TMI Blog2022 (8) TMI 144X X X X Extracts X X X X X X X X Extracts X X X X ..... findings of fact of the CIT(A) and the Tribunal that the subject TDS in the present case was deposited in the state exchequer before the due date of filing of return which is not disputed by the revenue. Also no material or facts have been brought before us even to suggest that the deduction has been granted twice to the assessee. Therefore, there cannot be any disallowance on this count. Assessing Officer could not have made a disallowance under section 40(a)(ia) in view of the retrospective nature of the proviso to the said section. We do not find any error apparent or perversity in the order of the Tribunal in confirming the order of the CIT (A) holding that no disallowance is called for under section 40(a)(ia) of the Act. - Decided in favour of assessee. - INCOME TAX APPEAL NO.667 OF 2018 - - - Dated:- 29-7-2022 - DHIRAJ SINGH THAKUR AND ABHAY AHUJA, JJ. Mr. Akhileshwar Sharma for the Appellant. Ms. Aasifa Khan for the Respondent. ORAL ORDER : (Per Abhay Ahuja, J.) 1. This is an appeal relating to assessment year 2005-06 filed by the revenue under section 260A of the Income Tax Act, 1961 ( the Act ) seeking to challenge the order of the Tribunal date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t source was deposited in the state exchequer before due date of filing of return. It appears that finding on this issue has not been challenged in this appeal. Coming to the issue relating to the section 40(a)(ia) raised by the department in this appeal, the Tribunal considered the following question in appeal of the revenue which was raised as an additional ground by the department :- On the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeal) is not justified as the assessee has been allowed relief of Rs.3,97,76,005/- in Assessment Year 2006-07 on account of disallowance made u/ s 40(a)(ia) of the Act in Assessment Year 2005-06, resultantly the deduction has been allowed twice. 3. The Tribunal after considering the various submissions observed that since the amendment of section 40(a)(ia) is retrospective with effect from 1st April, 2005, payment of TDS can be deposited in the state exchequer on or before the last date of filing of return under section 139(1) of the Act for the relevant assessment year and such a deduction has to be allowed. The Tribunal relied upon the decision of the Calcutta High Court in the case of V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first proviso quoted 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 Profits and gains of business or profession:- (a) In the case of any assessee-- (ia) Thirty percent of any sum payable to a resident 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, thirty percent of such sum sh all be allowed as a deduction in computing the income of the previous year in which such tax has been paid: The above provision has been substituted by the Finance Act, 2010 w.r.e.f. 1-4-2010. Prior to its substitution, proviso , as substituted by the Finance Act, 2008, w.e.f. 1-4-2005, read as under: Provided that where in respect of any such sum, tax has been deducted in any subsequent year, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ub-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- (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 (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. 19) The above amendments made by the Finance Act, 2008 thus provided that no disallowance under Section 40 (a) (ia) of the IT Act shall be made in respect of the expenditure incurred in the month of March if the tax deducted at source on such expenditure has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mended by Finance Act, 2010, with effect from 01.04.2010 and now reads as under: 4(a)(ia) any 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, 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 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. 24) Thus, the Finance Act, 2010 further relaxed the rigors of Section 40(a)(ia) of the IT Act to provide that all TDS made during the previous year can be deposited with the Government by the due date of filing the return of income. The idea was to allow additional time to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent made by the Finance Act, 2010 is to solve the anomalies that the insertion of section 40(a)(ia) was causing to the bonafide tax payer. The amendment, even if not given operation retrospectively, may not materially be of consequence to the Revenue when the tax rates are stable and uniform or in cases of big assessees having substantial turnover and equally huge expenses and necessary cushion to absorb the effect. However, marginal and medium taxpayers, who work at low gross product rate and when expenditure which becomes subject matter of an order under Section 40(a)(ia) is substantial, can suffer severe adverse consequences if the amendment made in 2010 is not given retrospective operation i.e., from the date of substitution of the provision. Transferring or shifting expenses to a subsequent year, in such cases, will not wipe off the adverse effect and the financial stress. Such could not be the intention of the legislature. Hence, the amendment made by the Finance Act, 2010 being curative in nature required to be given retrospective operation i.e., from the date of insertion of the said provision. 9. In view of the above decision of the Apex Court, it would not be necessa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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