The Instant Appeals Have Been Filed Assailing The Orderdated 16.07.2010 Passed By The Leamed Income Tax Appellatetribunal, Hyderabad, Bench 'A' In I.t.a v. Calcultta Export Companyr Lras Decided Theissue, Wt Erein At Paragraphs 19 , 2L , 24, 25 To 28 Har; Held As Under

IN THE HIGH COURT FOR THE STATE OF TELANGANA MONDAY, THE ELEVENTH DAY OF AUGUSTTWO THOUSAND AND TWENTY FIVE PRESENT THE HONOURABLE SRI JUSTICE P.SAM KOSHYANDTHE HONOURABLE SRI JUSTICE SUDDALA CHALAPATHI RAOINCOME TAX TRIBUNAL APPEAL Nos. 198 AND 234 OF 2012 INCOME TAX TRIBUNAL APPEAL NO: 198 OF 2012 lncome Tax Tribunal Appeal Under Section 2604 of the lncome Tax Act,1961aggrieved by the Order dated 16-07-2010 [passed ]in [ITA No. ][67/HYD/09 ][for ][the]Assessment Year 2005-2006 on the file of the lncome [Tax ][Appellate ][Tribunal,]Hyderabad Bench'A', Hyderabad [.] Between: M/s. Aishu Fincorp Limited, 6-2-9131914, I Floor, Progressive Towers,Khairatabad, Hyderabad. ...Appellant AND The Assistant Commissioner of lncome Tax, Circle - 1(1), Hyderabad. ...Respondent INCOME TAX TRIBUNAL APPEAL NO: 234 OF 2012 lncome Tax Tribunal Appeal Under Section 2604 [of ]the [Income ][Tax ][Act,1961]aggrieved by the Order dated 16-07-2010 [passed ]in.lTA [No. ]66/HYD/09 [for ][the]Assessment Year 2005-2006 on the file of the lncome Tax Appellate [Tribunal,]Hyderabad Bench'A', Hyderabad.Between: M/S. Aishu Securities Ltd, 6-2-9131914, 1st floor, [Progressive]towers, Khairatabad, Hyderabad. ...Appellant AND .: '*Yr*ry:"1=l-*ryr. ...Respondent - Counsel for the Appellants in both ITTAs : SRI A V A SIVP, KARTIKEYArepresenting SRI AV KRISHNAKOUNDINYA Counsel for the Respondents in both ITTAs: MS. BOKARC SAPNA REDDY(sENroR sc lNcoME TAx) The Court delivered the following: COMMON JUDGMENT THE HONOURABLE SRI JUSTICE P.SAM KOSI{YANDTHE HONOURABLE SRI JUSTICESUDDALA CHALAPATHI RAO ITTA Nos.I98 & 234 OF 2012 COMMONJUDGMENT(per Hon'ble Sri Justice P.Sam Koshy) Heard Mr.A.V.A.Siva Kartikeya, leamed counselrepresenting Mr. A.V.Krishna Koundinya, leamed counsel for theappeilants and Ms. B.Sapna Reddy, learned Standing Counsel forthe Income Tax Department for the respondent. Perused therecord. 2. The instant appeals have been filed assailing the orderdated 16.07.2010 passed by the leamed Income Tax AppellateTribunal, Hyderabad, Bench 'A' in I.T.A.No.67lHyN\9 arrdI.T.A.No. 66lHyd/09 for the assessment year 2005-06. 3. The substantial question of law framed while admitting theappeals was whether the ITAT was right in upholding thedisallowance made by the Assessing Officer for the amounts ofRs.1,88,85,983/- and Rs.1,13,18,977/- made under Section 40(a)(ia) of the Income Tax Act, 1961. 4. Tc,day, when the matters are taken up lor hearing, theleamed counsel for the appellants submits that the issue involved inthe instant cases have already come up for hearing before theHon'ble Supreme Court arising out of Calculta High Courljudgmeni and the Hon'ble Supreme Court in Commissioncr ofIncome Tax vs. Calcultta Export Companyr lras decided theissue, wt erein at paragraphs 19 , 2l , 24, 25 to 28 har; held as under: "21) The amendment though has addr,>ssed theconcerns of the assesses falling in the first categorybut with regard to the case falling in ttre secondcategory, it was still resulting into rrnintendedconsequences and causing grave anc genuinehardships to the assesses who had substantiallycomplied with the relevant TDS provisions bydeducting the tax at source and by paying tl e same tothe credit of the Government before the due date offiling of their returns under Section 139(1) of the lT Act.The disability to claim deductions on account of suchlately credited sum of TDS in assessmernt of theprevious year in which it was dedur:ted, wasdetrimental to the small traders who may not be in aposition to bear the burden of such disallow€rnce in thepresent Assessment Year". xxxxx xxxxx "21) The amendment though has addr,>ssed theconcerns of the assesses falling in the first categorybut with regard to the case falling in ttre secondcategory, it was still resulting into rrnintendedconsequences and causing grave anc genuinehardships to the assesses who had substantiallycomplied with the relevant TDS provisions bydeducting the tax at source and by paying tl e same tothe credit of the Government before the due date offiling of their returns under Section 139(1) of the lT Act.The disability to claim deductions on account of suchlately credited sum of TDS in assessmernt of theprevious year in which it was dedur:ted, wasdetrimental to the small traders who may not be in aposition to bear the burden of such disallow€rnce in thepresent Assessment Year". xxxxx xxxxx "24) Thus, the Finance Act, 2010 further rrllaxed therigors of Section 40(axia) of the lT Act to provide thatall TDS made during the previous yea' can bedeposited with the Government by the due dztte of filingthe return of income. The idea was to allow additionaltime to the deductors to deposit the TDS so made.However, the Memorandum explaining the provisions 1 [2018] 404 rrR 6s4 (sc) of the Finance Bill, 2010 expressly mentioned asfollows: "This amendment is proposed to take effectrelrospectively from 1"t April, 2O1O and will,accordingly, apply in relation to the Assessment year2010-11 and subsequent years". "25) The controversy surrounding the aboveamendment was whether the amendment beingcurative in nature should be applied retrospectively i.e.,curative in nature should be applied retrospectively i.e.,from the date of insertion of the provisions of Sectiona0(a)(ia) or to be applicabte from the date ofenforcement".enforcement". '26) TDS results in collection of tax and the deductordischarges dual responsibility of collection of tax andits deposit to the Government- Strict compliance withSection 40(a)(ia) may be justified keeping in view thelegislative object and purpose behind the provision buta provision of such nature, the purpose of which is toensure tax compliance and not to punish the tax payer,should not be allowed to be converted into an iron rodprovision which metes out stern punishment andresults in malevolent results, disproportionate to theoffending act and aim of the legislation. Legislature canand do experiment and intervene from time to timewhen they feel and notice that the existing provision iscausing and creating unintended and excessivehardships to citizens and subject or have resulted ingreat inconvenience and uncomfortable results.Obedience to law is mandatory and has to be enforcedbut the magnitude of punishment must not bedisproportionate to what is required and necessary.The consequences and the injury caused, ifdisproportionate do and can result in amendmentswhich have the effect of streamlining and correctinganomalies. As discussed above, the amendmentsmade in 2008 and 2010 were steps in the said directiononly. The legislative purpose and the object of the saidamendments were to ensure payment and deposit ofTDS with the Government". "27) A proMso which is inserted to remedy unintendedconsequences and to make the provision workable, aproviso which supplies an obvious omission in theSection, is required to be read into the Section tggiveproviso which supplies an obvious omission in theSection, is required to be read into the Section tggive the Sectiorr a reasonable interpretation and [-equires ]tobe treated as retrospective in operation so that areasonable interpretation can be given to tlre Sectionas a whole". "27) A proMso which is inserted to remedy unintendedconsequences and to make the provision workable, aproviso which supplies an obvious omission in theSection, is required to be read into the Section tggiveproviso which supplies an obvious omission in theSection, is required to be read into the Section tggive the Sectiorr a reasonable interpretation and [-equires ]tobe treated as retrospective in operation so that areasonable interpretation can be given to tlre Sectionas a whole". "28) The purpose of the amendment ma,je by theFinance Act, 2010 is to solve the anomali€ s thal theinsertion of section 40(a)(ia) was causing k, the bonafide tax payer. The amendment, even if not givenoperation retrospectively, may not materirrlly be ofconsequence to the Revenue when lhe tar rates arestable and uniform or in cases of big assessoes havingsubstantial turnover and equally huge expenses andnecessary cushion to absorb the effect. However,marginal and medium taxpayers, who wc rk at lowgross product rate and when expendihrre whichbecomes subject matter of an order under SectionO(a)(ia) is substantial, can suffer severe adverseconsequences if the amendment made in 2010 is notgiven retrospective operation i.e., from the date ofsubstitution of the provision. Transferring :r shiftingexpenses to a subsequent year, in such casr>s, will notwipe off the adverse effect and the financial stress.Such could not be the intention of the l?gislature.Hence, the amendment made by the Finance Act, 2010being curative in nature is required to be givenretrospective operation i.e., from the date of i rsertion ofthe said provision". and as surh the issue raised stands decided against tlte Revenue and in favour of the appellants and the instant two appoals can also bedisposed of in similar terms. 5. Learned Standing Counsel appearing for the department onverification of facts did accept the fact that the issue involved in theinstant appeals in fact stands covered against the Rt:venue vide theaforesaid judgment of the Hon'ble Supreme Court. 6. In view of the same, the present appeals stand allowed infavour of the assessees and against the Revenue holding that thedisallowance made by the Assessing Officer which stoodconfirmed by the Appellate Tribunal was bad in law and whichstands adjudicated by the Hon'ble Supreme Court in the aforesaidjudgment in the case of Commisstoner of Income Tax vs. CalculttaExport Company (supra) 7 . The appeals, accordingly, stand allowed with consequencesto follow. There shall be no order as to costs Consequently, miscellaneous petitions pending, if any, shallstand closedstand closed Sd/- I. NAGA LAKSHMIJOINT REGISTRAR ,/TRUE COPY// SECTION OFFICER To, 1. The lncome Tax [Appellate Tribunal, Hyderabad Bench ]['A', ][Hyderabad] 2. One CC to SRI [KRISHNA KOUNDINYA' Advocate ] 3 One CC to MS. [BOKARO SAPNA REDDY (SENIOR ] [INCOME TAX)]loPUClloPUCl 4. Two CD Copies ADKiPSL HIGH COURT DATED:1110812025 COMMON JUDGMENTlTTA.Nos.198 & 234 o12012 ALLOWING THE BOTH ITTAsWITHOUT COSTS (.X{- ; [t'5 ][S147.](..,})i)t)18 SEP zffit