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<h1>Retrospective application of section 40(a)(ia) proviso defeats disallowance where TDS is paid before the return-filing due date.</h1> 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 ... Delayed deposit of TDS - operation of curative amendment u/s 40(a)(ia) - Assessee had deducted tax on certain payments during the previous year but failed to deposit the same on or before the last day of the previous year as required u/s 40(a)(ia) Assessee relied upon the amendment brought by the Finance Act, 2010 whereby the deduction was allowable in case TDS was paid before the due date specified in section 139(1) HELD THAT: - The Tribunal held that the amendment made by the Finance Act, 2010 extending the time for deposit of TDS up to the due date of filing the return under section 139(1) is curative and operates retrospectively. Following Calcutta Export Company case [2018 (5) TMI 356 - SUPREME COURT] it was held that once the deducted tax had been deposited before the due date of filing the return, the expenditure could not be disallowed under section 40(a)(ia). [Paras 8] Final Conclusion: The Tribunal allowed the appeal by holding that the expenditure was allowable since the TDS had been deposited before the due date u/s 139(1), and the amendment to section 40(a)(ia) was applicable retrospectively. 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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