2014 (1) TMI 1263 - AT - Income Tax

ITAT upholds CIT(A)'s decision on TDS addition, emphasizing timely deposit & retrospective effect

The ITAT upheld the CIT(A)'s decision to delete the addition under section 40a(ia) of the Income Tax Act for Assessment Year 2005-06. The ITAT emphasized ... Deduction u/s 40(a)(ia) of the Act – The decision in ASSTT COMMISSIONER OF INCOME TAX Versus SHRI MK GURUMURTHY [2012 (6) TMI 293 - ITAT, Bangalore] followed - The assessee deducted TDS which was not paid to the account of Central Govt. within the prescribed time, however it was paid before the due date of filing the return specified in Section 139(1) of the Act - addition u/s 40(a)(ia) of the Act cannot be made if the payment of tax deducted at source has been before the due date of filing the return of income for the year under consideration - payment of TDS has been made before the due date of filing of the return u/s 139(1) of the Act – thus, the CIT(A) was fully justified in deleting the addition made by the Assessing Officer – Decided against Revenue. Issues:Appeal against deletion of addition under section 40a(ia) of the Income Tax Act for Assessment Year 2005-06.Analysis:The Department appealed against the deletion of an addition made under section 40a(ia) of the Income Tax Act for the Assessment Year 2005-06. The Assessing Officer had initially made an addition of Rs. 31,02,433 on account of disallowance under section 40a(ia), which was later set aside by the ITAT. Subsequently, a reduced addition of Rs. 20,89,433 was made by the Assessing Officer after directions from the ITAT. The crux of the issue was the timing of TDS deposit by the assessee in relation to the due date specified in Section 139(1) of the Act. The assessee contended that the amendment to Section 40a(ia) by the Finance Act, 2010, with retrospective effect from Assessment Year 2005-06, allowed for non-disallowance of expenditure if the TDS was deposited before the due date of filing the return of income. The assessee relied on various case laws to support this argument.The CIT(A) analyzed the case in light of the legislative amendments and judicial precedents. It was observed that the TDS was deducted by the assessee on a monthly basis but deposited into the Government account after the due date of filing the return of income. The CIT(A) noted the retrospective application of the amendment to Section 40a(ia) and considered it curative in nature. Citing decisions from the ITAT Mumbai Bench and ITAT Jaipur Bench, the CIT(A) concluded that the addition made by the Assessing Officer was unwarranted and deleted the same.During the appeal, the assessee cited additional decisions in support of their stance, highlighting that the issue was decisively settled in favor of the assessee by various judicial pronouncements. The Department, represented by the ld. DR, maintained the stance taken by the Assessing Officer.In its deliberation, the ITAT referred to a decision by the ITAT Bangalore Bench, which emphasized that if the TDS payment was made before the due date of filing the return of income as specified in Section 139(1) of the Act, no addition under section 40a(ia) should be made. Drawing parallels with a judgment from the Calcutta High Court and a decision by the ITAT Mumbai Bench, the ITAT concurred with the CIT(A) and dismissed the Department's appeal. The ITAT's decision was based on the principle that the amendment to Section 40a(ia) had retrospective effect, shielding the assessee from the additional disallowance.In conclusion, the ITAT upheld the CIT(A)'s order, emphasizing the importance of timely TDS deposit in alignment with the statutory provisions. The appeal filed by the Department was consequently dismissed, affirming the deletion of the addition under section 40a(ia) for the Assessment Year 2005-06.