1 IN HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS 29TH DAY OF JUNE 2020 PRESENT HON BLE MR. JUSTICE ALOK ARADHE AND HON BLE MR. JUSTICE M.NAGAPRASANNA I.T.A. NO.422 OF 2012 BETWEEN: M/S. A.Y. GARMENTS INTERNATIONAL PRIVATE LTD REP. BY ITS DIRECTOR K.S. GOVINDRAJ NO.11, 1ST CROSS, 4TH BLOCK 3RD STAGE, BASAVESHWARANAGAR BANGALORE 560079. APPELLANT (BY SRI. A. SHANKAR, SR. ADV., A/W SRI. M. LAVA, ADV.,) AND: DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 11(1), NRUPATHUNGA ROAD R P BHAVAN, OPP. RESERVE BANK OF INDIA BANGALORE 560001. RESPONDENT (BY SRI. K.V. ARAVIND, ADV.) THIS ITA IS FILED UNDER SECTION 260-A OF I.T. ACT, 1961, ARISING OUT OF ORDER DATED 04/04/2012 PASSED IN ITA NO.1347/BANG/2010 AND M.P. NO.46/BANG/2012 DATED 23/11/2012, FOR ASSESSMENT YEAR 2005-06, PRAYING THAT THIS HON BLE COURT MAY BE PLEASED TO: (I) FORMULATE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN. 2 (II) ALLOW APPEAL AND SET ASIDE FINDINGS TO EXTENT AGAINST APPELLANT IN ORDER PASSED BY TRIBUNAL IN ITA NO.1347/BANG/2010 DATED 04/04/2012 AND M.P.NO.46/BANG/2012 DATED 23/11/2012. THIS ITA COMING ON FOR HEARING, THIS DAY, ALOK ARADHE J., DELIVERED FOLLOWING: JUDGMENT This appeal under Section 260A of Income Tax Act, 1961 (hereinafter referred to as Act for short) has been preferred by assessee. subject matter of appeal pertains to Assessment year 2005-06. appeal was admitted by bench of this Court vide order dated 26.06.2013 on following substantial questions of law: (i) Whether Tribunal was justified in law in holding that amendment made by Finance Act, 2010 in provisions of Section 40(a)(ia) of Income-tax Act, 1961 is not retrospective in operation on facts and circumstances of case? (ii) Whether Tribunal was justified in law in reversing well reasoned order 3 of learned Commissioner of Income- tax (Appeals) on facts and circumstances of case? (iii) Without prejudice whether Tribunal was justified in law in not holding appellant is liable to deduct tax at source only on amount payable on end of financial year as per provisions of section 40(a)(i) and 40(a)(ia) of Act on facts and circumstances of case? (iv) Without prejudice whether Tribunal was justified in law in not holding that unless there is proceeding initiated under chapter XVII-B in respect of contravention of said chapter invoking provisions of section 40(a)(i) and 40(a)(ia) is not valid in law on facts and circumstances of case? (v) Whether Tribunal was justified in law in refusing to rectify under section 254(2) of Act, order dated 4.4.2012 passed by Tribunal 4 allowing appeal preferred by revenue on facts and circumstance of case? (vi) Whether authorities below justified in law in levying interest under Section 234B and 234C of Act on facts and circumstances of case? 2. Facts leading to filing of appeal briefly stated are that assessee is private limited company carrying on business of manufacture and export of ready made garments. assessee for Assessment year 2005-06 filed return of income on 30.10.2005 declaring loss of Rs.29,69,644/-. return of income was processed under Section 143(1) of Act and thereafter case was selected for scrutiny and notice under Section 143(2) of Act was issued on 17.10.2006. assessing officer by order passed under Section 143(3) of Act disallowed sum of Rs.55,17,037/- being expenditure incurred, by invoking provisions of Section 40(a)(ia) of Act. Being 5 aggrieved, assessee filed appeal before Commissioner of Income Tax (Appeals). Commissioner of Income Tax (Appeals) by order dated 13.09.2010 inter alia held that amendment brought about in Finance Act, 2010 in Section 40(a)(ia) of Act is retrospective in nature and deleted addition made by assessing officer. 3. revenue preferred appeal before Income Tax Appellate Tribunal (hereinafter referred to as 'the Tribunal' for short). tribunal vide order dated 04.04.2012 by placing reliance on decision of special bench of tribunal in M/S BHARATHI SHIPYARD LTD. VS. DCIT, 11 ITR (TRIB) 599 (Mum) held that provisions of Section 40(a)(ia) of Act as amended by Finance Act, 2010 are not retrospective in nature and reversed order of Commissioner of Income Tax (Appeals) and allowed appeal preferred by revenue. assessee thereupon filed Miscellaneous petition under Section 6 254(2) of Act. tribunal vide order dated 23.11.2012 dismissed miscellaneous petition. In aforesaid factual background, assessee has approached this court. 4. Learned Senior Counsel for assessee submitted that first substantial question of law is no longer res integra, as same has already been answered by Supreme Court in CIT VS. CALCUTTA EXPORT COMPANY, 404 ITR 654 (SC), wherein it has been held that amendment in Section 40(a)(ia) brought about by Finance Act, 2010 is curative in nature and has retrospective operation. In view of aforesaid enunciation of law, first substantial question of law framed by bench of this court has to be answered in favour of assessee and remaining questions of law need not be dealt with if first substantial question of law is answered in favour of assessee as they have been rendered academic. Learned Senior Counsel has also referred to decision of this court in CIT VS. SANTOSH 7 KUMAR SHETTY, 227 TAXMAN 170 (KARNATAKA). On other hand, learned counsel for revenue was unable to dispute legal proposition laid down by Supreme Court in case of CALCUTTA EXPORT COMPANY supra. 5. We have considered submissions made on both sides and have perused record. Before proceeding further, it is apposite to take note of Section 40(a)(ia) as amended by Finance Act, 2010, which reads as under: Section 40(a)(ia): Any interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to resident, or amounts payable to 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 paid on or before due 8 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 previous year but paid after due date specified in sub-section (1) of section 139, thirty per cent of such sum shall be allowed as deduction in computing income of previous year in which such tax has been paid. 6. issue whether aforesaid amendment being curative in nature has retrospective operation was considered by Supreme Court in case of CALCUTTA EXPORT COMPANY supra and it was held that purpose of amendment made by Finance Act, 2010 is to solve anomalies and proviso was inserted to remedy unintended consequences and to make provision workable. It was further held that proviso which supplies obvious omission in Section is required to be read into Section to give Section 9 reasonable interpretation and requires to be treated as retrospective in operation so that reasonable interpretation can be given to Section as whole. Thus, it was held that amendment made by Finance Act, 2010 in Section 40(a)(ia) being curative in nature is required to be given retrospective operation. aforesaid decision was followed by division bench of this Court in case of SANTOSH KUMAR SHETTY supra. issue with regard to retrospectivity of Section 40(a)(ia) is no longer res integra and is answered in favour of assessee by Supreme Court. 7. In view of aforesaid enunciation of law by Supreme Court, first substantial question of law is answered in favour of assessee and against revenue. In view of our answer to substantial question of law, remaining substantial questions of law are rendered academic and therefore, it is not necessary to answer same. In view of preceding analysis, order passed by Income Tax Appellate Tribunal 10 cannot be sustained in eye of law, it is hereby quashed. In result, appeal is allowed. Sd/- JUDGE Sd/- JUDGE ss A.Y. Garments International Private Ltd. v. Deputy Commissioner of Income-tax Circle 11(1), Bangalore