The Commissioner Of Income Tax,Central Circle, Chennai v. M/S.archean Granites Private Ltd.,Chennai-28

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 13.7.2020 CORAMTHE HONOURABLE MR. JUSTICE T.S.SIVAGNANAMAND THE HONOURABLE MRS. JUSTICE V.BHAVANI SUBBAROYANTAX CASE APPEAL NO.478 OF 2014 (heard through video conferencing) The Commissioner of Income Tax,Central Circle, Chennai ...Appellant/Appellant Vs M/s.Archean Granites Private Ltd.,Chennai-28. ...Respondent /Respondent APPEAL under Section 260A of the Income Tax Act, 1961against the order dated 19.6.2013 made in ITA.No.2286/Mds/2012on the file of the Income Tax Appellate Tribunal, Chennai ‘A’Bench for the assessment year 2005-06, against the order of theCommissioner of Income Tax(Appeals)-I No.46, Mahatma GandhiRoad, Nungambakkam, Chennai-34 dated 04/09/2012 and made in ITA89/11-12 (612/07-08/A-III) against the order of the AssistantCommissioner of Income Tax Company Circle I(1), Chennai dated24/12/2007 and made in PAN/GIR.No.AAACA 7344J/AX4-624, For Appellant :Mr.T.R.Senthilkumar, SSC & Ms.K.G.Usharani, SC For Respondent : Mr.G.Baskar 1/5 https://hcservices.ecourts.gov.in/hcservices/ Judgment was delivered by T.S.SIVAGNANAM,J We have heard Mr.T.R.Senthilkumar, learned SeniorStanding Counsel and Ms.K.G.Usharani, learned Standing Counselappearing for the appellant - Revenue and Mr.G.Baskar, learnedcounsel appearing for the respondent – assessee. 2. This appeal by the Revenue is directed against the orderdated 19.6.2013 made in ITA.No.2286/Mds/2012 on the file of theIncome Tax Appellate Tribunal, Chennai ‘A’ Bench for theassessment year 2005-06. 3. The appeal has been admitted on 01.9.2014 on thefollowing substantial questions of law : “i. Whether, on the facts andcircumstances of the case, the Income TaxAppellate Tribunal was right in holding thatamendment made to Section 40(a)(ia) byFinanceAct,2010wouldapplyretrospectively though the amendment is madewith effect from 01.4.2010 ? and ii. Whether, on the facts and in thecircumstances of the case, the Income TaxAppellate Tribunal was right in holding thatif taxes withheld have not been remittedbefore the end of the financial year, thenthe corresponding expenditure is allowableas a deduction ?”4. The learned counsel on either side do not dispute thefact that the substantial questions of law framed forconsideration in this appeal were answered against the Revenuein the decision of the Hon’ble Supreme Court in the case of CITVs. Calcutta Export Company [reported in (2018) 404 ITR 654]. 5. While answering the substantial questions of law in thesaid decision, the Hon’ble Supreme Court held as follows : “27) A proviso which is inserted toremedy unintended consequences and to makethe provision workable, a proviso whichsupplies an obvious omission in the Section,is required to be read into the Section togive the Section a reasonable interpretationand requires to be treated as retrospectivein operation so that a reasonableinterpretation can be given to the Sectionas a whole. 2/5 3/5 5. While answering the substantial questions of law in thesaid decision, the Hon’ble Supreme Court held as follows : “27) A proviso which is inserted toremedy unintended consequences and to makethe provision workable, a proviso whichsupplies an obvious omission in the Section,is required to be read into the Section togive the Section a reasonable interpretationand requires to be treated as retrospectivein operation so that a reasonableinterpretation can be given to the Sectionas a whole. 2/5 3/5 28) The purpose of the amendment madeby the Finance Act, 2010 is to solve theanomalies that the insertion of section 40(a)(ia) was causing to the bona fide taxpayer. The amendment, even if not givenoperationretrospectively,maynotmaterially be of consequence to the Revenuewhen the tax rates are stable and uniform orin cases of big assessees having substantialturnover and equally huge expenses andnecessary cushion to absorb the effect.However, marginal and medium taxpayers, whowork at low gross product rate and whenexpenditure which becomes subject matter ofanorderunder Section40(a)(ia) issubstantial, can suffer severe adverseconsequences if the amendment made in 2010is not given retrospective operation i.e.,from the date of substitution of theprovision. Transferring or shifting expensesto a subsequent year, in such cases, willnot wipe off the adverse effect and thefinancial stress. Such could not be theintention of the legislature. Hence, theamendment made by the Finance Act, 2010being curative in nature required to begiven retrospective operation i.e., from thedate of insertion of the said provision.29) Further, in Allied Motors (P)Limited (supra), this Court while dealingwith a similar question with regard to theretrospective effect of the amendment madein section 43-B of the Income Tax Act,1961has held that the new proviso to Section43B should be given retrospective effectfrom the inception on the ground that theproviso was added to remedy unintendedconsequences and supply an obvious omission.Theprovisoensuredreasonableinterpretation and retrospective effectwould serve the object behind the enactment.The aforesaid view has consistently beenfollowed by this Court in the followingcases, viz., Whirlpool of India Ltd., vs.CIT, New Delhi (2000) 245 ITR 3, CIT vs.Amrit Banaspati (2002) 255 ITR 117 and CITvs. Alom Enterprises Ltd. (2009) 319 ITR 306. 30) Hence, in light of the forgoingdiscussion and the binding effect of thejudgment given in Allied Moters (supra), weare of the view that the amended provisionof Sec 40(a)(ia) of the IT Act should beinterpreted liberally and equitable andapplies retrospectively from the datewhen Section 40(a)(ia) was inserted i.e.,with effect from the Assessment Year 2005-2006 so that an assessee should not sufferunintended and deleterious consequencesbeyond what the object and purpose of theprovision mandates. As the developments withregard to the Section recorded above showsthat the amendment was curative in nature,it should be given retrospective operationas if the amended provision existed even atthe time of its insertion. Since theassessee has filed its returns on 01.08.2005i.e., in accordance with the due date underthe provisions of Section 139 IT Act, hence,is allowed to claim the benefit of theamendment made by Finance Act, 2010 to theprovisions of Section 40(a)(ia) of the ITAct. 31) In light of the forgoingdiscussion, we are of the view that judgmentof the High Court does not call for anyinterference and, hence, the appeals areaccordingly dismissed. In view of the above,all the connecting appeals, interlocutoryapplications, if any, transferred cases aswell as diary numbers are disposed offaccordingly.” 4/5 https://hcservices.ecourts.gov.in/hcservices/ 31) In light of the forgoingdiscussion, we are of the view that judgmentof the High Court does not call for anyinterference and, hence, the appeals areaccordingly dismissed. In view of the above,all the connecting appeals, interlocutoryapplications, if any, transferred cases aswell as diary numbers are disposed offaccordingly.” 4/5 https://hcservices.ecourts.gov.in/hcservices/ 6. Thus, following the said decision, this appeal by theRevenue stands dismissed and the substantial questions of lawframed for consideration are answered against the Revenue. Nocosts. Sd/- Asst.Registrar /true copy/ Sub Asst. Registrar rs To 1.The Income Tax Appellate Tribunal, Chennai ‘A’ Bench. 2.The Commissioner of Income Tax (Appeals)I, Chennai. 3.The Deputy Commissioner of Income Tax Company Circle I(1)Chennai.4.The Assistant Commissioner of Income TaxCompany Circle I(I)Chennai +1 cc to Mr.G.Baskar Advocate sr24661 TCA.No.478 of 2014 aa11/09/2020 5/5 https://hcservices.ecourts.gov.in/hcservices/