Pr. Commissioner Of Income Tax -5 v. Perfect Circle India Pvt Ltd

IN THE HIGH COURT OF JUDICATURE AT BOMBAYO.O.C.J.INCOME TAX APPEAL NO. 707 OF 2016 Pr. Commissioner of Income Tax -5 ..Appellant Versus Perfect Circle India Pvt Ltd ..Respondent ................... •Mr. Suresh Kumar for the Appellant Mr. Sanjiv M. Shah for the Respondent ................... CORAM : AKIL KURESHI & B.P. COLABAWALLA, JJ. DATE : JANUARY 7, 2019. P.C.: 1.This appeal is filed by the Revenue challenging thejudgment of the Income Tax Appellate Tribunal ("Tribunal" forshort) dated 27.3.2015. Following question is presented forour consideration:- "Whether on the facts and in the circumstances of the case and inlaw, the Tribunal was justified in rejecting the disallowance of Rs.1,44,78,000/- made by the AO u/S. 40(a)(ia) of the Act by holdingthat the amendment to the proviso of the said section wasretrospective in nature without appreciating that the Act specificallyprovides that the said proviso comes into operation w.e.f. 1.4.2013and is prospective in nature and cannot be applied retrospectively?" 2.It is not necessary to record background facts since thequestion of law raised by the Revenue is whether the secondproviso to Section 40(a)(ia) of the Income Tax Act, 1961 ("theAct" for short) would have retrospective effect. We maynotice that the said proviso was inserted w.e.f 1.4.2013 andin essence, it provides that where an assessee fails to deductwhole or any part of the tax at source but is not deemed tobe an assessee in default under the first proviso to Section201(1), then for the purpose of clause 40(a)(ia), it shall bedeemed that the assessee has deducted and paid the tax onsuch sum on the date of furnishing of return of income bythe payee. The Revenue would content that the benefit ofthis proviso would be available to the assessee onlyprospectively w.e.f. 1.4.2013. Various Courts, however, haveseen this proviso as beneficial to the assessee and curativein nature. The leading judgment on this point was of theDivision Bench of Delhi Court in the case of CIT Vs. AnsalLand Mark Township P Ltd[1]. The Court held that Section40(a)(ia) is not a penalty and insertion of second proviso isdeclaratory and curative in nature and would haveretrospective effect form 1.4.2005 i.e the date from the main1[2015] 377 ITR 635 (Delhi) proviso 40(a)(ia) itself was inserted. Several High Courtshave adopted the same lines. We may also note that theSupreme Court in the case of Hindustan Coca ColaBeverages P Ltd Vs. CIT[2] even in absence of secondproviso to Section 40(a)(ia) had noticed that the payee hadalready paid the tax. Under such circumstances, the Courtheld that the payer / deductor can at best be asked to paythe interest on delay in depositing tax. 3.Under such circumstances, no question of law arises.Tax appeal is dismissed. [ B.P. COLABAWALLA, J. ] [ AKIL KURESHI, J ] 2[2007] 293 ITR 226 (SC)