Retrospective curative amendment to section 40(a)(ia) barred disallowance where TDS was paid before return filing due date.

Section 40(a)(ia) disallowance for freight and other payments was held unsustainable where tax was deducted in February 2007 and deposited in May 2007 before the due date under section 139(1). The Tribunal applied the jurisdictional High Court's view that the Finance Act, 2010 amendment to the proviso to section 40(a)(ia) was remedial and curative, and therefore retrospective. On that basis, the statutory condition for disallowance was not met, and the assessee was entitled to the deduction.

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Issues: Whether the disallowance under section 40(a)(ia) for freight and other payments was sustainable where tax was deducted in February 2007 but deposited in May 2007, and whether the Finance Act, 2010 amendment to section 40(a)(ia) applied retrospectively.

Analysis: The disallowance turned on the effect of the amended proviso to section 40(a)(ia). The Tribunal followed the jurisdictional High Court ruling that the amendment brought by the Finance Act, 2010 was remedial and curative in nature and therefore operated retrospectively. On the undisputed facts, the tax deducted at source had been paid before the due date for filing the return under section 139(1), so the statutory condition for disallowance was not attracted.

Conclusion: The disallowance was not sustainable and the assessee was entitled to the deduction.

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