Girdhari Lal Bargoti, Jaipur vs Department Of Income Tax

Jh vkj-ih-rksykuh] U;kf;d lnL; ,oa Jh Vh-vkj-ehuk] ys[kk lnL; ds le{k BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM

vk;dj vihy la-@ITA No. 757/JP/2012 fu/kZkj.k o"kZ@Assessment Year : 2009-10

Assistant Commissioner of cuke Girdhari Lal Bargoti, Income Tax, Circle-4, Jaipur. Vs. Jaipur.

LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ACGPB 5276 K vihykFkhZ@Appellant izR;FkhZ@Respondent

jktLo dh vksj ls@ Revenue by : Shri Purushottam Kashyap (Addl. CIT) fu/kZkfjrh dh vksj ls@ Assessee by : Shri P.C. Parwal (C.A.)

lquokbZ dh rkjh[k@ Date of Hearing : 12/02/2015 ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 10/04/2015

vkns'k@ ORDER

PER: T.R. MEENA, A.M.

This is an appeal filed by the revenue against the order dated

05/06/2012 passed by the learned CIT(A)-II, Jaipur for A.Y. 2009-10.

The effective grounds of appeal are as under:-

"On the facts and in the circumstances of the case and in law the Ld. CIT(Appeals) has erred in:-

(i) Deleting the addition of Rs. 51,66,768/- made by the A.O. U/s 69 on the ground that assessee had no

2 ITA 757/JP/2012_ ACIT Vs. Girdhari lal Bargoti

stock when sale was made on 17.04.2008 without appreciating the facts and circumstances of the case.

(ii) Deleting addition of Rs. 9,21,058/- made by the A.O. u/s 40(a)(ia) on account of non deduction of tax at source on interest paid to non banking financial companies.

(iii) Deleting addition of Rs. 15,07,235/- made by the A.O. on account of unexplained investment by holding that assessee sold more quantity than the purchases quantity."

2. Grounds No. (i) and (iii) of the revenue's appeal are against

deleting the addition of Rs. 51,66,768/- made by the Assessing Officer

U/s 69 of the Income Tax Act, 1961 (hereinafter referred as the Act)

and Rs. 15,07,235/- made by him on account of unexplained investment

by the Ld. CIT(A). The ld. Assessing Officer observed that the assessee

is a contractor of Rajasthan State Electricity Board (in short the RSEB).

The assessee is an individual and proprietor of Hind Construction. The

assessee filed its original return of income declaring total income of Rs.

30,64,625/- on 29.09.2009. His case was scrutinized U/s 143(3) of the

Act. M/s Hind Construction is a registered contractor of RSEB and

engaged in the work of installation of underground cable for Jaipur

VVNL, Ajmer VVNL and Jodhpur VVNL. The Assessing Officer observed

that on verification of the trading and P&L account, there was no

opening stock but on examination of sale book of the assessee, it was 3 ITA 757/JP/2012_ ACIT Vs. Girdhari lal Bargoti

seen that a sale of Rs. 51,66,768/- of 101.813 KM of cable was made

on 17/04/2008, while assessee had no stock of its own. Further the

purchases made by the assessee were only on 18/04/2008 of 50.404

KM and on 19/04/2008 of 50.265 KM from M/s Galaxy Concab (I) Pvt.

Ltd. The Assessing Officer gave reasonable opportunity of being heard

on this issue, which was replied by the assessee. After considering the

assessee's reply, the ld Assessing Officer held that the work order was

allotted to the assessee by RSEB that means sale of the material

supplied to the DISCOMs has begun in other words sale of the assessee

has taken place for the material to be supplied by him. Therefore, the

plea of the assessee is not tenable to him. He further observed that

when there was no material available with the assessee wherefrom he

supplied the goods on 17/04/2008 for Rs. 51,66,768/- of 101.813 KM of

cable. Thus, he treated the purchase in transaction dated 17/04/2008

at Rs. 51,66,768/- through undisclosed source and made the addition of

the same. Further he also verified the total sales during the year was

610.715 KMs, however, the purchases were shown of 562.810 KMs

cable. There were difference in sale and purchase by 47.905 KMs. The

Assessing Officer gave further reasonable opportunity of being heard on

this issue, which was availed by the assessee but it has been held that 4 ITA 757/JP/2012_ ACIT Vs. Girdhari lal Bargoti

no documentary evidence of explanation submitted by the assessee was

filed. He calculated the average rate of purchase of cable per KM @ Rs.

31,463.03/- and accordingly, total value of difference in cable at Rs.

15,07,235/- was treated as income from undisclosed source. However,

no separate addition was made as already on account of opening

account, the ld Assessing Officer made the addition of Rs. 51,66,268/-.

3. Being aggrieved by the order of the Assessing Officer, the

assessee carried the matter before the learned CIT(A), who had allowed

the appeal by observing as under:-

"3.1 I have considered the submissions of the appellant. The appellant has been following standard procedure for supply of material to the various Electrical Companies and he was engaged in the work of installation of underground cables for Jaipur Vidyut Vitran Nigam Limited, Ajmer Vidyut Vitran Nigam Limited & Jodhpur Vidyut Vitran Nigam Limited. It was quite evident that the appellant did not keep any stock of material on his own and material was directly supplied by the supplier namely M/s Galaxy Concab India Pvt. Ltd. at the site and the bills were raised by the appellant. The procedure adopted by the assessee was that after contract was awarded to him, he directed the contractor to arrange the goods as he was not a manufacturer. The electrical companies such as Jaipur Vidyut Vitran Nigam Limited then 5 ITA 757/JP/2012_ ACIT Vs. Girdhari lal Bargoti

inspected the goods at the factory site of the supplier. After inspection, the goods were sent for testing at the laboratory of the electrical companies. After the sample was approved and communicated to the assessee, he raised the bill. However, goods were directly supplied by the contractor/supplier at the site of electrical companies. The assessee raised a challan for the actual quantity of goods supplied by his supplier directly to the electrical companies. On this challan, endorsement was made by the stores in charge of the electrical companies certifying the receipt of material. Under these circumstances, the appellant never kept any stock of goods at his premises and goods were directly supplied by the supplier at the site of electrical companies. The dispute in the present case was whether the assessee had undisclosed stock from which it supplied the goods on 17.04.2008 and thereafter the same was replenished by the purchases made on 18.04.2008 and 19.04.2008 or the goods were directly supplied by the supplier of the assessee. From the various documents submitted by the appellant and the procedure of supply of goods being followed, it is noticed that on 17.04.2008, only sale bill was raised and the actual goods were supplied on 18.04.2008 and 19.04.2008 by making purchases from M/s Galaxy Concab India Private Limited. The material was tested in the laboratory of Jaipur Vidyut Vitran Nigam Limited 17.04.2008. Since the material was 6 ITA 757/JP/2012_ ACIT Vs. Girdhari lal Bargoti

approved, the appellant raised the bill dated 17.04.2008 on the electrical company for cable quantity of 101.813 km. The supplier namely Galaxy Concab India Pvt. Ltd. supplied the material on 18.04.2008 and 19.04.2008. The challan of goods supplied to JVVNL furnished by the appellant clearly mentioned that the buyer of these goods was M/s Hind Construction i.e. assessee and the consignee was JVVNL. Further, the assessee had filed challan for supplying these goods wherein on the back side of it, complete details of the goods received by JVVNL duly certified by the JVVNL engineer and other official were mentioned. It also proved that on 17.04.2008, only the bill was raised. The actual goods were supplied on 18.04.2008 and 19.04.2008 after making purchases from M/s Galaxy Concab India Private Limited. The A.O. had also not disputed the challan and bills of the suppliers. Considering all these facts, I find that the A.O. had not brought any evidence on record to support his allegation that the goods had been actually supplied on 17.04.2008. On the contrary, the assessee has proved that the goods had actually been supplied on 18.04.2008 and 19.04.2008 against the sale bill raised on 17.04.2008. Therefore, the allegation of the A.O. that the goods were supplied out of undisclosed stocdk remains unsubstantiated. Under these circumstances, the addition made by the A.O. has no legs to stand and cannot be sustained. I, therefore, direct the A.O. to delete the 7 ITA 757/JP/2012_ ACIT Vs. Girdhari lal Bargoti

addition of Rs. 51,66,768/-. These grounds of appeal are allowed."

The Ld. CIT(A) for addition of Rs. 15,07,235/- has decided as under:-

"4.1 I have considered the submissions of the appellant. The A.O. noticed that the assessee had sold 610.715 KM of cables to Jaipur Vidyut Vitran Nigam Ltd. but in the books of account, the purchases of cables were declared at 562.810 Kms. The assessee however explained that there was lesser supply of the material than the invoiced quantity for which deduction was made by JVVNL. It happened many a times that when cable lines were being dismantled and the old cable was found to be in order and reusable, then the old cables were again reused alongwith the new cables. However, the assessee has raised the bill on the basis of actual quantity of goods being supplied by the supplier. After inspection, if the officials of JVVNL found out that old cable lines were again reinstalled then they made the necessary deductions from the bills. The A.O. had worked out the amount of undisclosed investment by holding that the assessee had failed to prove that the deductions made by JVVNL were in respect of the short supply of the material of 47.905 km. On the other hand, the counsel of the appellant has argued that the variation was on account of lesser supply of the material and partly the use of the old/dismantled cables for which the JVVNL had made the deductions under the head "RMD 8 ITA 757/JP/2012_ ACIT Vs. Girdhari lal Bargoti

deductions". In support of this, the payment advice issued by JVVNL showing the RMD deduction were filed by the assessee. The details of deductions by JVVNL were provided to the A.O. vide letters dated 05.09.2011 and 28.11.2011. On going through the details of deductions made by JVVNL, it is seen that the total deductions made were of Rs. 18,05,766/- whereas the addition made by the A.O. in respect of cost of the material lesser supplied was of Rs. 15,07,235/-. Even otherwise, there was no dispute as to the fact that the assessee had already included the entire sale proceeds of the lesser material supplied by him in the sale proceeds. Thus when entire sale proceeds were declared in sales, there was no reason to make further addition for investment which was otherwise also verifiable from the deductions made by JVVNL in respect of the sale bills raised. Under these circumstances, the addition made by the A.O. has no legs to stand and cannot be sustained. I, therefore, direct the A.O. to delete the addition of Rs. 15,07,235/-. This ground of appeal is allowed."

4. Now the Revenue is in appeal before us. The learned D.R.

vehemently supported the order of the Assessing Officer.

5. At the outset, the learned A.R. for the assessee reiterated the

arguments made before the ld CIT(A) and submitted as under:-

9 ITA 757/JP/2012_ ACIT Vs. Girdhari lal Bargoti

1. To understand the issue raised by the AO, it is necessary to know the process by which goods are supplied to the electricity companies. The same is as under:-

(a) The successful bidder in the tender is awarded the contract to supply the material. For this the supply agreement is entered into. In pursuance to the said agreement the assessee is to supply the goods.

(b) If the items are not manufactured by the successful bidder it is specified that the same is to be arranged by the contractor. Since the assessee is not a manufactures of the cable the same was procured/arranged by the assessee from Galaxy Concab India Private Limited.

(c) The goods so arranged is inspected at the factory site of the assessee's supplier. After inspection, a sample of the material is taken for testing and material is sent for testing at the laboratory of the electricity companies.

(d) After the sample is passed by the testing laboratory of the electricity companies and communicated to the assessee, the bill is raised by the assessee of the quantity communicated by the supplier of the assessee.

(e) Against the said bill the supplier of the assessee supplies the material directly at the site of the 10 ITA 757/JP/2012_ ACIT Vs. Girdhari lal Bargoti

electricity companies. After the entire quantity as per the bill is supplied, the assessee raises a Challan of the actual quantity of goods supplied by its supplier directly to the site of the electricity companies.

(f) On this Challan endorsement is made by the store incharge of the electricity companies certifying the receipt of the material with the necessary details of the truck no. and the bill number through which the supplier of the assessee supplied the material.

(g) Thereafter bill is passed for making necessary payment.

2. In the present case, the assessee procured the material to be supplied to the electricity company from Galaxy Concab India Private Limited. This material was inspected on 11-04- 2008, a sample was taken and it was tested in the laboratory on 17-04-2008. Once the material was passed, the same was communicated to the assessee and accordingly assessee raised the bill dated 17-04-2008 on the electricity company for the cable quantity of 101.813 KM informed by his supplier.

3. Thereafter the supplier dispatched the material directly to the site of the electricity company through four delivery challan no. 17 & 18 dated 18-04-2008 and 19 & 20 dated 19-04-2008. The delivery challan contain the details of the truck no. and the actual quantity supplied. The supplied 11 ITA 757/JP/2012_ ACIT Vs. Girdhari lal Bargoti

quantity is 100.669 km as against the invoiced quantity of 101.813 km. After the entire quantity was supplied assessee issued a delivery Challan no.18 dated 30-04-2008. On the back of this Challan the store keeper has certified the receipt of the material indicating the complete detail of the material which was supplied by the supplier on account of the assessee.

4. From these details it is evident that assessee has no undisclosed stock on 17-04-2008. The assessee has raised the bill on 17-04-2008 in respect of the same material which was supplied directly by its supplier Galaxy Concab India Private Limited at the site of the Electricity Company. Therefore question of having supplied the material out of the alleged undisclosed stock do not arise.

In view of the above, the order of the CIT(A) be upheld by dismissing the ground of the department.

The Ld. A.R. further submitted as under:-

1. The issue which arise for consideration in this ground is whether the difference in the quantity mentioned in the bills raised by the assessee and the quantity procured by the assessee is undisclosed investment of the assessee or such variation is on account of lesser supply of the quantity than the invoiced quantity or use of old material of cable lines dismantled for which RMD deduction was made by the JVVNL.

12 ITA 757/JP/2012_ ACIT Vs. Girdhari lal Bargoti

2. The process of raising of the bills by the assessee is that initially after inspection and testing of material, the bill is raised by the assessee on the basis of the quantity of goods informed by the supplier of the assessee. Thereafter the supplier of the assessee supplies the goods and it is actually measured at the site of the electricity companies.

Accordingly the supplier raises the bill on the assessee of the actual quantity of the goods supplied whereas assessee has invoiced the goods to the electricity companies on the basis of the quantity informed by the supplier. It is for this reason that the electricity companies made deduction from the invoice raised by the assessee on account of RMD Penalty/duty. Further in some cases the old cable dismantled is also used by the assessee for which also electricity company made deduction under the head RMD penalty. The details of the deductions made by the Jaipur VVNL are as under:-

Bill Details Payment advice from JVVNL

Bill No. & Total Bill Security VAT Total TDS & RMD Others (Date) Amount Deduction Receivabl WCT PENALTY WCT of 35% as per e the agreement /DUTY Previous Year

1 (17.4.2008) 5166268 1808194 206651 3564725 402827 363668

3 (4.5.2008) 2567937 898778 102717 1771877 1048251 180764

7 (17.5.2008) 2545305 890857 101812 1756260 92485 179172

9 (30.7.2008) 2561188 896416 102448 1767220 93062 180330

11 (4.8.2008) 2594576 908102 103784 1790258 94275 182640 13 ITA 757/JP/2012_ ACIT Vs. Girdhari lal Bargoti

10 (4.8.2008) 1270381 444633 50815 876563 46160 89426

15/16 5084167 1779458 203367 3508075 184736 357889 (17.11.2008)

19 2536679 887838 101467 1750309 92171 271877 129754 (21.1.2009)

Total 1805766

Copy of all the above bills is at. From the above table it can be noted that the JVVNL has made the deductions for lesser supply of the material/use of dismantled cables vis a vis the invoiced quantity in the name of RMD penalty. The deductions made are almost equal to the value of the addition of short purchases made by AO. Therefore, it is incorrect on the part of the AO to allege that assessee has supplied more quantity than what has been purchased/ procured by it. In view of the above, the order of the CIT(A) be upheld by dismissing the ground of the department.

6. We have heard the rival contentions of both the parties and

perused the material on record. The Ld. AR for the assessee has

explained the process of supply the goods through contract to VVNL.

The assessee first awarded the contract by the VVNL. Thereafter he

supplied the goods which is tested in the laboratory by the engineers,

thereafter approved by it. In the present case, the assessee procured

the material to be supplied to the electricity company from M/s Galaxy 14 ITA 757/JP/2012_ ACIT Vs. Girdhari lal Bargoti

Concab (I) Pvt. Ltd.. The material was inspected on 11/4/2008, which

was tested in the laboratory on 17/4/2008. Once the material was

passed by the competent authority, the assessee was communicated,

accordingly he raised the bill on electricity company for supply of cable.

The supplier directly sent the cable to the electricity company through

challans with all bills at vehicle, actual quantity. After the entire quantity

was supplied, thereafter, issued a delivery challan, which was certified

by the stock keeper of the electricity company. The Ld. DR has not

controverted the finding given by the ld CIT(A), therefore, we uphold

the order of the ld. CIT(A).

7. The ground No. (ii) of the revenue's appeal is against deleting the

addition of Rs. 9,21,058/- made by the Assessing Officer U/s 40(a)(ia)

of the Act. The ld Assessing Officer observed that the assessee had

made payment of interest of Rs. 9,21,058.12 to Non-banking Finance

Company (In short NBFC) without deducting TDS. The Ld. Assessing

Officer gave reasonable opportunity of being on this issue. It is

submitted before the Assessing Officer that the payment to these NBFC

were in the nature of payment to bank and these were having no

deduction certificate. However, no such certificate has been submitted

by the assessee as per Section 194A TDS is liable to be deduction on 15 ITA 757/JP/2012_ ACIT Vs. Girdhari lal Bargoti

payment of interest except the cases where the payments have been

made to the bank or financial institutions. These payments are neither

falling in the category of bank or financial institution through provisions

of Section 40(a)(ia) of the Act is squarely applicable as no TDS has

been deducted on it. Therefore, the ld Assessing Officer made addition

of Rs. 9,21,058/- U/s 40(a)(ia) of the Act.

8. Being aggrieved by the order of the Assessing Officer, the

assessee carried the matter before the Ld. CIT(A), who had allowed the

appeal by observing that Section 40(a)(ia) of the Act is fiction of law,

which required to be construed strictly. The language of Section

40(a)(ia) of the Act provides for non deductibility of certain amounts

which is payable on which tax is deductible and such tax has not been

deducted. Therefore, the non deductibility would arise only when tax is

not deducted on an amount which is payable. If an amount has been

actually paid without deduction of tax at source, section 40(a)(ia) would

not apply on such payment. In Chapter XVII B, the liability of deduction

of tax at source arises both at the time of payment or at the time of

credit whichever is earlier U/s 40(a)(ia), the expenses are not allowable

only when tax is not deducted on the payment outstanding at the year

end. This view finds support from the recent decision of ITAT 16 ITA 757/JP/2012_ ACIT Vs. Girdhari lal Bargoti

Vishakhapatnam Special bench in case of M/s Merilyn Shipping &

Transport Vs. ACIT (136 ITD 23). In Section 40(a)(ia) word "payable"

used is to be assigned strict interpretation in view of the object of the

Legislation, which was intended from the replacement of words in the

proposed and enacted provision from the work "amount credited or

paid" to "payable, This view is also supported by the decision of

jurisdictional ITAT, Jaipur Bench in the case of JVVNL Vs DCIT ITA No.

132/JP?2009 dated 30/04/2009 and ACIT Vs. Sethi Construction

Company ITA No. 697/JP/2009. In the present case also, no amounts

remained payable to these NBFCs at the end of the year as every

month installment was paid in advance which included payment of

interest. Therefore, Section 40(a)(ia) was not applicable in view of the

decision of Special Bench as well as ITAT Jaipur Bench reported supra.

Therefore, he deleted the addition made by the Assessing Officer.

9. Now the revenue is in appeal before us. The ld DR supported the

order of the Assessing Officer.

10. At the outset, the ld AR for the assessee has submitted as

under:-

17 ITA 757/JP/2012_ ACIT Vs. Girdhari lal Bargoti

1. The legislative intent for introducing section 40(a)(ia) is explained in CBDT Circular No.5/2005 dt. 15.07.2005 reported at 269 ITR 101 (statute). In the present case there is no dispute as to the fact that interest has actually been paid to above finance companies and as on 31.03.2009 no amount of interest was payable. The Special Bench of ITAT in case of Merilyn Shipping & Transport Vs. ACIT 16 ITR (Trib) 1 (PB 62-63) has held that section 40(a)(ia) cannot be invoked in respect of amounts actually paid within the previous years without deduction of tax at source. After this decision the Gujarat High Court in case of CIT Vs. Sikandar Khan N. Tunvar 357 ITR 312 and Calcutta High Court in case of CIT Vs. Crescent Export Syndicate 94 DTR 81 held that section 40(a)(ia) would cover not only to the amounts which are payable as on 31st March of the particular year but also which are payable at any time during the year. However, the Allahabad High Court in case of CIT Vs. Vector Shipping Services (P) Ltd. 94 DTR 101/357 ITR 642 held that it is only the amount which is payable and not that which has been already paid by the end of the year that can be disallowed u/s 40(a)(ia). Against the said decision of Allahabad High Court, the department filed a Special Leave Petition (SLP) in the Supreme Court which was dismissed by the Supreme Court vide its order dt.02.07.2014. Thus, there are two views on this issue, 18 ITA 757/JP/2012_ ACIT Vs. Girdhari lal Bargoti

one in favour of the assessee and other against the assessee. Considering these views, the various benches of Hon'ble ITAT, after considering the various amendment made to section 40(a)(ia) from time to time to remove the undue hardship and considering the decision of Supreme Court in case of CIT Vs. Vegetable Products Ltd. 88 ITR 192 where it is held that when two views are possible on an issue, the view in favour of the assessee has to be preferred deleted the disallowance. He also relied on the following case laws:

(i) DCIT Vs. Ananda Marakala (2014) 150 ITD 323 (Bang.) (Trib.)

(ii) ITO Vs. M/s Theekathir Press (Chennai)(Trib.) ITA No. 2076(Mds)2012 dt. 18.09.2013 The issue of applicability of TDS on amount payable as on 31st march only is also covered by the decision of the Hon'ble ITAT Jaipur Bench in case of JVVNL V. DCIT 123 TTJ 888 wherein it was held that section 40(a)(ia) applies only when the amount is payable and not where the expenditure is paid. Therefore where the assessee has made actual payment, the provisions of section 40(a)(ia) is not applicable.

2. It may also be pointed out that second proviso to section 40(a)(ia) inserted by FA, 2012 w.e.f. 01.04.2013 has provided that where an assessee fails to deduct tax on the sum paid to the resident but such resident payee has 19 ITA 757/JP/2012_ ACIT Vs. Girdhari lal Bargoti

furnished the return, taken into account such sum for computing income and has paid the tax due on the income declared by him then it will be deemed that assessee has deducted and paid the tax on such sum on the date of furnishing of return by the resident payee. All the finance companies to which assessee have paid interest are large companies and assessed to tax. Therefore, the presumption is that these companies have included the interest paid by the assessee to them in their income and paid tax thereon. The Delhi High Court in case of CIT Vs. Trans Bharat Aviation Pvt. Ltd. 320 ITR 671 has held that since deductee is a Government undertaking, the taxes may be presumed to have been paid lastly by the due date of filing of the return of income and, therefore, the liability of the assessee to pay interest on the amount which was to be deducted as TDS ends with the due date of filing of the return by the deductee. Therefore, considering the above amendment which is introduced to remove unintended hardship, the department may be directed to verify this fact and where finance companies has paid tax on such interest, no disallowance u/s 40(a)(ia) be made in the hands of the assessee. It is a settled law that second proviso to section 40(a)(ia) inserted w.e.f. 01.04.2013 has retrospective effect as held in Bangalore Bench in case of Sh. G. Shankar Vs. ACIT in ITA No.1832/Bang/2013 dt. 10.10.2014, Agra Bench in case of Rajeev Kumar Agarwal 20 ITA 757/JP/2012_ ACIT Vs. Girdhari lal Bargoti

Vs. ACIT (2014) 34 ITR(Trib.)479, Delhi Bench in case of ITO Vs. Dr. Jaideep Kumar Sharma (2014) 34 ITR(Trib.)565, Bangalore Bench in case of DCIT Vs. Ananda Marakala (2014) 150 ITD 323 as the amendment was made to remove the undue hardship.

3. It may also be pointed out that an amendment has been made by FA, 2014 w.e.f. 01.04.2015 in section 40(a)(ia) whereby it is provided that 30% of any sum payable to a resident shall be disallowed if tax is not deducted at source under Ch. XVIIB as against the 100% presently made. The purpose of this amendment was explained in the memorandum as under:-

"the disallowance of whole of the amount of expenditure results into undue hardship and therefore In order to reduce the hardship, it is proposed that in case of non-deduction or non-payment of TDS on payments made to residents as specified in section 40(a)(ia) of the Act, the disallowance shall be restricted to 30% of the amount of expenditure claimed."

The Finance Minister while introducing the amendment in para 207 of the Budget Speech has stated as under:-

"207. Currently, where an assessee fails to deduct and pay tax on specified payments to residents, 100 percent of such payments are not allowed as deduction while computing his income. This has caused undue hardship to taxpayers, particularly where the rate of tax is only 1 to 10%. Hence, I propose to provide that instead of 100 percent, only 30% of such payments will be disallowed."

From the above it can be noted that the amendment made by FA (No.2) Act, 2014 w.e.f. 01.04.2015 is to remove unintended and undue hardship and therefore this amendment should be give retrospective effect as per the 21 ITA 757/JP/2012_ ACIT Vs. Girdhari lal Bargoti

various decisions stated above. It is also submitted that the Supreme Court in case of CIT Vs. Vatika Township Pvt. Ltd. 109 DTR 33 has held that legislations which modify accrued rights or which impose obligations or impose new duties or attach a new disability have to be treated as prospective unless the legislative intent is clearly to give the enactment a retrospective effect. However, if legislation confers a benefit on some persons but without inflicting a corresponding detriment on some other person or on the public generally and where to confer such benefit appears to have been the legislators object, then the presumption would be that such legislation, giving it a purposive construction, would warrant it to be given a retrospective effect. Therefore even in a case it is held that the disallowance u/s 40(a)(ia) is warranted, same should be restricted to only 30% of the amount of interest paid. In view of above, the order of the CIT(A) be upheld by dismissing the ground of the department.

11. We have heard the rival contentions of both the parties and

perused the material available on the record. On issue of amount

already paid during the year or amount shown payable as on 31st March

of every year, the various courts have different views i.e. in favour of

the assessee and against the assessee. The Hon'ble Supreme Court in

the case of CIT Vs. Vegetable Products Ltd. (supra) has held that when 22 ITA 757/JP/2012_ ACIT Vs. Girdhari lal Bargoti

there are to views on an issue, the view in favour of the assessee has

to be preferred. Therefore, we confirm the order of the Ld. CIT(A).

Further the recipient are NBFC, therefore, not possible to not be

assessed to tax, these payments were related for A.Y. 2009-10 and

return for A.Y. 2009-10 already might have been filed by these NBFC by

including these interests receipts as their income. Therefore, we do not

find any reason to interfere in the order of the Ld. CIT(A).

12. In the result, the revenue's appeal is dismissed.

Order pronounced in the open court on 10/04/2015.

Sd/- Sd/- ¼vkj-ih-rksykuh½ ¼Vh-vkj-ehuk½ (R.P.Tolani) (T.R. Meena) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated 10th April, 2015 *Ranjan

vkns'k dh izfrfyfi vxzsf'kr@Copy of the Order forwarded to:

1. vihykFkhZ@The Appellant- The ACIT, Circle-4, Jaipur.

2. izR;FkhZ@ The Respondent- Shri Girdhari Lal Bargoti, Jaipur.

3. vk;dj vk;qDr@ CIT

4. vk;dj vk;qDr@ vk;dj vk;qDr¼vihy½@The CIT(A)

5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur

6. xkMZ QkbZy@ Guard File (ITA No. 757/JP/2012).

vkns'kkuqlkj@ By order,

lgk;d iathdkj@Asst. Registrar