Huda Construction, Mumbai vs Assessee

Present for: Assessee by : Shri Dharmesh Shah, A.R. Revenue by : Shri Jeetendra Kumar, D.R.

Date of Hearing : 10.02.2015 Date of Pronouncement : 15.04.2015

ORDER

Per Sanjay Garg, Judicial Member:

The present appeal has been preferred by the assessee against the order dated 27.09.2010 of the Commissioner of Income Tax (Appeals) [(hereinafter referred to as CIT(A)] relevant to assessment year 2005-06.

2. The assessee in this appeal has agitated the confirmation of disallowance of Rs.10,40,220/- under section 40(a)(ia) of the Income Tax Act, 1961. The grounds of appeal taken by the assessee are reproduced as under:

"1. On t h e f a ct s a n d in t h e ci r cu m sta n ce s of t h e ca se th e l e a rne d CIT (A ) h a s e r r ed i n co n f i r mi n g d i sa l l owa n ce o f e xp e n se s u / s 4 0 (a )(i a ) i g n o r i n g t h e f a c t t h a t t h e r e i s R s " N I L " i n c o m e a s assessee has followed project completion method of accounting and hence only c l o s i n g W I P n e e d s t o b e r e d u c e d a n d e x p e n s e s s h a l l n o t b e converted into income on ITA No.816/M/2011 2 M/s. Huda Construction

technical grounds.

2. On t h e f a ct s a n d in t h e ci r cu m sta n ce s of t h e ca se th e l e a rne d CIT ( A ) h a s i g n o r e d t h e f a c t t h a t d u r i n g t h e n e x t F . Y . 2 0 0 5 - 06 there wa s n o s u f f i c i e n t p r o f i t ( R s 2 , 6 4 , 5 9 0 / - o n l y ) s o a s t o a d j u s t e x p e n se s d i s a l l o w e d u / s 4 0 (a )( i a ) o f Rs 1 0 , 4 0 , 2 2 0 /- wh i ch r e su l t s i n t o d e p r i v i n g o f f t h e a s s e s s e e f r o m c l a i m i n g t h e e x p e n s e s a n d forcefully taxing on notional disallowance.

3. On t h e f a ct s a n d i n t h e ci r cu m st a n ce s o f t h e ca se t h e l e a r n e d C IT (A ) h a s e rr ed i n conf ir min g th e A O's a ct ion of not a l lo wi ng the sa id expenses in next F.Y. 2005-06.

4. On t h e f a ct s a n d i n t h e ci r cu m st a n ce s o f t h e ca se t h e l e a r n e d C IT ( A ) h a s i g n o r e d t h e f a c t t h a t t h e a p p e l l a n t f i r m h a s d i s s o l v e d o n 0 1/04 /200 6 and even th ough e xpen se s wo uld h ave been all o wed in n e x t F . Y . 2 0 0 5 - 0 6 t h e r e w i l l b e unabsorbed loss of Rs.7,75,630/- (Rs 2,64,590/- Less Rs 1 0 , 4 0 , 2 2 0 / - ) w h i c h c a n n o t b e c a r r i e d forward and set off as the project is completed & sold out and there is no any other business carried on as the firm is dissolved.

5. On the facts and circumstances of the case the learned CIT (A) has ignored that the objective behind the new provision (S ec 40(a)(ia ) ) is to ensure effective compliance with the provisions of TDS and not t o p e n a l i z e d b y d i s a l l o w i n g e x p e n s e s p e r m a n e n t l y l i k e s t a t u t o r y deduction of PF u/s 43B."

3. At the outset, the Ld. AR of the assessee, before us, has contended that without prejudice to the above grounds of appeal, the TDS was duly deducted by the assessee on the payments made and the same was deposited with the I Govt. before the due date of filing of return and hence the case of the assessee has been duly covered with the decision of the Hon'ble Delhi High Court in the case of "CIT vs. Naresh Kumar" (2013) 262 CTR (Del) 389 and further with that of the Hon'ble Calcutta High Court in the case of "CIT v. Virgin Creations".

On the other hand the ld. D.R. has relied upon the findings of the lower authorities.

ITA No.816/M/2011 3 M/s. Huda Construction

4. We have considered the rival contentions of the Ld. Representatives of the parties. In the case in hand the assessee has claimed that though it had not deposited the TDS before the due date as was prescribed u/s 40(a)(ia) of the Act, however, he had deposited the TDS before the due date of filing of return. He has relies upon a chart and copies of the challans to show that the TDS was duly deposited before the due date of filing of return of income for the assessment year under consideration.

5. Admittedly, the section 40(a)(ia) of the Act has been amended by the Finance Act, (2010) to the effect that the due date for deposit of tax will be the due date as prescribed in sub section (1) of section 139 of the Act i.e. due date for filing of return of income. The Ld. Authorised Representative (AR) of the assessee has invited our attention to the decision of the Hon'ble Delhi High Court in the case of "CIT vs. Naresh Kumar" (2013) 262 CTR (Del) 389 wherein the Hon'ble Delhi High Court has held that the amendment made to section 40(a)(ia) of the Act vide Finance Act, 2010 which states that the due date of deposit of TDS will be the date of filing of return u/s 139(1) is applicable retrospectively. While holding so, the Hon'ble Delhi High Court has relied upon another decision in the case of "CIT vs. Rajinder Kumar" (ITA No. 65/2013) and further on the case of "CIT vs. Jagannath Steel Corporation" observing that where the statute is curative or merely declaratory of previous law, retrospective operation is generally intended. Further the Hon'ble Calcutta High Court in the case of "CIT v. Virgin Creations" (in GA 3200/2011 dated 23/11/2011 copy on record) has held that the amendment to section 40(a)(ia) by the Finance Act, 2010 is to be considered as retrospective in-as-much as it is only toward mitigating a hardship and, thus, is to be considered as curative in nature. In view of the above decisions of the Hon'ble Delhi High Court and that of Calcutta High Court and in the absence of any decision to the contrary of our Hon'ble jurisdictional High Court of Bombay, it ITA No.816/M/2011 4 M/s. Huda Construction

is to be held that the amendment to section 40(a)(ia) of the Act made vide Finance Act, 2010 is applicable retrospectively and if the payments have been deposited before the due date of filing of return, then it cannot be said to be a case of violation of provisions of section 194C of the Act inviting disallowance u/s section 40(a)(ia) of the Act. Since the challans representing the deposit of TDS were not produced before the lower authorities, hence, subject to the verification of the deposit of the TDS by the AO, we direct that the assessee's claim be allowed towards payment to the extent it exhibits payment of corresponding TDS by the due date of furnishing the return for the relevant year.

6. In the result, the appeal of the assessee is allowed for statistical purposes.

Order pronounced in the open court on 15.04.2015.

Sd/- Sd/- (R.C. Sharma) (Sanjay Garg) ACCOUNTANT MEMBER JUDICIAL MEMBER

Mumbai, Dated: 15.04.2015. * Kishore, Sr. P.S.

Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The CIT (A) Concerned, Mumbai The DR Concerned Bench //True Copy// [

By Order

Dy/Asstt. Registrar, ITAT, Mumbai.