2011 (8) TMI 1145 - AT - Income Tax

Summary

Issues Involved:
1. Disallowance u/s 40(a)(ia) of the Income-tax Act due to non-compliance with TDS provisions.

Summary:

Issue 1: Disallowance u/s 40(a)(ia) of the Income-tax Act

The assessee, engaged in the construction business, filed an appeal against the order of the CIT(A) confirming the disallowance of Rs. 14,30,535/- u/s 40(a)(ia) of the Act. The AO had added back Rs. 15,12,485/- for non-compliance with Chapter XVII-B of the Income-tax Act regarding TDS payments.

In appeal, the assessee argued that the disallowance was notional since TDS had been deducted and paid on 10.05.2003. The CIT(A) partially upheld the disallowance but provided relief for payments made in March 2005, where TDS was deposited before the return filing date, deleting Rs. 81,950/- from the disallowance.

The assessee contended that the TDS amount with interest was deposited on 10.05.2005, before the due date specified u/s 139(1) of the Act, and cited the Finance Act, 2010 amendment, which should apply retrospectively, thus negating the disallowance u/s 40(a)(ia).

The Tribunal referenced a similar case (ACIT vs. Shri Sandeep R. Kapoor) where it was held that the amendment to Section 40(a)(ia) by the Finance Act, 2010, was clarificatory and retrospective from 01-04-2005. The Tribunal concluded that if TDS was paid before the due date of filing the return, no disallowance should be made u/s 40(a)(ia).

Following this precedent, the Tribunal directed the AO to verify the actual date of TDS payment. If TDS was deposited before the return filing due date, no disallowance would be warranted. Otherwise, the disallowance would be sustained. The AO was instructed to adjudicate the issue after providing the assessee an opportunity to be heard.

In conclusion, the appeal was allowed for statistical purposes, with the order pronounced in open Court on 26.8.2011.