2012 (9) TMI 470 - AT - Income Tax

Tribunal upholds CIT(A)'s order on retrospective amendment, disallows Revenue's appeal.

The tribunal upheld the CIT(A)'s order, dismissing the Revenue's appeal. It confirmed that the amendment to section 40(a)(ia) by the Finance Act, 2010 is ... Disallowance of expense on account of late deposit of TDS u/s 40(a)(ia) – Whether provision amended by finance act. 2010 in respect of Sec. 40(a)(ia) is applicable prospectively or retrospectively – Assessee has made the payment of TDS in the next F.Y in respect of payments made/credited before March – As per AO, assessee’s claim such expenses in the next year therefore made addition – Held that:- Following the decision of Hon’ble Calcutta High Court in case of VIRGIN CREATIONS (2011 (11) TMI 348), that amendment to the provisions of Sec.40(a)(ia) of the Act, by the Finance Act, 2010 is retrospective from 1.4.2005. Consequently, any payment of tax deducted at source during previous years relevant to and from AY 05-06 can be made to the Government on or before the due date for filing return of income u/s.139(1) of the Act. Decision in favour of assessee. Issues Involved:1. Deletion of addition made by the Assessing Officer under section 40(a)(ia) of the Income Tax Act, 1961 on account of late deposit of TDS.2. Retrospective application of the amendment to section 40(a)(ia) by the Finance Act, 2010.Detailed Analysis:1. Deletion of Addition Made by the Assessing Officer Under Section 40(a)(ia) of the Income Tax Act, 1961 on Account of Late Deposit of TDS:The Assessing Officer (AO) noted that the assessee had defaulted in depositing TDS on rent, commission, and maintenance expenses within the stipulated time. Consequently, an addition of Rs. 19,75,456/- was made under section 40(a)(ia) of the Income Tax Act, 1961. The AO stated that if the tax is deducted but not deposited before March 31 of the previous year, the expenditure claimed in the current previous year is not deductible. However, if the tax is deposited after the end of the current previous year, the expenditure will be deductible in the year in which the tax is deposited.The CIT(A) deleted the impugned addition, referencing various decisions, including the ITAT decision in the case of Bansal Parivahan (India) (P) Ltd. vs. ITO, the Supreme Court decision in the case of Allied Motors Private Limited vs. CIT, and the Calcutta High Court decision in the case of CIT vs. Virgin Creations.2. Retrospective Application of the Amendment to Section 40(a)(ia) by the Finance Act, 2010:The Revenue appealed against the CIT(A)'s order, arguing that the amendment to section 40(a)(ia) is effective from April 1, 2010, and should not be applied retrospectively. The Revenue contended that the CIT(A) erred in treating the provisions as having retrospective effect.The assessee's counsel argued that the issue is covered in favor of the assessee by the Calcutta High Court decision in the case of CIT vs. Virgin Creations, which held that the amendment to section 40(a)(ia) by the Finance Act, 2010 is retrospective from April 1, 2005. This view was also supported by the ITAT, Mumbai in the case of Shri Piyush C. Mehta.After hearing both sides and considering the material on record, the tribunal found that the tax deducted was paid within the due date for filing the return under section 139(1). The tribunal noted that the Calcutta High Court had held that the amendment to section 40(a)(ia) by the Finance Act, 2010, though effective from April 1, 2010, should be treated as retrospective from April 1, 2005. The tribunal cited the Calcutta High Court's decision, which emphasized that the amendment was remedial and curative in nature, intended to remove hardships caused by the earlier provisions.The tribunal concluded that following the Calcutta High Court's decision, the amendment to section 40(a)(ia) should be considered retrospective from April 1, 2005. Consequently, any payment of tax deducted at source during previous years relevant to and from AY 2005-06 can be made to the government on or before the due date for filing the return under section 139(1). Since the assessee had deposited the tax deducted at source on or before the due date for filing the return, no disallowance under section 40(a)(ia) could be made.Conclusion:The tribunal upheld the CIT(A)'s order and dismissed the Revenue's appeal, confirming that the amendment to section 40(a)(ia) by the Finance Act, 2010 is retrospective from April 1, 2005, and that the assessee's claim for deduction should be allowed as the TDS was deposited within the due date for filing the return. The appeal filed by the department was dismissed, and the order was pronounced in open court on July 6, 2012.