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TMI Blog2012 (10) TMI 515X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Audit Report, the assessee has deducted TDS on amount excluding the interest income of Rs.7,53,294/- and the amount so deducted was deposited on 4-08-2008. He further submitted that the entire TDS on the aforesaid amount has been paid before the due date of filing of the return of income and no disallowance can be made under sec. 40(a)(ia) in view of the amendment made to this section by the Finance Act, 2010 which has been held to be retrospective by the ruling of Mumbai Bench of ITAT in the case of M/s. Golden Stables Lifestyle Centre (P) Ltd. vs. CIT (ITAT `G' Bench Mumbai) in ITA No.5145/Mum./2009, dated 30/09/2010. The AO observed that the provisions of section 40(a)(ia) are very clear for A.Y. 2008-09 and required that the tax deducted by the assessee before February of the previous year had to be deposited before the ending of the previous year & the tax deducted in the last month i.e. March of the previous year had to be deposited before the filing of return. Thus, in this case the assessee was required to deposit the tax deducted upto February 2008 by 31-3-08 & tax deducted during the month of March 2008 had to be deposited before the filing of return. It was observed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for filing return of income, the same are to be allowed in the light of the following decisions: * Kanubhai Ramjibhai Makwana vs. ITO (Ahd.-ITAT) * Golden Stables Lifestyles Centre (P) Ltd. vs. CIT - ITAT-MUM. In the case of M/s. Bharati Shipyard Ltd. 11 ITR (Trib) 599, it is held that amended provisions brought on to the statute by Finance Act 2010 with effect from 01.04.2010 are prospective in operation and not applicable to the earlier years. Hence the contentions of the AR are not tenable and the action of the AO is upheld. The AR further argued that the same may be directed to be allowed the same in next A.Y. Since the AR has not waived his right to appeal such direction cannot be issued since there is no finality on the issue. Accordingly, Ground No.3 is dismissed." 6. Still aggrieved, the assessee has filed further appeal and by reiterating the submissions made before the lower authorities, the assessee has pleaded for deletion of addition of Rs.66,29,926/- by contending that retrospectivity of the provision has been upheld by the Hon'ble Calcutta High Court in the case of CIT vs. Virgin Creations in ITAT No.302 of 2011 GA 3200/2011 dated 23rd November, 2011 and Mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions 30 to 38, the following amounts shall not be deducted in computed the income chargeable under the head `Profits and gains of business or profession'-. (ia) any interest, commission or brokerage, fees for professional services or fees for technical services payable to a resident, 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 or, after deduction, has not been paid during the previous year, or in the subsequent year before the expiry of the time prescribed under sub-section (1) of section 200: Provided that where in respect of any such sum, tax has been deducted in any subsequent year or, has been deducted in the previous year but paid in any subsequent year after the expiry of the time prescribed under sub-section (1) of section200, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid. Explanation. - For the purposes of this sub-clause, - (i)"commission or brokerage" shall have the same meaning as in clause (i) of the Explanation to section 194H; (ii)"fees for technical services" shall have the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar, or has been deducted- (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."; 11. The Finance Act, 2008 brought out amendment to section 40(a)(ia) w.r.e.f. 1.4.2005 by relaxing earlier position to some extent. It made two categories of defaults causing disallowance on the basis of the period of the previous year in which tax was deductible. The first category of disallowances included the cases in which tax was deductible and was so deducted during the last month of the previous year but there was failure to pay such tax on or before the due date specified in sub-section (1) of section 139 of the Act. In other words, if any amount on which tax was deductible during last month of the previous year, that is March 2005, but was paid before 31st October, 2005, being the due date u/s 139(1), the deductibility of the amount was kept intact. The second category included cases other than those given in category first. To put it simply, if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he previous year as a requirement for grant of deduction in the year of incurring such expenditure, has been eased to extend such time for payment of tax up to due date u/s 139(1) of the Act. As per the new amendment, the disallowance will be made if after deducting tax at source, the assessee fails to pay the amount of tax on or before the due date specified in sub-section (1) of section 139 of the Act. The effect of this amendment is that now the assessee deducting tax either in the last month of the previous year or first eleven months of the previous year shall be entitled to deduction of the expenditure in the year of incurring it, if the tax so deducted at source is paid on or before the due date u/s 139(1). This is the only difference which has been made by the Finance Act, 2010. 14. The question as to whether the Amendment by the Finance Act, 2010 as aforesaid is prospective or retrospective from 1.4.2005 came up for consideration before the Mumbai Special Bench ITAT in the case of Bharati Shipyard Ltd. Before the Special Bench it was argued that the amendment was made with a view to remove the unnecessary hardship caused to the assessee by the earlier provision. The Speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hes may take a different view, since Mumbai Bench after analyzing the provisions of Sec.40(a)9ia) since its inception and various amendments made to the same including the suggestion made by the Industry in the form of representation in their pre-budget memorandum to the Hon'ble Finance Minister and by applying the decision of the Hon'ble Apex Court in the case of Alom Extrusions Ltd., has observed that "The provisions of Section 40(a)(ia) as stood prior to the amendments made by the Finance Act 2010 thus were resulting into unintended consequences and causing grave and genuine hardships to the assesses who had substantially complied with the relevant TDS provisions by deducting the taxes at source and by paying the same to the credit of the Government before the due date of filing of their returns u/s.139(1). In order to remedy this position and to remove the hardships which was being caused to the assessee belonging to such category, amendments have been made in the provisions of Section 40(a)(ia) by the Finance Act, 2010. The said amendments, in our opinion, thus are clearly remedial/curative in nature as held by the Hon'ble Supreme Court in the case of Allied Motors Pvt.Ltd. (s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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." 17. It can be seen from the above decision of the Hon'ble Calcutta High Court that Amendment to the provisions of Sec. 40(a)(ia) of the Act, by the Finance Act, 2010 as aforesaid was held to be retrospective from 1.4.2005. If the amendment is considered as retrospective from 1.4.2005, the effect will be that payments of TDS to the credit of the Government on or before the last date for filing return of income u/s.139(1) of the Act for the relevant AY have to be allowed as deduction. Admittedly in the case of the Assessee payments were so made before the said due date and in terms of the decision of the Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X
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