Retrospective TDS amendment under section 40(a)(ia) held curative, removing hardship and making deduction available on timely return filing.

The Finance Act, 2010 amendment to section 40(a)(ia) was treated as curative and retrospective from 1 April 2005 because it removed the earlier disparity in TDS deposit timing and extended the deposit deadline to the due date under section 139(1). Legislative materials showed the change was intended to remove hardship and make the provision workable, so the disallowance based on a prospective reading was unsustainable.

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Issues: Whether the amendment made to section 40(a)(ia) of the Income-tax Act, 1961 by the Finance Act, 2010 is curative and retrospective from 1 April 2005, so as to permit deduction where tax deducted at source was deposited before the due date for filing the return.

Analysis: The amended provision removed the earlier disparity between tax deducted in the last month of the previous year and tax deducted in the earlier months, by allowing deposit up to the due date under section 139(1). The legislative materials, including the notes on clauses, memorandum explaining the Finance Bill, and the Finance Minister's speech, showed that the amendment was introduced to remove hardship and make the provision workable. The Court treated the amendment as continuing the earlier remedial changes made by the Finance Act, 2008 and relied on the principle that a curative or declaratory amendment intended to remove unintended consequences is ordinarily retrospective. It followed the reasoning adopted in earlier High Court and Supreme Court authorities dealing with similar remedial tax amendments.

Conclusion: The amendment to section 40(a)(ia) by the Finance Act, 2010 is retrospective in operation from 1 April 2005 and the disallowance made by treating the provision as prospective was unsustainable.

Ratio Decidendi: A remedial amendment enacted to remove an unintended hardship and to make a taxing provision workable is to be construed as retrospective where the legislative purpose and context so indicate.

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