TaxTMI 
TaxTMI 
2012 (6) TMI 293
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....efore the due date of filing of return is not acceptable. 4. The tax deductable during the period other than that of the last month of the year is covered by Proviso B of section 40(a)(ia), according to which, the due date for remitting the tax deducted would be the last day of the previous year in order to avoid disallowance u/s.40(a)(ia) of the Act. 5. For these and such other grounds that may be urged at the time of hearing of the appeal, the order of the learned CIT(A) may be set aside and that the order of the AO may be restored." 3. From the above grounds it is gathered that the grievance of the assessee relates to the deletion of the addition of Q 70,13,932 made by the Assessing Officer by invoking the provisions of section 40(a)(ia) of the Income-tax Act, 1961 [hereinafter referred to as "the Act" in short"]. 4. The facts of the case in brief are that the assessee is a proprietor of M/s. G.S. Power Systems which was trading in generator and spare parts. The assessee filed his return of income on 30.09.2008 declaring an income of Q 18,01,980. The assessee revised the return on 01.10.2008 which was processed u/s. 143(1) of the Act. Thereafter the case was selected....
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.... RR Power Systems 3,42,405 7,054 31/3/08 30/5/08 Sri Lalitha Enterprises 4,65,561 9,591 31/3/08 30/5/08 Asian Power Controls Ltd. 21,349 440 31/3/08 30/5/08 TOTAL 17,30,932 54,355 31/3/08 30/5/08 From the above statement it is evident that all deductions have been made on the last month of the previous year and such TDS has been paid on or before the due date of filing the return; and accordingly as per sub-clause (A) of section 40(a)(ia), the assessee is entitled for deduction of the expenditure." The assessee placed the reliance on the following case laws:- (i) Bapusaheb Nanasaheb Dhumal v. ACIT, ITA.No. 6628/Mum/2009 (Mum ITAT) (ii) Bansal Parivahan (India) Pvt. Ltd. v. ITO, 36(II) 427 (Mum. 'B' Trib) (iii) ITO v. Kulwant Singh Randhwa (ITAT) dt. 16/12/2010 7. The ld. CIT(Appeals) after considering the submissions of the assessee directed the AO to allow the deduction of expenditure of Rs.17,30,932 by observing in paras 3 and 3.1 of the impugned order as under:- "3. I have considered the facts of the case, the appellant's submission and perused the assessment order. The assessment order reveals that th....
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.... provisions of Chapter-XVII but deducted in the subsequent year or deducted during the last month of previous year but paid after the due date u/s 139(1) or deducted during the other month of the previous year except last month but paid after the end of the said previous year then the said sum shall not be allowed as deduction in computing the income of the previous year but allowed in the previous year in which the said tax has been paid. If the condition of deduction and payment prescribed under Chapter XVII/XVIIB are applicable for disallowance of the deduction u/s 40(a)(ia) then the provisions of section 40(a)(ia) will be rendered as meaningless, absurdity and etios. As per the provisions of section 40(a)(ia) the deduction is disallowed only in the case when either no tax was deducted or it was not paid after deduction. But when the tax is deducted may be belatedly and deposited belatedly then deduction is allowable in the previous year in which it was deposited. Therefore, if the provisions of section 194C with respect to the time of deduction and payments are applied for the disallowance u/s 40(a)(ia) then there will be no purpose or object for providing the certain condition....
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....Hon'ble Calcutta High court in favour of the assessee in the case of CIT v. Virgin Creations, ITA No.302 of 2011, order dated 23.11.2011, copy of the same is placed at pages No.15 & 16 of the assessee's paperbook. 11. We have considered the submissions of both the parties and carefully gone through the material available on record. In the present case, it is not in dispute that that the assessee deducted TDS which was not paid to the account of Central Govt. within the prescribed time, however, it was paid before the due date of filing the return specified in section 139(1) of the Act. On a similar issue, the Hon'ble Calcutta High Court held that amendment in sec. 40(a)(ia) is having retrospective operation and upheld the order of the ITAT in the case of CIT v. Virgin Creations, ITA No.302 of 2011, judgment dated 23.11.2011, copy of which is placed at pages 15 and 16 of the assessee's compilation, by observing as under:- "The learned Tribunal on fact found that the assessee had deducted tax at source from the paid charges between the period April 1, 2005 and April 28, 2006 and the same were paid by the assessee in July and August 2006, i.e. well before the due date of filing ....
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....ent under Chapter XVII and such tax has not been deducted or after deduction has not been paid then the said deduction is not allowable. As per clause (A) of proviso to clause (a)(ia), if the tax is deducted during the last month of previous year and paid on or before the due date of filing of return as per the provisions of section 139(1), then such sum shall be allowed as deduction. In the cases where the tax is deducted during previous year other than the last month of previous year but is deposited before the last day of previous year then it will be allowed as deduction. Therefore, the condition for allowability of deduction is prescribed under section 40(a)(ia) itself and provisions of Chapter XVII and section 194C under Chapter XVII-B are relevant only for purposes of ascertaining deductibility of tax on payment. Once, the nature of payment is falling under the provisions of Chapter XVII/VII-B then disallowance under section 40(a)(ia) shall be as per condition as provided under this section itself. The proviso to section 40(a)(ia) makes it further clear that even in the case when the tax has been deductible as per the provisions of Chapter XVII but deducted in the subsequent....
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..... 40(a)(ia) by the Finance Act, 2010 has been specifically made retrospectively applicable from the asst. yr. 2010-11. It has nowhere been expressly set out that the amendment is curative or merely declaratory of the previous law. The intention of the legislature as gathered from the Notes on Clauses and the Memorandum Explaining the Provisions of the Finance Bill does not particularly indicate any relaxation in the provision retrospectively from asst. yr. 2005-06 by providing that the expenditure on which due tax was deducted upto February, 2005 but paid before the due date specified in s. 139(1) shall not suffer any disallowance in the asst. yr. 2005-06." 14. However, the Hon'ble Calcutta High Court has taken a different view in the case of CIT v. Virgin Creations (supra) and the issue stands decided against the revenue. Therefore considering the precedent in the judicial hierarchy, we are bound to follow the decision of the Hon'ble Calcutta High Court because it is the only judgment of any High Court which is brought to our notice. 15. Similar view has been taken in the Third Member decision in the case of Kanel Oil & Export Inds. Ltd. v. JCIT [2009] 121 ITD 596 (Ahd) (TM)....