$~3.
*IN THE HIGH COURT OF DELHI AT NEW DELHI
+ INCOME TAX APPEAL NO. 65/2013
Date of decision: 1st July, 2013
COMMISSIONER OF INCOME TAX -XIII
..... Appellant
Through Mr. N.P. Sahni, Sr. Standing
Counsel.
versus
RAJINDER KUMAR
..... Respondent
Through Mr. M.P. Devanath & Mr. R.
Ramachandran, Advocates.
CORAM:
HON'BLE MR. JUSTICE SANJIV KHANNA
HON'BLE MR. JUSTICE SANJEEV SACHDEVA
SANJIV KHANNA, J. (ORAL):
Having heard learned counsel for the parties, we frame the
following substantial question of law:
"Whether the Income Tax Appellate Tribunal was
right in deleting addition of Rs.78,51,800/- under
Section 40(a)(ia) of the Income Tax Act, 1961?"
2. With the consent of the counsel for the parties, we have heard
arguments and proceed to dictate our decision on the aforesaid
question.
ITA No. 65/2013 Page 1 of 20
3. The respondent-assessee is an individual and an architect by
profession. It is an accepted position and it is recorded and noted in
the assessment order itself that the assessee is following cash system of
accounting.
4. The assessment year involved is 2007-2008.
5. The Assessing Officer referred to the TDS payable account for
professional payments as on 31st March, 2007 and noticed that an
amount of Rs.8,52,034/- had not been paid by 31st March, 2007. The
assessee was asked to explain why disallowance should not be made
under Section 40(a)(ia) as amended by Finance Act, 2008 with
retrospective effect from 1st April, 2005. The assessee filed written
submissions that they had not claimed any expense on accrual basis
and were following cash system of accounting. However, for better
control and record maintenance, they were maintaining a memorandum
in the books. This memorandum was of no consequence as the
assessee was claiming expenses on cash system and there were no
sundry creditors or liabilities at the end of the year. In the month of
February, 2007, Rs.8,33,064/- was shown in the TDS account on
account of professional charges amounting to Rs.1,48,49,500/-.
Rs.69,92,000/- was paid in the month of February, 2007 and TDS of
Rs.3,92,221/- thereon was deposited on 7th March, 2007. The balance
amount of Rs.78,51,800/- was paid/released in the month of March,
ITA No. 65/2013 Page 2 of 20
2007 and TDS was deducted and was paid on the said amount before
the due date in the month of April, 2007. Deduction, therefore, was
due and made in the month of March, 2007 and the TDS was deposited
in the Government account in April, 2007, i.e., within the stipulated
time.
6. The Assessing Officer after noticing the submission did not deal
with it but observed that there was violation of Section 40(a)(ia) as
TDS should have been paid on or before 31st March, 2007 and as
expenses of Rs.78,51,800/- had been debited to the professional
charges account in February, 2007, i.e., prior to March, 2007.
7. The Commissioner of Income Tax (Appeals) upheld the said
addition under Section 40(a)(ia) observing that Section 194J required
deduction of tax at source either at the time of payment or at the time
of credit of such sum to the account of the payee, whichever is earlier.
It did not make any difference whether the assessee was following cash
system or mercantile system. Reference was made to Explanation (c)
to Section 194J which stipulates that credit to suspense account or
account by any other name in the books of accounts required deduction
of TDS.
8. On further appeal by the respondent-assessee, ITAT by their
order dated 1st August, 2012 has deleted the said addition relying upon
decision dated 23rd November, 2011 of the Calcutta High Court in ITA
ITA No. 65/2013 Page 3 of 20
No. 302/2011 GA No. 3200/2011, Commissioner of Income Tax
versus Virgin Creations. In the said decision, it has been held that the
proviso to Section 40(a)(ia) of the Act amended by Finance Act, 2010
has retrospective effect.
9. Learned counsel for the appellant submits that the decision of
the Calcutta High Court in the case of Virgin Creations (supra) should
not be applied and the ratio laid down in the said decision is debatable.
Amendments were made to the proviso to Section 40(a)(ia) of the Act
by Finance Act, 2010 and these are not retrospective but applicable to
and from assessment year 2010-11 onwards. He has referred to Full
Bench decision of the tribunal in Bharati Shipyard Limited versus
Deputy Commissioner of Income Tax, (2011) 11 ITR Tribunal 599 in
support. Reference is also made to the decision of the Bombay High
Court in Commissioner of Income Tax versus Shyam Narayan and
Brothers, (2012) 349 ITR 145.
10. Respondent assessee, on the other hand, relies upon the decision
of the Calcutta High Court in Virgin Creations (supra) and reference is
also made to the decision of the Supreme Court in Allied Motors (P)
Limited versus Commissioner of Income Tax, (1997) 224 ITR 677
and Commissioner of Income Tax, Bombay and Others versus Podar
Cement Private Limited and Others, (1997) 5 SCC 482.
11. At the outset, we notice and record that the decision of the
ITA No. 65/2013 Page 4 of 20
Bombay High Court in Shyam Narayan and Brothers (supra) does not
lay down or propound any ratio applicable to the question of law raised
in the present case. The said decision does not examine or affirm the
ratio by the Full Bench decision of the tribunal in Bharati Shipyard
Limited (supra). Bombay High Court records that the earlier decision
of the tribunal in the case of Bansal Parivahan (India) Private
Limited versus ITO, (2011) 9 ITR Tribunal 565 stands overruled by
Bharati Shipyard Limited (supra), which is a factual assertion. It did
not examine on merits the ratio and reasoning of the tribunal in
Bharati Shipyard Limited (supra) and/or affirm or disapprove the
same. The order of the tribunal in the case of Shyam Narayan and
Brothers (supra) was set aside for re-examination as the tribunal had
followed the decision in the case of Bansal Parivahan (India) Private
Limited (supra) which stood overruled by the Full Bench. Thus, the
said decision does not deal with the legal question raised before us.
12. The decision of the Calcutta High Court in Virgin Creations
(supra) is a short one and is as under:-
"The Court: We have heard Mr.Nizamuddin and
gone through the impugned judgment and order.
We have also examined the point formulated for
which the present appeal is sought to be admitted.
It is argued by Mr.Nizamuddin that this court
needs to take decision as to whether section
40A(ia) is having retrospective operation or not.
The learned Tribunal on fact found that the
ITA No. 65/2013 Page 5 of 20
assessee had deducted tax at source from the paid
charges between the period April 1, 2005 and
April 28, 2006 and the same were paid by the
assessee in July and August 2006, i.e., well before
the due date of filing of the return of income for
the year under consideration. This factual position
was undisputed. Moreover, the Supreme Court, as
has been recorded by the learned Tribunal, in the
case of Allied Motors Pvt. Ltd. And also in the
case of Alom Extrusions Ltd., has already decided
that the aforesaid provision has retrospective
application. Again, in the case reported in 82 ITR
570, the Supreme Court held that the provision,
which has inserted the remedy to make the
provision workable, requires to be treated with
retrospective operation so that reasonable
deduction can be given to the section as well. In
view of the authoritative pronouncement of the
Supreme Court, this court cannot decide otherwise.
Hence we dismiss the appeal without any order as
to costs."
13. Section 40(a)(ia) of the Act was introduced with effect from 1 st
April, 2005 by Finance (No. 2), 2004 Bill. Explaining the rationale
behind insertion of the said Section, the Memorandum elucidated:-
"With a view to augment compliance of TDS
provisions, it is proposed to extend the provisions
of section 40(a)(i) to payments of interest,
commission or brokerage, fees for professional
services or fees for technical services to residents,
and payments to a resident contractor or sub-
contractor for carrying out any work (including
supply of labour for carrying out any work), on
which tax has not been deducted or after
deduction, has not been paid before the expiry of
the time prescribed under sub-section (1) of
section 200 and in accordance with the other
provisions of Chapter XVII-B. It is also proposed
to provide that where in respect of payment of any
sum, tax has been deducted under Chapter XVII-B
ITA No. 65/2013 Page 6 of 20
or paid in any subsequent year, the sum of
payment shall be allowed in computing the income
of the previous year in which such tax has been
paid.
The proposed amendment will take effect
from the 1st day of April, 2005 and will,
accordingly, apply in relation to the assessment
year 2005-06 and subsequent years. (clause 11)."
(emphasis supplied)
14. Thereafter, by Finance Act, 2008 an amendment was made to
Section 40(a)(ia) with retrospective effect from 1st April, 2005.
Section 40(a)(ia) as amended by Finance Act, 2008 was as under:
"40. Notwithstanding anything to the contrary in
Sections 30 to 38, the following amounts shall not
be deducted in computing the income chargeable
under the head "profit and gains of business or
profession"...
(ia) any interest, commission or brokerage, rent,
royalty, fees for professional services or fees for
technical services payable to a resi-dent, or
amounts payable to a contactor or sub-contractor,
being resident, for carrying out any work
(including supply of labour for carrying out any
work), on which tax is deductible at source under
Chapter XVII-B and such tax has not been paid,-
(A) in a case where the tax was deductible and
was so deducted during the last month of the
previous year, on or before the due date specified
in sub-section (1) of section 139; or
(B) in any other case, on or before the last day of
the previous year;
Provided that where in respect of any such sum,
tax has been deducted in any subsequent year, or
has been deducted-
ITA No. 65/2013 Page 7 of 20
(A) during the last month of the previous year but
paid after the said due date; or
(B) during any other month of the previous year
but paid after the end of the said previous year,
such sum shall be allowed as a deduction in
computing the income of the previous year in
which such tax has been paid."
(emphasis supplied)
15. Section 40(a)(ia) was further amended by Finance Act, 2010
with effect from 1st April, 2010 and the amended provision now reads
as under:
"(ia) any interest, commission or brokerage, rent,
royalty, fees for professional services or fees for
technical services payable to a resi-dent, or
amounts payable to a contractor or sub-contractor,
being resident, for carrying out any work
(including supply of labour for carrying out any
work), on which tax is deductible at source under
Chapter XVII-B and such tax has not been
deducted or; after deduction, has not been paid on
or before the due date specified in sub-section (1)
of Section 139:
Provided that where in respect of any such sum,
tax has been deducted in any subsequent year, or
has been deducted during the previous year but
paid after the due date specified in sub-section (1)
of section 139, such sum shall be allowed as a
deducted in computing the income of the previous
year in which such tax has been paid."
(emphasis supplied)
16. The note on clauses and the memorandum explaining the
amendments to Section 40(a)(ia) reproduced in (2010) 321 ITR
Statutes 79 reads:
ITA No. 65/2013 Page 8 of 20
"Notes on Clauses:
Clause 12 of the Bill seeks to amend section 40 of
the Income-tax Act relating to amounts not
deductible.
Under the existing provisions contained in sub-
clause (ia) of clause (a) of the aforesaid section,
non-deduction of tax or non-payment of tax after
deduction on payment of any sum by way of
interest, commission or brokerage, rent, royalty,
fees for professional services or fees for technical
services payable to a resident or amounts payable
to a contractor or sub-contractor, being resident,
results in the disallowance of the said sum, in the
computation of income of the payer, on which tax
is required to be deducted under Chapter XVII-B.
It is proposed to amend sub-clause (ia) of clause
(a) of the aforesaid section to provide that
disallowance under the said sub-clause will be
attracted, if, after deduction of tax during the
previous year, the same has not been paid on or
before the due date of filing of return of income
specified in sub-section (1) of section 139.
The proviso to the said sub-clause provides that
where in respect of any such sum, tax has been
deducted in any subsequent year, or has been
deducted during the last month of the previous
year but paid after the due date of filing of return
or deducted during any other month of the
previous year but paid after the end of the said
previous year, such sum shall be allowed as a
deduction in computing the income of the previous
year in which such tax has been paid.
This amendment will take effect
st
retrospectively from 1 April, 2010, and will,
accordingly, apply in relation to the assessment
year 2010-11 and subsequent years."
17. We have noticed the facts of the present case. It is an accepted
ITA No. 65/2013 Page 9 of 20
and admitted position that the assessee was following cash system and
not mercantile system of accountancy. Neither the Assessing Officer
nor the CIT (Appeals) have disputed the said factual position. The
assessment order itself specifically records that the assessee was
following cash system. It is not disputed in the assessment order or in
the first appellate order that the assessee had paid a sum of
Rs.78,51,800/- in the month of March, 2007 and had accordingly
deducted TDS of Rs.4,40,843/- and the same was deposited within the
due date from the date of said deduction in the month of April, 2007.
Prior to that, the assessee had deducted TDS of Rs.3,92,221/- on
professional charges of Rs.69,92,700/- in February, 2007. TDS on the
said amount which was deducted in the month of February was
deposited on 7th March, 2007, within the due date.
18. The aforesaid facts show that the assessee had made payment of
Rs.78,51,800/- in the month of March, 2007 only and not in the month
of February, 2007. The assessee has throughout stated and it is not
disputed either in the assessment order or in the order passed by the
first appellate authority that they were for convenience maintaining a
Memorandum relating to pending bills but this Memorandum did not
get reflected and was not shown in the annual accounts as sundry
creditors or liabilities, which were payable. It was not booked as an
expense or liability. The assessment order nowhere records or
ITA No. 65/2013 Page 10 of 20
specifically holds that the account of the payee was credited with
Rs.78,51,800/- or with Rs.1,48,49,500/-. The first appellate order
again does not specifically state so. In such circumstances, we feel a
pragmatic and a practical approach has to be adopted. The respondent
assessee had deducted tax at source when the payment was made in the
month of March, 2007 and thereafter deposited the payment in the
month of April, 2007. It is an accepted position that in case tax was
deductible in the month of March, 2007 the due date of payment was in
April, 2007 and before due date payment, Rs.4,40,843/- deducted as
TDS in the month of March, 2007 was duly paid. It has to be accepted
and it is logical that there would be some time gap between date of
deduction of tax at source and when payment is deposited. Section
40(a)(ia) and the proviso as amended by Finance Act, 2008 with
retrospective effect from 1st April, 2005 notices and acknowledges the
said position and, therefore, clause (A) states that where tax "was"
deductible and was so deducted during the last month of the previous
year but stands paid before the due date specified under sub-section (1)
to Section 139, deduction shall be allowed in the said year.
19. Proviso applies when tax was deducted in a subsequent year;
when TDS has been deducted during any month of the previous year
but paid after the end of the previous year; or TDS was deducted
during the last month of the previous year but paid after the said due
ITA No. 65/2013 Page 11 of 20
date. When proviso applies deduction is to be allowed in the year in
which the payment is made. Clause A of the proviso has to be read
with clause A of the main Section and not in isolation. Clause A of the
main Section and clause A of the proviso will apply in different factual
matrix or situations. Clause A of the main Section applies when the
tax was deductable and was so deducted during the last month of the
assessment year and was paid on or before the due date for filing of the
return under Section 139(1). The proviso applies when tax has been
deducted in any subsequent year or has been deducted as per clause A
thereto during last month of the previous year, but has been paid after
the said due date. The expression "said due date" cannot mean the
date on which TDS as per the Chapter XVIII B should have been paid.
It refers to the due date for filing of the return under Section 139(1) of
the Act. Any other interpretation would lead to difficulties,
incongruities and conflict between clause A of the main Section and
clause A of the proviso. Both would be applicable to the same factual
matrix/situation with contradictory stipulations or consequences.
Under clause A of the main Section, the TDS deductable and so
deducted during the last month should be paid on or before the due
date for filing of the return under Section 139(1) but as per the
Revenue under the proviso clause A, TDS should be deducted during
the last month of the previous year but paid before the "said due date"
ITA No. 65/2013 Page 12 of 20
i.e. the date by which TDS is payable under the Act. This
interpretation if accepted means that clause A of the proviso and clause
A of the main Section would become irreconcilable and mutually
contradictory. Clause A of the proviso does not postulate the obvious
but seeks to relax the rigor when tax deducted stands paid. This is the
reason why the proviso in clause A does not use the expression "tax
was deductable and was so deducted" but uses the expression "tax has
been deducted ...... during the last month of the previous year". The
expression "said due date" in the clause A to the proviso does not mean
and refer to the date on which tax should have been deposited without
interest or penalty under Chapter XVII-B. This is obvious. Clause A
to the proviso applies when the deduction is post the period specified
by law but in the last month of a previous year. In such cases under the
proviso clause A, TDS should be paid before "the said due date" i.e.
the date on which return under Section 139(1) of the Act is to be filed.
20. Therefore, when the respondent assesse deducted TDS in March
2007, i.e. last month of the previous year and paid the same before in
April 2007 before the said due date i.e. the date on which return of
Income U/s 139(1) of the Act is to be filed. Section 40(a)(ia) could not
have been invoked.
21. Reference to Explanation clause (c) which states that credit to
ITA No. 65/2013 Page 13 of 20
suspense account or any other account in book would be deemed to be
credit in account of the payee is inappropriate. The said clause in the
explanation is meant to curtail possibility or chance of non-deduction if
an assesse credits a third account/head, instead of crediting the account
of the payee to await deduction of TDS. It would not be appropriate to
apply clause (c) of Explanation to section 194J to factual matrix of the
current case. The amount was credited to the account of the payee,
payment was made and TDS was deducted in March, 2007 and
paid/deposited in April, 2007.
22. Now, we refer to the amendments which have been made by the
Finance Act, 2010 and the effect thereof. We have already quoted the
decision of the Calcutta High Court in Virgin Creations (supra). The
said decision refers to the earlier decision of the Supreme Court in the
case of Allied Motors (P) Limited (supra) and Commissioner of
Income Tax versus Alom Extrusions Limited, (2009) 319 ITR 306
(SC). In the case of Allied Motors (P) Limited (supra), the Supreme
Court was examining the first proviso to Section 43B and whether it
was retrospective. Section 43B was inserted in the Act with effect
from 1st April 1984 for curbing claims of taxpayers who did not
discharge or pay statutory liabilities but claimed deductions on the
ground that the statutory liability had accrued. Section 43B states that
the statutory liability would be allowed as a deduction or as an expense
ITA No. 65/2013 Page 14 of 20
in the year in which the payment was made and would not be allowed,
even in cases of mercantile system of accountancy, in the year of
accrual. It was noticed that in some cases hardship would be caused to
assessees, who paid the statutory dues within the prescribed period
though the payments so made would not fall within the relevant
previous year. Accordingly, a proviso was added by Finance Act,
1987 applicable with effect from 1st April, 1988. The proviso
stipulated that when statutory dues covered by Section 43B were paid
on or before the due date for furnishing of the return under Section
139(1), the deduction/expense, equal to the amount paid would be
allowed. The Supreme Court noticed the purpose behind the proviso
and the remedial nature of the insertion made. Of course, the Supreme
Court also referred to Explanation 2 which was inserted by Finance
Act, 1989 which was made retrospective and was to take effect from 1st
April, 1984. Highlighting the object behind Section 43B, it was
observed that the proviso makes the provision workable, gives it a
reasonable interpretation. It was elucidated:
"12. In the case of Goodyear India Ltd. V. State
of Haryana this Court said that the rule of
reasonable construction must be applied while
construing a statute. Literal construction should be
avoided if it defeats the manifest object and
purpose of the Act.
13. Therefore, in the well-known words of
Judge Learned Hand, one cannot make a fortress
ITA No. 65/2013 Page 15 of 20
out of the dictionary; and should remember that
statutes have some purpose and object to
accomplish whose sympathetic and imaginative
discovery is the surest guide to their meaning. In
the case of R.B. Judha Mal Kuthiala v. CIT, this
Court said that one should apply the rule of
reasonable interpretation. A proviso which is
inserted to remedy unintended consequences and
to make the provision workable, a proviso which
supplies an obvious omission in the section and is
required to be read into the section to give the
section a reasonable interpretation, requires to be
treated as retrospective in operation so that a
reasonable interpretation can be given to the
section as a whole.
14. This view has been accepted by a number
of High Courts. In the case of CIT v. Chandulal
Venichand, the Gujarat High Court has held that
the first proviso to Section 43-B is retrospective
and sales tax for the last quarter paid before the
filing of the return for the assessment year is
deductible. This decision deals with Assessment
Year 1985-85. The Calcutta High Court in the
case of CIT v. Sri Jagannath Steel Corpn. has
taken a similar view holding that the statutory
liability for sales tax actually discharged after the
expiry of the accounting year in compliance with
the relevant statute is entitled to deduction under
Section 43-B. The High Court has held the
amendment to be clarificatory and, therefore,
retrospective. The Gujarat High court in the above
case held the amendment to be curative and
explanatory and hence retrospective. The Patna
High court has also held the amendment inserting
the first proviso to be explanatory in the case of
Jamshedpur Motor Accessories Stores v. Union of
India. The special leave petition from this decision
of the Patna High Court was dismissed. The view
of the Delhi High Court, therefore, that the first
proviso to Section 43-B will be available only
prospectively does not appear to be correct. As
observed by G.P. Singh in his Principles of
ITA No. 65/2013 Page 16 of 20
Statutory Interpretation, 4th Edn. At p. 291: "It is
well settled that if a statute is curative or merely
declaratory of the previous law retrospective
operation is generally intended." In fact the
amendment would not serve its object in such a
situation unless it is construed as retrospective.
The view, therefore, taken by the Delhi High Court
cannot be sustained."
23. Section 43B deals with statutory dues and stipulates that the year
in which the payment is made the same would be allowed as a
deduction even if the assessee is following the mercantile system of
accountancy. The proviso, however, stipulates that deduction would
be allowed where the statutory dues covered by Section 43B stand paid
on or before the due date of filing of return of income. Section
40(a)(ia) is applicable to cases where an assessee is required to deduct
tax at source and fails to deduct or does not make payment of the TDS
before the due date, in such cases, notwithstanding Sections 30 to 38 of
the Act, deduction is to be allowed as an expenditure in the year of
payment unless a case is covered under the exceptions carved out. The
amended proviso as inserted by Finance Act, 2010 states where an
assessee has made payment of the TDS on or before the due date of
filing of the return under Section 139(1), the sum shall be allowed as
an expense in computing the income of the previous year. The two
provisions are akin and the provisos to Sections 40(a)(ia) and 43B are
to the same effect and for the same purpose.
ITA No. 65/2013 Page 17 of 20
24. In Podar Cement Private Limited (supra), the Supreme Court
considered whether term ,,owner would include unregistered owners
who had paid sale consideration and were covered by Section 53A of
the Transfer of Property Act. The contention of the assessees was that
the amendments made to the definition of term ,,owner by Finance
Bill, 1987 should be given retrospective effect. It was held that the
amendments were retrospective in nature as they rationalise and clear
the existing ambiguities and doubts. Reference was made to Crawford:
,,Statutory Construction and ,,the principle of Declaratory Statutes,
Francis Bennion: ,,Statutory Interpretation, Justice G.P. Singhs
,,Principles of Statutory Interpretation, it was observed that sometimes
amendments are made to supply an obvious omission or to clear up
doubts as to the meaning of the previous provision. The issue was
accordingly decided holding that in such cases the amendments were
retrospective though it was noticed that as per Transfer of Property
Act, Registration Act, etc. a legal owner must have a registered
document.
25. In view of the aforesaid discussion in paras 18,19 and 20, it is
apparent that the respondent assesse did not violate the unamended
section 40(a)(ia) of the act. We have noted the ambiguity and referred
their contention of Revenue and rejected the interpretation placed by
them. The amended provisions are clear and free from any ambiguity
ITA No. 65/2013 Page 18 of 20
and doubt. They will help curtail litigation. The amended provision
clearly support view taken in paragraphs 17 20 that the expression
"said due date" used in clause A of proviso to unamended section
refers to time specified in Section 139(1) of the Act. The amended
section 40(a)(ia) expands and further liberalises the statue when it
stipulates that deductions made in the first eleven months of the
previous year but paid before the due date of filing of the return, will
constitute sufficient compliance.
26. Before we close, we must deal with another contention raised by
the counsel for the Revenue to the effect that Finance Bill, 2010
increases the rate of interest from 12% to 18% for failure to deposit
TDS in time. This increase in rate of interest, it is submitted, is
directly connected and associated with the concession or benefit which
was extended to the assessee by amending the proviso. We do not find
any merit in the said contention. Even prior to the amendment made
by Finance Bill, 2010, Section 40(a)(ia) had stipulated that in case
where the tax was deductable and so deducted during the last month of
the previous year but was paid on or before the due date specified in
Section 139(1) of the Act, deduction/expenditure will be allowed in the
previous year notwithstanding the main Section. The section as well as
the proviso before the amendment in 2010 had ambiguities and doubts.
The proviso as amended by Finance Act, 2008 with retrospective effect
ITA No. 65/2013 Page 19 of 20
from 1st April, 2005 was not free from interpretative difficulties and
problems. This aspect is highlighted above. The intention behind
Section 40(a)(ia) is to ensure that TDS is deducted and paid. The
object of introduction of Section 40(a)(ia) is to ensure that TDS
provisions are scrupulously implemented without default in order to
augment recoveries. It is not to penalise an assessee when payment has
been made within the time stated. Failure to deduct TDS or deposit
TDS results in loss of revenue and may deprive the Government of the
tax due and payable. The provision should be interpreted in a fair, just
and equitable manner. It should not be interpreted in a manner which
results in injustice and creates tax liabilities when TDS has been
deposited/paid and the respondent who is following cash system of
accountancy has made actual payment to the third party for services
rendered. If the said object and purpose is kept in view, we do not
think the Assessing Officer was justified in disallowing and in
invoking Section 40(a)(ia) in the present case. The question of law is
accordingly answered in negative, i.e., in favour of the respondent-
assessee and against the Revenue. The appeal is accordingly disposed
of. No costs.
SANJIV KHANNA, J.
SANJEEV SACHDEVA, J.
JULY 01, 2013/VKR
ITA No. 65/2013 Page 20 of 20
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