Case Law Details
Dis allowance U/s. 40(a)(i) cannot be made in a situation in which tax ability is confirmed only as a result of retrospective amendment of law
Issue – Dis allowance of Rs 52,07,883, in respect of leather testing charges paid to TUV Product Und Umwelt GmbH – a tax resident of Germany, under section 40(a)(i) of the Act, on the ground that the assessee failed to discharge his tax withholding obligations in respect of the same.
In our considered view, the provisions of Section 40(a)(i) cannot be interpretated in such a manner so as to restrict the scope of section to only amounts remaining payable at the end of the year, because, apart from the difference in wording of Section 40(a)(i) vis-a-vis Section 40(a)(ia) and other factors, such an interpretation will make the section redundant and it is one of the fundamental principles of interpretation is to interpret is ut res magis valeat quam pereat, i.e., in such a manner as to make it workable rather than redundant, and to understand the words with reference to the subject-matter, i.e., verba accopoenda sunt secundum subjectum materiam. It is also an elementary legal principle, as was also held by Hon’ble Bombay High Court in the case of CIT Vs Sudhir Jayantilal Mulji (214 ITR 154) that a judicial precedent is an authority for what it actually decides and not what may what come to follow from some observations made therein.31. Learned counsel also submits in any event, it is because of a retrospective amendment in law . It is submitted that the retrospective amendment was brought about by the Finance Act 2010 which was nowhere in sight at the material point of time, i.e. previous year relevant to the assessment year 2008- 09. Learned counsel submits that the assessee cannot be penalized for performing the impossible task of deducting tax at source in accordance with the law which was brought on the statute book much after the point of time when tax deduction obligations were to be discharged. Our attention is invited to the decisions of a coordinate bench in the case of Channel Guide India Ltd Vs ACIT (139 ITD 49), wherein, following the views expressed by Ahmedabad bench in the case of Sterling Abrasives Ltd Vs ITO (ITA No. 2234 and 2244/Ahd/2008; order dated 2008), it is held that law cannot cast the burden of performing the impossible task of performing tax withholding obligations with retrospective effect, and, accordingly, the dis allowance under section 40(a)(i) cannot be made in a situation in which tax ability is confirmed only as a result of retrospective amendment of law. Learned counsel has also cited several other decisions in support of the proposition that in the case of retrospective amendment, the assessee cannot be punished for not complying with the law as it did not exist at the material point of time.
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