2014 (11) TMI 1154

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....educted for a sum of Rs. 4,26,65,256/- being not deposited to government account within the time limit prescribed. To assail the assessment made by the Assessing Officer under the order dated 30.12.2009 the assessee preferred an appeal, that came to be allowed vide order dated 31.3.2011. The learned Commissioner Income Tax while setting aside the assessment order dated 31.12.2009 held that the provisions of Section 40[a](ia) as amended by the Finance Act, 2010 are remedial/curative in nature, thus, the same would apply retrospectively. On such application of the provision aforesaid, the addition of the TDS was ordered to be excluded from income of the assessee. The Revenue challenged the order passed by the Commissioner Income Tax, Jodhpur Bench, Jodhpur by way of filing an appeal, that came to be dismissed by quite a short order dated 27.6.2013. As per learned Income Tax Appellate Tribunal, if the TDS is deducted in time and deposited before filing of the return no disallowance could have been made. In this appeal while questioning correctness of the order passed by the Income Tax Appellate Tribunal the only argument advanced by learned counsel for the Revenue is that the....

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.... of interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to a resident or amounts payable to a contractor or subcontractor, being resident, results in the disallowance of the said sum, in the computation of income of the payer, on which tax is required to be deducted under Chapter XVII-B. It is proposed to amend sub-clause (ia) of clause (a) of the aforesaid section to provide that disallowance under the said sub-clause will be attracted, if, after deduction of tax during the previous year, the same has not been paid on or before the due date of filing of return of income specified in subsection (1) of section 139. The proviso to the said sub-clause provides that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the last month of the previous year but paid after the due date of filing of return or deducted during any other month of the previous year but paid after the end of the said previous year, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid. This amendment will take effect retrospectiv....

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....12 per cent to 18 per cent per annum". The amended provision, its explanation and the contents of the Finance Bill, 2010 speech clearly indicates curative nature of the amendment brought in. A Division Bench of Gujarat High Court while examining a question in the terms that whether the Income Tax Appellate Tribunal was justified in deleting the addition of Rs. 23,13,933/-, relying upon the amendment made in Section 40[a](ia) of the Income Tax Act, 1961 by the Finance Act, 2010 and thereby giving it retrospective effect, after taking into consideration the facts noticed above arrived at conclusion that the amendment made in Section 40[a](ia) of the Income Tax Act, 1961 by the Finance Act, 2010 is retrospective in operation i.e. from the date of insertion of Section 40[a](ia) of the Act. The conclusion aforesaid was arrived by discussing the entire issue as under:- "16.5 Of course, the Legislature has given the effect from a specified date and applied the same to A.Y 2010-11 and subsequent years, this provision being curative in nature, its effect needs to be read retrospectively in operation. Its very purpose would not be subserved, if the effect is limited to A.Y 201....

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.... limit for payment of TDS has to be held retrospective not from 1st April 2010 only. If we recall at this stage the speech of Finance Minister while introducing this provision by way of Finance Act, 2010, this amendment essentially has been brought for relaxing the current provision on disallowance of expenditure. The tax, if is deducted at any time during the financial year and paid before the date of filing of the return, the Legislature intended to allow deduction on such expenditure with an intention to permit additional time for most deductors upto September of the next financial year. 17.1 We draw further support from the fact that the rigor of payment of interest is also enhanced by increasing the interest charged on tax deducted, if any deposit by the specified date i.e., up to the filing of the return is not made, from 12% to 18% per annum in the provision of Section 201 (1A). Prior to the said amendment of Finance Act, 2010 under Section 201 (1A), assessee was liable to pay simple interest at one per cent for every month or part of month, in case of failure to deduct tax on payment of deducted tax, increase is made correspondingly from one per cent to one and hal....