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2013 (7) TMI 958 - AT - Income TaxAddition u/s 40(a)(ia) - Held that - The provisions of Sec.40(a)(ia) of the Act, by the Finance Act, 2010 is retrospective from 1.4.2005. Consequently, any payment of tax deducted at source during previous years relevant to and from AY 05-06 can be made to the Government on or before the due date for filing return of income u/s.139(1) of the Act. If payments are made as aforesaid, then no deduction u/s.40(a)(ia) of the Act can be made. Admittedly in the present case, the 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. We order accordingly and allow the appeal by the Assessee.
Issues Involved:
1. Deductibility of payments made to sub-contractors under Section 40(a)(ia) of the Income Tax Act. 2. Retrospective application of amendments to Section 40(a)(ia) by the Finance Act, 2010. 3. Condonation of delay in filing the appeal. Issue-wise Detailed Analysis: 1. Deductibility of Payments Made to Sub-contractors under Section 40(a)(ia) of the Income Tax Act: The assessee, an individual deriving income from consultancy services and engineering contracts, made payments totaling Rs. 43,07,493 to sub-contractors during the assessment year 2008-09. The Assessing Officer (AO) noted that the assessee deducted tax at source on these payments but deposited the tax only on 15.04.2008. Under Section 40(a)(ia) of the Act, payments to contractors or sub-contractors are not deductible if tax is not deducted or, if deducted, not paid on or before 31st March of the previous year. An exception exists for payments made in March, where the tax can be paid by the due date for filing the return of income. The AO disallowed Rs. 31,67,175 paid before March 2008, as the tax was not deposited before 31.03.2008. The CIT(A) upheld this disallowance but allowed the assessee to claim the deduction in the subsequent year, provided the AO examined the claim as per law. 2. Retrospective Application of Amendments to Section 40(a)(ia) by the Finance Act, 2010: The Finance Act, 2010 amended Section 40(a)(ia) with retrospective effect from 1st April 2010, allowing deductions if the tax deducted at source is paid on or before the due date specified in Section 139(1). The ITAT Bangalore examined whether this amendment should be applied retrospectively from 1st April 2005. The Tribunal referred to the legislative history and judicial precedents, including the Special Bench decision in Bharati Shipyard Ltd. and the Kolkata Bench decision in Virgin Creations. The Kolkata High Court in Virgin Creations held the amendment to be retrospective from 1.4.2005, aligning with Supreme Court rulings in Allied Motors Pvt. Ltd. and Alom Extrusions Ltd. The Tribunal followed the Kolkata High Court's decision, concluding that the amendment is retrospective and thus applicable to the assessee's case. 3. Condonation of Delay in Filing the Appeal: The assessee filed an appeal against the CIT(A)'s order with a delay of 386 days. The delay was attributed to the advice of the tax consultant to file an application under Section 154 for the subsequent year, which was later found unfeasible. The Tribunal considered the affidavit explaining the delay and found a reasonable cause, thus condoning the delay. Conclusion: The Tribunal held that the amendment to Section 40(a)(ia) by the Finance Act, 2010 is retrospective from 1.4.2005. Consequently, the assessee's payment of tax deducted at source on or before the due date for filing the return of income should be allowed as a deduction. The disallowance of Rs. 31,67,175 was deleted, and the appeal was allowed. The Tribunal also referenced similar decisions in Rajamahendri Shipping & Oil Field Services Ltd. and Sri Piyush C. Mehta, reinforcing the consistency of this interpretation. The judgment was pronounced on 26th July 2013.
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