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Case Law Details

Case Name : R K P Company vs. ITO (ITAT Raipur)
Appeal Number : I.T.A. No.: 106/RPR/2016
Date of Judgement/Order : 24.06.2016
Related Assessment Year : 2010-11
Courts : ITAT Raipur
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During the course of the assessment proceedings, the Assessing Officer disallowed a sum of Rs 6,48,456, being payment made to NBFCs on account of interest charges without deduction of tax at source, under section 40(a)(ia). Aggrieved, assessee carried the matter in appal, and relied upon, inter alia, Hon’ble Delhi High Court’s judgment in the case of CIT Vs Ansal Landmark Townships Pvt Ltd [(2015) 377 ITR 635 (Del)], but without any success. The assessee is not satisfied and is in further appeal before the Tribunal.

We find that Hon’ble Delhi High Court has specifically approved the stand taken by a coordinate bench of this Tribunal, in the case of Rajeev Kumar Agarwal Vs ACIT [(2014) 149 ITD 363 (Agra)], and upheld the action of the Tribunal in following the same.

9. ………………………. Now that the legislature has been compassionate enough to cure these shortcomings of provision, and thus obviate the unintended hardships, such an amendment in law, in view of the well settled legal position to the effect that a curative amendment to avoid  unintended consequences is to be treated as retrospective in nature even though it may not state so specifically, the insertion of second proviso must be given retrospective effect from the point of time when the related legal provision was introduced. In view of these discussions,as also for the detailed reasons set out earlier, we cannot subscribe to the view that it could have been an “intended consequence”to punish the assessees for non deduction of tax at source by declining the deduction in respect of related payments, even when the corresponding income is duly brought to tax. That will be going much beyond the obvious intention of the section. Accordingly, we hold that the insertion of second proviso to Section 40(a)(ia) is declaratory and curative in nature and it has retrospective effect from 1st April, 2005, being the date from  which sub clause (ia) of section 40(a) was inserted by the Finance (No. 2) Act, 2004.

10. In view of the above discussions, we deem it fit and proper to remit the matter to the file of the Assessing Officer for fresh adjudication inthe light of our above observations and after carrying out necessary verifications regarding related payments having been taken into account by the recipients in  computation of their income, regarding payment of taxes in respect of such income and regarding filing of the related income tax returns by the recipients. While giving effect to these directions, the Assessing Officer shall give due and fair opportunity of  hearing to the assessee, decide the matter in accordance with the law and by way of a speaking order. We order so

In effect thus, Their Lordships have approved the action of the Tribunal in remitting the matter to the file of the Assessing Officer with a direction to ascertain whether the recipient has taken into account related payments into computation of his income and offering the same to tax, and, if so, delete the disallowance under section 40(a)(ia) in respect of the same.

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July 2024