Retrospective TDS disallowance relief applies when tax is deposited before the return filing due date, despite year-end payment timing.

The ITAT Allahabad held that the addition relating to alleged suppression of income from sale of prospectus was rightly sustained because the assessee failed to produce cogent material showing that the stock was fully accounted for or that no sale took place outside the books. On section 40(a)(ia), the Tribunal applied the curative and retrospective effect of the Finance Act, 2010 amendment and held that where tax was deducted during the year and deposited on or before the due date under section 139(1), the expenditure could not be disallowed merely because payment was made after the end of the previous year. The assessee received relief only on the TDS disallowance issue.

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Issues: (i) Whether the addition made on account of alleged suppression of income from sale of prospectus was liable to be deleted in full; (ii) Whether the disallowance under section 40(a)(ia) was sustainable where tax deducted at source was deposited before the due date for filing the return of income under section 139(1).

Issue (i): Whether the addition made on account of alleged suppression of income from sale of prospectus was liable to be deleted in full.

Analysis: The assessee failed to establish with cogent material that the prospectus stock was fully accounted for or that the entire quantity had not been sold outside the books. The surrounding circumstances and the nature of the prospectus stock supported the inference that the sale proceeds had escaped assessment to the extent sustained by the appellate authority.

Conclusion: The addition sustained by the appellate authority was upheld and the assessee was not entitled to any further relief on this issue.

Issue (ii): Whether the disallowance under section 40(a)(ia) was sustainable where tax deducted at source was deposited before the due date for filing the return of income under section 139(1).

Analysis: The amendment to section 40(a)(ia) by the Finance Act, 2010 was held to be curative and retrospectively applicable from the date of insertion of the provision. Where tax was deducted during the year and deposited on or before the due date under section 139(1), the corresponding expenditure could not be disallowed merely because deposit was after the end of the previous year.

Conclusion: The assessee was entitled to deduction and the disallowance was deleted on this issue.

Final Conclusion: The appeal succeeded only on the disallowance under section 40(a)(ia) and failed on the prospectus income issue, resulting in partial relief to the assessee.

Ratio Decidendi: A curative amendment intended to remove unintended hardship and make a TDS disallowance provision workable operates retrospectively from the date of insertion, so expenditure cannot be disallowed where the deducted tax is deposited before the due date under section 139(1).

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