895/JP/2012 vide order dated 29.01.2016 has held as under:-
"6.1. Recently in the matter of P.M.S. Diesels 2015 ] 59 taxmann.com 100 (Punjab & Haryana), Hon'ble Punjab & Haryana High Court had elaborately discussed the judgment passed by the Hon'ble Calcutta High Court and Hon'ble Gujarat High Court, Hon'ble Allahabad High Court and other judgments as available and thereafter has come to the conclusion that the provisions of section 40(a)(ia) are mandatory in nature and non compliance/non deduction of tax attracts disallowance of the entire amount. Having said so, we will be failing in our duty if we do not discuss the amendment brought in by the Finance (No. 2) Act 2014 with effect from 1.4.2015 by virtue of which proviso to section 40(a)(ia) has been inserted, which provides that if any such sum taxed has been deducted in any subsequent year or has been deducted during the previous year but 17 ITA 866/JP/2018_ M/s Fortune Infonet Vs ITO 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 previous year, and further, section 40(a)(ia) has been substituted wherein the 30% of any sum payable to a resident has been substituted. In the present case, the authorities below has added the entire sum of Rs. 7,51,322/- by disallowing the whole of the amount. Though the substitution in section 40 has been made effective with effective from 1.4.2015, in our view the benefit of the amendment should be given to the assessee either by directing the AO to confirm from the contractors, namely, M/s. Garvit Stonex, M/s. Chanda Marbles and M/s. Nidhi Granites as to whether the said parties have deposited the tax or not and further or restrict the addition to 30% of Rs. 11 ITA No. 895/JP/2012 A.Y 2007-08. Shri Rajendra Yadav vs. ITO Ajmer. 7,51,322/-. In our view, it will be tied of justice if the disallowance is only restricted to 30% of Rs. 7,51,322/-. Accordingly, the appeal of the assessee is partly allowed in the above said manner."
Further this Tribunal has taken a similar view on this issue by following the above decisions and therefore even if there is divergent view taken by the Hon'ble Kerala High Court the view taken in favour of the assessee by this Tribunal by following the various decisions are to be followed to maintain the rule of consistency. Accordingly, We are of the view the second proviso to section 40(a)(ia) of the Act would be effective retrospective as it was undisputedly inserted to removable the hardship faced by the assesses. Hence, we set aside this issue to the record of the Assessing Officer for limited purpose to verify the fact that the interest income received by these NBFCs have been included in the return of income and offered to tax and then decide this issue in light of above observation."
Accordingly by following the decision of this Tribunal (supra) as well as the various decisions of the Hon'ble High Courts on this point we decide this 18 ITA 866/JP/2018_ M/s Fortune Infonet Vs ITO issue in favour of the assessee and consequently the disallowance made by the Assessing Officer U/s 40(a)(ia) of the Act is deleted.
14. In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open court on 20/11/2018.
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(VIKRAM SINGH YADAV) (VIJAY PAL RAO)
ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member
Tk;iqj@Jaipur
fnukad@Dated:- 20th November, 2018
*Ranjan
vkns'k dh izfrfyfi vxzsf'kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- M/s Fortune Infonet, Jaipur.
2. izR;FkhZ@ The Respondent- The ITO, Ward 6(1), Jaipur.
3. vk;dj vk;qDr@ CIT
4. vk;dj vk;qDr¼vihy½@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. 866/JP/2018) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar