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2016 (3) TMI 756 - KARNATAKA HIGH COURT

2016 (3) TMI 756 - KARNATAKA HIGH COURT - [2016] 388 ITR 266 - Retrospectivity of amendment to the provisions of section 40(a)(ia) of the Act, by the Finance Act, 2010 - w.e.f. 01.04.2005 - Held that:- As decided in CIT Vs. Shri Santosh Kumar Shetty [2015 (8) TMI 232 - KARNATAKA HIGH COURT ] this question came up for consideration before the Gujarat High Court in the case of Commissioner of Income Tax, Ahmedabad IV Vs. Om Prakash R Chaudhary [2015 (2) TMI 150 - GUJARAT HIGH COURT] after referrin .....

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t the revenue. - ITA No. 551/2015 - Dated:- 29-2-2016 - Jayant Patel And B. V. Nagarathna, JJ. For the Appellant : Sri E I Sanmathi, Adv JUDGMENT The appellant-revenue has preferred the present appeal by raising following substantial questions of law: "Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the amendment to the provisions of section 40(a)(ia) of the Act, by the Finance Act, 2010, is retrospective from 01.04.2005, by relying o .....

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ri. Santhosh Kumar Shetty [(2014) 89 CCH 199] held as under at para 5 to 8 of its order: 5. The argument of the Revenue is, when the Finance Act, 2010, expressly states that the said provision would come into effect from 01.04.2010, it is not permissible for the Tribunals or the Courts to give it a retrospective effect prior to the date and therefore, it is submitted that the order passed by the Tribunal holding it as retrospective notwithstanding the fact that the parliament made its intention .....

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ported in (2009) 319 ITR 306, has held as under: "15.4: Thus, considering relevant legislative changes made by the Parliament from time to time and. some of the decisions relevant to consider the question of retrospectivity raised in these present appeals, the focal question, therefore, would be whether the amendment brought about by way of Finance Act 2010 in Section 40 [a](ia) with effect from 1st April 2010 could be said to be clarificatory in nature for attending to unintended consequen .....

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ed inexplicable situation whereby the assessee who deducted the tax at source from the payments made by it for and on behalf of the Government and then if misses out the time limit of depositing the same with the Treasury within the time prescribed, the amount spent for its business purposes on account of the late deposit of such tax would result into disallowance of entire expenditure under Section 40[a](ia). The said proviso thereby caused immense hardship. The amendment under consideration ma .....

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) of Section 200 and in accordance with the other provisions of Chapter XVII, such amount shall not be deducted in computing the 'income' chargeable under the head 'Profit & Gains' of business or profession. Such provision starts with non obstante clause which states that notwithstanding anything contained in Section 30 to 38 of the Incometax Act, if the tax deducted at source is not paid within prescribed time [under Section 200 (1)], no amount could be deducted while comput .....

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tc. 16.4: Since, this had created anomaly whereby tax deducted in the last month was permitted payment till filing of return as per sub-section (1) of Section 139 whereas for the TDS deducted during the rest of the months, period was provided only till 31st March of the previous year, Finance Act, 2010 was brought. To bring parity, to remedy unintended consequences and to make the provision workable, it proposed to amend the said provision and provided inter alia that no disallowance would be ma .....

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would not be sub-served, if the effect is limited to A.Y.2010.11 and subsequent years only. Strict construction if leads to a result not intended to be fulfilled by the object of legislation and another construction is possible apart from literal construction, then that construction needs to be preferred as held in a decision in case of CIT V. Alom Extrusion Limited [Supra]. 16.6: We also cannot be oblivious of submissions not denied by the other side that various representations were made to th .....

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by the Court. When plain interpretation frustrates the very legislative intent, the Court is expected to bear in mind the legislative intent from the language used in the statue with the help of permissible tools of interpretation of statute. 17: The core issue as to whether the amendment made by the Finance Act 2010 of Section 40[a](ia) of the Act is retrospective from the date of insertion of the provision i.e., 1st April 2005 therefore needs to be answered in affirmation. It can be seen that .....

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Act, 2010 brings the law in parity with the aforementioned situation and accordingly, for the TDS deducted all throughout the year, time is extended from payment till the filing of return. It is thus apparent that when the amendment introduced by the Finance Act, 2008 of relaxing the time for deposit of TDS was made retrospective from the year 2005 [1st April 2005], the amendment by Finance Act 2010 with regard to other limb of time limit for payment of TDS has be to held, retrospective not fro .....

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eptember of the next financial year. 17.1: We draw further support from the fact that the rigor of payment of interest is also enhanced by increasing the interest charged on tax deducted, if any deposit by the specified date i.e., up to the filing of the return is not made from 12% to 18% per annum in the provision of Section 201 (1A). Prior to the said amendment of Finance Act, 2010 under Section 201 (1A), assessee was liable to p[ay simple interest at one per cent for every month or part of mo .....

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