Retrospective application of section 40(a)(ia) proviso defeats disallowance where TDS is paid before the return-filing due date.

The amended proviso to section 40(a)(ia), which permits deduction where tax deducted at source is deposited before the due date under section 139(1), was treated as a curative and beneficial amendment with retrospective effect from the date of insertion. Applying that principle, the disallowance of labour charges could not stand because the deducted tax had been deposited within the return-filing due date. The statutory condition for disallowance was therefore not attracted, and the assessee was entitled to relief.

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Issues: Whether the amended proviso to section 40(a)(ia) of the Income-tax Act, 1961, allowing deduction where tax deducted at source is deposited before the due date under section 139(1), applies retrospectively to Assessment Year 2009-10 and consequently whether the disallowance of labour charges was sustainable.

Analysis: The amendment introduced by the Finance Act, 2010 was treated as curative in nature and intended to remove unintended hardship. The controlling principle applied was that such a beneficial amendment, which merely relaxes the time for deposit of tax deducted at source, is to be interpreted liberally and given retrospective effect from the date of insertion of section 40(a)(ia). Since the assessee had deposited the deducted tax before the due date for filing the return under section 139(1), the statutory condition for disallowance was not attracted.

Conclusion: The amended provision applied retrospectively and the disallowance under section 40(a)(ia) was not justified. The issue is decided in favour of the assessee.

Ratio Decidendi: A curative amendment that extends the time for depositing TDS and removes unintended hardship must be applied retrospectively, and no disallowance under section 40(a)(ia) survives where the deducted tax is deposited before the due date under section 139(1).

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