IN THE HIGH COURT OF JUDICATURE AT BOMBAY
\nO.O.C.J.
\nINCOME TAX APPEAL NO. 707 OF 2016
\nPr. Commissioner of Income Tax -5 .. Appellant
\nVersus
\nPerfect Circle India Pvt Ltd .. Respondent
\n……………….<\/p>\n
\uf0b7 Mr. Suresh Kumar for the Appellant
\n\uf0b7 Mr. Sanjiv M. Shah for the Respondent
\n……………….<\/p>\n
CORAM : AKIL KURESHI &
\nB.P. COLABAWALLA, JJ.
\nDATE : JANUARY 7, 2019.<\/p>\n
P.C.:<\/p>\n
1. This appeal is filed by the Revenue challenging the
\njudgment of the Income Tax Appellate Tribunal (“Tribunal” for
\nshort) dated 27.3.2015. Following question is presented for
\nour consideration:-<\/p>\n
“Whether on the facts and in the circumstances of the case and in
\nlaw, the Tribunal was justified in rejecting the disallowance of Rs.
\n1,44,78,000\/- made by the AO u\/S. 40(a)(ia) of the Act by holding
\nthat the amendment to the proviso of the said section was
\nretrospective in nature without appreciating that the Act specifically
\nprovides that the said proviso comes into operation w.e.f. 1.4.2013
\nand is prospective in nature and cannot be applied retrospectively?”<\/p>\n
2. It is not necessary to record background facts since the
\nquestion of law raised by the Revenue is whether the second
\nproviso to Section 40(a)(ia) of the Income Tax Act, 1961 (“the
\nAct” for short) would have retrospective effect. We may
\nnotice that the said proviso was inserted w.e.f 1.4.2013 and
\nin essence, it provides that where an assessee fails to deduct
\nwhole or any part of the tax at source but is not deemed to
\nbe an assessee in default under the first proviso to Section
\n201(1), then for the purpose of clause 40(a)(ia), it shall be
\ndeemed that the assessee has deducted and paid the tax on
\nsuch sum on the date of furnishing of return of income by
\nthe payee. The Revenue would content that the benefit of
\nthis proviso would be available to the assessee only
\nprospectively w.e.f. 1.4.2013. <\/p>\n
Various Courts, however, have
\nseen this proviso as beneficial to the assessee and curative
\nin nature. The leading judgment on this point was of the
\nDivision Bench of Delhi Court in the case of CIT Vs. Ansal
\nLand Mark Township P Ltd [2015] 377 ITR 635 (Delhi). The Court held that Section
\n40(a)(ia) is not a penalty and insertion of second proviso is
\ndeclaratory and curative in nature and would have
\nretrospective effect form 1.4.2005 i.e the date from the main
\nproviso 40(a)(ia) itself was inserted. Several High Courts
\nhave adopted the same lines. <\/p>\n
We may also note that the
\nSupreme Court in the case of Hindustan Coca Cola
\nBeverages P Ltd Vs. CIT [2007] 293 ITR 226 (SC)
\n even in absence of second
\nproviso to Section 40(a)(ia) had noticed that the payee had
\nalready paid the tax. Under such circumstances, the Court
\nheld that the payer \/ deductor can at best be asked to pay
\nthe interest on delay in depositing tax.<\/p>\n
3. Under such circumstances, no question of law arises.
\nTax appeal is dismissed.<\/p>\n
[ B.P. COLABAWALLA, J. ] [ AKIL KURESHI, J ]<\/p>\n","protected":false},"excerpt":{"rendered":"
Various Courts, however, have seen this proviso as beneficial to the assessee and curative in nature. The leading judgment on this point was of the Division Bench of Delhi Court in the case of CIT Vs. Ansal Land Mark Township P Ltd [2015] 377 ITR 635 (Delhi). The Court held that Section 40(a)(ia) is not a penalty and insertion of second proviso is declaratory and curative in nature and would have retrospective effect form 1.4.2005 i.e the date from the main proviso 40(a)(ia) itself was inserted<\/p>\n