2015 (3) TMI 1067 - AT - Income Tax

TDS U/S 194C not made within the due date - Disallowance made under section 40(a)(ia) - CIT(A) deleted the disallowance - Held that - CIT(A) has committed no error in deleting the disallowance by following the decision of IT AT Mumbai in the case of Piyush C. Mehta(2012 (4) TMI 349 - ITAT MUMBAI ) in which it has followed the decision of Hon ble Calcutta High Court in the case of Virgin Creation (2011 (11) TMI 348 - CALCUTTA HIGH COURT ) to held Amendment to the provisions of Sec.40(a)(ia) of the Act, by the Finance Act, 2010 is retrospective from 1.4.2005. - If tax was deductible and was so deducted during the first eleven months of the previous year, that is, up to February, 2005, the disallowance was to be made if the assessee failed to pay it before 31st March, 2005 - provisions of Sec.40(a)(ia) of the Act, by the Finance Act, 2010 is retrospective from 1.4.2005 - assessee had deposited the tax deducted at source on or before the due date for filing return of income u/s.139(1) of the Act and therefore the impugned disallowance deserves to be deleted - Decided in favour of assessee.

Summary

Issues Involved:
1. Deletion of disallowance of Rs. 12,39,11,827 under section 40(a)(ia) of the Income Tax Act, 1961.
2. Applicability of the amendment to section 40(a)(ia) by the Finance Act, 2010.
3. Jurisdictional and hierarchical adherence to judicial decisions.

Issue-Wise Detailed Analysis:

1. Deletion of Disallowance under Section 40(a)(ia):
The Revenue appealed against the order of the CIT(A) which deleted the disallowance of Rs. 12,39,11,827 made under section 40(a)(ia) on the grounds that TDS payments under section 194C were not made within the due date. The CIT(A) found that the TDS on the disallowed amount was deducted and paid on 26/09/2009, before the due date for filing the return. The CIT(A) granted relief to the assessee by following the ITAT Mumbai decision in the case of Piyush C. Mehta, which held that the amendment by the Finance Act, 2010 was retrospective. The Revenue contended that the amendment was applicable only from 01/04/2010 and should not apply to the assessment year 2009-10.

2. Applicability of the Amendment to Section 40(a)(ia):
The Revenue argued that the amendment to section 40(a)(ia) by the Finance Act, 2010, which allows for payment of TDS up to the due date of filing the return, was applicable only from 01/04/2010 and not for earlier assessment years. The CIT(A) and the ITAT, however, relied on the decision of the Calcutta High Court in the case of Virgin Creations, which held that the amendment was retrospective and applied from 1.4.2005. The ITAT further supported its decision by referencing the Karnataka High Court ruling in CIT vs. Santosh Kumar Shetty, which also held that the amendment was curative and retrospective in operation.

3. Jurisdictional and Hierarchical Adherence to Judicial Decisions:
The ITAT emphasized the principle of hierarchical judicial system, where lower courts and tribunals are expected to follow the decisions of higher courts. The ITAT Mumbai in Piyush C. Mehta had followed the Calcutta High Court's decision in Virgin Creations, which was deemed to have higher judicial authority over the Special Bench decision in Bharati Shipyard Ltd. The ITAT reiterated that the amendment to section 40(a)(ia) by the Finance Act, 2010, being curative in nature, should be applied retrospectively, thus supporting the CIT(A)'s decision to delete the disallowance.

Conclusion:
The ITAT upheld the CIT(A)'s order, confirming that the disallowance of Rs. 12,39,11,827 under section 40(a)(ia) was rightly deleted since the TDS was paid before the due date for filing the return. The amendment to section 40(a)(ia) by the Finance Act, 2010 was deemed retrospective, applying from 1.4.2005, thereby covering the assessment year 2009-10. The ITAT dismissed the Revenue's appeal, reinforcing the adherence to higher judicial decisions and the retrospective application of curative amendments.