Curative amendment to TDS disallowance provision applies retrospectively, protecting deduction where tax is paid by return due date

The amendment to section 40(a)(ia) of the Income-tax Act was treated as curative and retrospective, so the extended time for payment of TDS up to the return-filing due date applied to remove the earlier hardship. The provision was read purposively to avoid unequal treatment between TDS deducted in March and TDS deducted in earlier months, where the tax was ultimately deposited within the statutory period under section 139(1). On that basis, the disallowance was not sustainable and the assessee was entitled to deduction.

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Issues: (i) Whether the amendment to section 40(a)(ia) of the Income-tax Act, 1961, allowing deduction where tax deducted at source is paid before the due date under section 139(1), applies retrospectively so as to prevent disallowance in respect of TDS deducted in the last month of the previous year and deposited before the return-filing due date.

Analysis: The Tribunal's view was examined in the light of the earlier High Court decisions and the nature of the amendment. The amendment was treated as curative and intended to remove unintended hardship created by the earlier time-limit structure in section 40(a)(ia). The provision was read purposively so that the relaxation, which extended the time for payment of TDS up to the due date of filing the return, would operate to cure the anomaly between TDS deducted in March and TDS deducted in earlier months. On that basis, the disallowance could not be sustained where the tax was ultimately paid within the extended statutory period.

Conclusion: The amendment to section 40(a)(ia) was held to be retrospective in operation and the disallowance was not warranted; the issue was decided in favour of the assessee.

Final Conclusion: The Revenue's challenge failed, and the Tribunal's deletion of the disallowance was confirmed, resulting in dismissal of the appeal.

Ratio Decidendi: A curative amendment enacted to remove an unintended hardship in a tax disallowance provision must be given retrospective effect where necessary to make the provision workable and to prevent discriminatory treatment between identical classes of TDS payments.

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