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Issues Involved:
The appeal by the Revenue and the Cross Objection by the assessee against the order of the Commissioner of Income-tax (Appeals)-II Nasik dated 5-7-2011, arising from the order dated 9-12-2009 passed by the Assessing Officer u/s 143(3) of the Income-tax Act, 1961 for the assessment year 2007-08. Revenue's Appeal: The Revenue contested the deletion of an addition of Rs. 19,99,800/- on account of disallowance of payment to labour u/s 40(a)(ia) without deducting and payment of TDS into Central Govt. Account. The CIT(A) relied on a decision of ITAT Pune Bench, Pune in a previous case without considering the decision of Hon'ble ITAT Mumbai Special Bench in another case. The Revenue's grievance primarily focused on the action of CIT(A) in deleting the mentioned addition made by the Assessing Officer invoking section 40(a)(ia) of the Act. The Assessing Officer disallowed the expenditure on labour charges due to late deposit of TDS, but the CIT(A) deleted the addition based on a previous Tribunal decision. The tax deducted at source on labour charges was deposited late, leading to the disallowance u/s 40(a)(ia) by the Assessing Officer. However, the CIT(A) deleted the addition citing a Tribunal decision that the provisions of sec. 40(a)(ia) are not applicable if actual payment was made before the end of the year. The Revenue argued that the amendment by the Finance Act, 2010 should not apply retrospectively to the assessment year 2007-08. Assessee's Argument: The assessee argued that the amendment by the Finance Act, 2010 should be applied retrospectively to mitigate the disallowance u/s 40(a)(ia) of the Act. They contended that the TDS was deposited before the due date for filing the return specified u/s 139(1) of the Act for the assessment year in question, rendering the disallowance unjustified. The assessee's position was supported by a judgment of the Calcutta High Court, which held that the impugned amendment made by the Finance Act, 2010 should be retrospective from 1-4-2005. This retrospective application would allow for the mitigation of the disallowance under section 40(a)(ia) if the TDS was deposited before the due date for filing the return. Judgment: The Tribunal upheld the decision of the CIT(A) in deleting the addition, citing the retrospective application of the amendment by the Finance Act, 2010 from 1-4-2005. The disallowance of Rs. 19,99,800/- by invoking section 40(a)(ia) of the Act was deemed unjustified as the assessee had deposited the corresponding TDS before the due date for filing the return of income specified u/s 139(1) of the Act for the assessment year in question. The appeal of the Revenue was dismissed, and the cross objection filed by the assessee became infructuous as the addition was deleted. Both the appeal of the Revenue and the cross objection of the assessee were ultimately dismissed. [Decision pronounced in the open court on 27th September 2012.]
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