ITAT upholds CIT(A) decision to delete disallowance under sec 40(a)(ia) due to timely TDS payment

The ITAT upheld the CIT(A)'s decision to delete the disallowance of Rs. 12,39,11,827 under section 40(a)(ia) as the TDS was paid before the return filing due date. The amendment to section 40(a)(ia) by the Finance Act, 2010 was considered retrospective from 1.4.2005, covering the relevant assessment year. The ITAT dismissed the Revenue's appeal, emphasizing adherence to higher judicial decisions and the retrospective application of curative amendments.

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Issues Involved:
1. Deletion of disallowance of Rs. 12,39,11,827 under section 40(a)(ia) of the Income Tax Act, 1961.
2. Applicability of the amendment to section 40(a)(ia) by the Finance Act, 2010.
3. Jurisdictional and hierarchical adherence to judicial decisions.

Issue-Wise Detailed Analysis:

1. Deletion of Disallowance under Section 40(a)(ia):
The Revenue appealed against the order of the CIT(A) which deleted the disallowance of Rs. 12,39,11,827 made under section 40(a)(ia) on the grounds that TDS payments under section 194C were not made within the due date. The CIT(A) found that the TDS on the disallowed amount was deducted and paid on 26/09/2009, before the due date for filing the return. The CIT(A) granted relief to the assessee by following the ITAT Mumbai decision in the case of Piyush C. Mehta, which held that the amendment by the Finance Act, 2010 was retrospective. The Revenue contended that the amendment was applicable only from 01/04/2010 and should not apply to the assessment year 2009-10.

2. Applicability of the Amendment to Section 40(a)(ia):
The Revenue argued that the amendment to section 40(a)(ia) by the Finance Act, 2010, which allows for payment of TDS up to the due date of filing the return, was applicable only from 01/04/2010 and not for earlier assessment years. The CIT(A) and the ITAT, however, relied on the decision of the Calcutta High Court in the case of Virgin Creations, which held that the amendment was retrospective and applied from 1.4.2005. The ITAT further supported its decision by referencing the Karnataka High Court ruling in CIT vs. Santosh Kumar Shetty, which also held that the amendment was curative and retrospective in operation.

3. Jurisdictional and Hierarchical Adherence to Judicial Decisions:
The ITAT emphasized the principle of hierarchical judicial system, where lower courts and tribunals are expected to follow the decisions of higher courts. The ITAT Mumbai in Piyush C. Mehta had followed the Calcutta High Court's decision in Virgin Creations, which was deemed to have higher judicial authority over the Special Bench decision in Bharati Shipyard Ltd. The ITAT reiterated that the amendment to section 40(a)(ia) by the Finance Act, 2010, being curative in nature, should be applied retrospectively, thus supporting the CIT(A)'s decision to delete the disallowance.

Conclusion:
The ITAT upheld the CIT(A)'s order, confirming that the disallowance of Rs. 12,39,11,827 under section 40(a)(ia) was rightly deleted since the TDS was paid before the due date for filing the return. The amendment to section 40(a)(ia) by the Finance Act, 2010 was deemed retrospective, applying from 1.4.2005, thereby covering the assessment year 2009-10. The ITAT dismissed the Revenue's appeal, reinforcing the adherence to higher judicial decisions and the retrospective application of curative amendments.

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