2015 (4) TMI 175 - AT - Income Tax

Amendment to Section 40(a)(ia) applies retrospectively: Tribunal dismisses Revenue's appeal, allows assessee's claim.

The DCIT Versus M/s. IVRCL Infrastructure & Projects Ltd.

The Tribunal upheld the CIT(A)'s decision that the amendment to Section 40(a)(ia) has retrospective application. It ruled that the expenditure should be ... Retrospectivity of amendment brought in section 40(a)(ia) - no disallowance under section 40(a)(ia) required to be made as held by CIT(A) - belated deposit of TDS - Held that:- Similar issue was considered by this Tribunal relying on CIT vs. Rajinder Kumar [2013 (7) TMI 454 - DELHI HIGH COURT] wherein held that the impugned amendment to section 40(a)(ia) permits remittance of TDS to the Central Government account on or before the due date of filing return of income u/s. 139(1) of the Act is retrospective in nature. Considering the consistent view taken by the Tribunal, we are inclined to hold that when the assessee, though deducted TDS before 31st March, 2005, relevant to A.Y. 2005-06, relating to expenditure claimed for the assessment year under consideration and paid the said amount to the Central Government before the due date of filing the return of income for A.Y. 2005-06, that expenditure cannot be disallowed u/s. 40(a)(ia) of the Act. If it is so, the CIT(A) is justified in allowing claim of the assessee. - Decided in favour of assessee. Issues Involved:1. Retrospective application of the amendment to Section 40(a)(ia) of the Income Tax Act.2. Disallowance of expenditure under Section 40(a)(ia) due to late remittance of TDS.Issue-wise Detailed Analysis:1. Retrospective Application of the Amendment to Section 40(a)(ia):The primary issue was whether the amendment to Section 40(a)(ia) by the Finance Act, 2010, which permits the remittance of TDS to the Central Government account on or before the due date of filing the return of income under Section 139(1), has retrospective application. The CIT(A) observed that the Hon'ble High Court of Calcutta in CIT vs. Virgin Creations (ITA No. 302 of 2011) held that the amendment has retrospective effect. This view was supported by the Hon'ble Supreme Court in the cases of Allied Motors (224 ITR 667) and Alom Extrusions (319 ITR 306), which held that amendments providing remedies to make provisions workable should be treated as having retrospective operation. The CIT(A) also referenced the Hon'ble High Court of Karnataka's decision in ITO vs. Anil Kumar & Co. (2013) (31 taxmann.com 317), which extended the benefit of the amendment retrospectively. The CIT(A) concluded that the amendment to Section 40(a)(ia) should be considered retrospective, and no disallowance should be made if TDS is paid to the Government on or before the due date for filing the return of income under Section 139(1).2. Disallowance of Expenditure under Section 40(a)(ia):The AO disallowed a proportionate expenditure of Rs. 101,19,00,000 due to the late remittance of TDS, citing a violation of Section 40(a)(ia). The CIT(A) observed that the AO's disallowance was based on the late payment of TDS, which was made in April and May 2005, instead of within the financial year 2004-05. The CIT(A) noted that the assessee's primary contention was that the TDS was paid within the due date prescribed under Section 200 read with Rule 30 of the IT Rules, 1962. The CIT(A) rejected this contention, stating that TDS should have been deducted and remitted on or before 31-3-2005. However, the CIT(A) agreed with the assessee's alternative argument that, based on the retrospective application of the amendment to Section 40(a)(ia), the expenditure should be allowed if TDS was paid before the due date for filing the return of income under Section 139(1).The CIT(A) directed the AO to verify whether the TDS amount of Rs. 1,05,79,973 was deducted and paid before the due date for filing the return of income. If verified, no disallowance should be made under Section 40(a)(ia). The CIT(A) also noted that the AO had allowed the expenditure in the subsequent assessment year 2006-07 due to the remittance of TDS in the financial year 2005-06. However, since the expenditure was now allowable in the assessment year 2005-06, the AO was directed to recompute the income for the assessment year 2006-07 by withdrawing any credit given for the expenditure.Conclusion:The Tribunal upheld the CIT(A)'s decision, agreeing that the amendment to Section 40(a)(ia) has retrospective application and that the expenditure should be allowed if TDS was paid before the due date for filing the return of income. The Tribunal dismissed the Revenue's appeal, affirming that the CIT(A) was justified in allowing the assessee's claim based on the retrospective application of the amendment.