2017 (5) TMI 1114 - HC - Income Tax

Revision u/s 263 - dis-allowance of transportation charges for non deduction of tds - effect of retrospective amendment - Held that - The amendment brought about in Section 40(a)(ia) is not only has limited retrospectivity but complete retrospectivity and would be applicable to the assessment year 2009-10 also to which the instant case belongs. In view of the above as the petitioner has deposited the tax deducted at source on 3.9.2009 before the expiry of the last date for the filing of the return under Section 139(i) of the Act i.e. 30.9.2009 he is entitle to the benefit of the above provision and the transportation charges of Rs. 10, 34, 600/- are allowable as deduction from the income for the purposes of computing income chargeable to tax under the head Profits and gains of business or profession from income. Accordingly the impugned order dated 15.3.2016 (Annexure-5) and the Assessment Order dated 31.12.2014 are quashed in so for they disallow the transportation charges to be deducted from the income of the petitioner for computing its taxable income. - Decided in favour of assessee.

Summary

Issues:
Challenge to assessment order and order under Section 264 of the Act regarding disallowance of transportation charges.

Analysis:
The petitioner, a cooperative society, filed its return for the assessment year 2009-10 showing NIL income. Subsequently, proceedings under Section 263 were initiated, leading to disallowance of transportation charges amounting to &8377; 10,34,600. The petitioner challenged this disallowance, arguing that the TDS on transportation charges was deposited before the due date of filing the return. The crux of the issue revolved around the interpretation of Section 40(a)(ia) of the Act and its applicability to the petitioner's case.

The petitioner contended that the amendment to Section 40(a)(ia) by the Finance Act 2010, effective from 1.4.2010, allowed deduction if TDS was paid before the due date specified in Section 139(1) of the Act. The petitioner had deposited the TDS on 3.9.2009, before the due date of filing the return. The argument hinged on whether this amendment could be applied retrospectively to the assessment year 2009-10.

The court analyzed precedents, including judgments by the Calcutta High Court and the Gujarat High Court, which held that Section 40(a)(ia) should be applied retrospectively. Citing Supreme Court decisions, the court concluded that the amendment had complete retrospectivity and should be applicable to the assessment year in question. Consequently, the transportation charges of &8377; 10,34,600 were deemed allowable as a deduction for computing taxable income.

In light of the above interpretation and legal principles, the court allowed the writ petition, quashing the impugned orders that disallowed the transportation charges from being deducted. The petitioner was granted the benefit of the amended provision of Section 40(a)(ia), and the assessment order was set aside in this regard.

In summary, the judgment delved into the intricacies of tax deduction at source, retrospective application of statutory amendments, and the permissible deductions under the Income Tax Act. The court's analysis centered on the interpretation of Section 40(a)(ia) and its implications for the petitioner's case, ultimately leading to a favorable outcome for the cooperative society in question.