TaxTMI 
TaxTMI 
2021 (4) TMI 1029
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.....04.2005 and 07.04.2005 after the due dates and the same was to be disallowed as per the provisions of section 40(a)(ia) of the Act and the amendment inserted by Finance Act, 2010 was applicable prospectively only from 01.04.2010 and not applicable to the assessment year 2005-06? (iii) Whether the disallowance made by the assessing officer as per the provisions of the Act as applicable for the assessment year 2005-06 was followed and since the assessee company has deducted tax for the entire amount only in the month of March and remitted the same on 04.04.2005 and 07.04.2005 after the closer for the relevant previous year?" 3. When the appeal is taken up for hearing, Mr. M.Swaminathan, learned Senior Standing Counsel appearing for the appellant fairly submitted that the issues involved in the present appeal are covered by the decision of the Hon'ble Supreme Court in the Judgment reported in (2018) 404 ITR 654 (SC) [Commissioner of Income Tax, Kolkata v. Calcutta Export Company] wherein the Hon'ble Supreme Court held as follows: " 14) For deciding as to the retrospective effect of the amendment made by Finance Act, 2010, it is required to see the Section as it stands be....
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....f the legislature was not to punish the assessee is further reflected from a bare reading of the provisions of Section 40(a)(ia) of the IT Act. It only results in shifting of the year in which the expenditure can be claimed as deduction. In a case where the tax deducted at source was duly deposited with the government within the prescribed time, the said amount can be claimed as a deduction from the income in the previous year in which the TDS was deducted. However, when the amount deducted in the form of TDS was deposited with the government after the expiry of period allowed for such deposit then the deductions can be claimed for such deposited TDS amount only in the previous year in which such payment was made to the government. 17) However, it has caused some genuine and apparent hardship to the assesses especially in respect of tax deducted at source in the last month of the previous year, the due date for payment of which as per the time specified in Section 200 (1) of IT Act was only on 7 th of April in the next year. The assessee in such case, thus, had a period of only seven days to pay the tax deducted at source from the expenditure incurred in the month of March so a....
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....ce under Section 40(a) (ia) of the IT Act shall be made if the tax deducted by them during the last month of the previous year has been paid on or before the last day of filing of return in accordance with the provisions of Section 139(1) of the IT Act for the said previous year. In case, the assessees are falling under the second category, no disallowance under Section 40(a)(ia) of IT Act where the tax was deducted before the last month of the previous year and the same was credited to the government before the expiry of the previous year. The net effect is that the assessee could not claim deduction for the TDS amount in the previous year in which the tax was deducted and the benefit of such deductions can be claimed in the next year only. 21) The amendment though has addressed the concerns of the assesses falling in the first category but with regard to the case falling in the second category, it was still resulting into unintended consequences and causing grave and genuine hardships to the assesses who had substantially complied with the relevant TDS provisions by deducting the tax at source and by paying the same to the credit of the Government before the due date of filing ....
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....tion of tax and the deductor discharges dual responsibility of collection of tax and its deposition to the government. Strict compliance of Section 40(a)(ia) may be justified keeping in view the legislative object and purpose behind the provision but a provision of such nature, the purpose of which is to ensure tax compliance and not to punish the tax payer, should not be allowed to be converted into an iron rod provision which metes out stern punishment and results in malevolent results, disproportionate to the offending act and aim of the legislation. Legislature can and do experiment and intervene from time to time when they feel and notice that the existing provision is causing and creating unintended and excessive hardships to citizens and subject or have resulted in great inconvenience and uncomfortable results. Obedience to law is mandatory and has to be enforced but the magnitude of punishment must not be disproportionate by what is required and necessary. The consequences and the injury caused, if disproportionate do and can result in amendments which have the effect of streamlining and correcting anomalies. As discussed above, the amendments made in 2008 and 2010 were ste....