2014 (1) TMI 1797 - AT - Income Tax

Addition invoking section 40(a)(ia) - plea of the assessee is that the TDS has been deposited with the state-exchequer much before the due date of filing of return of income - retrospectivity - CIT(A) deleted addition - Held that - The point canvassed by the assessee and which has also been accepted by the CIT(A), is in line with the judgment in the case of Virgin Creations (2011 (11) TMI 348 - CALCUTTA HIGH COURT ) wherein an identical controversy has been considered. As per the Hon ble High Court, amendment made to section 40(a)(ia) of the Act by the Finance Act, 2010 is retrospective in operation and considered in the said light, in the present case assessee has deposited the TDS on or before the due date of filing of return of income prescribed u/s 139(1) of the Act and therefore, the Assessing Officer was not justified in disallowing the corresponding expenditure u/s 40(a)(ia) of the Act. In this manner, we deem it fit and proper to affirm the order of the CIT(A) - Decided against revenue.

Summary

Issues:
Appeal against deletion of addition under section 40(a)(ia) of the Income-tax Act, 1961 for assessment year 2009-10.

Analysis:
The appeal before the Appellate Tribunal ITAT Pune concerned the deletion of an addition of Rs. 1,76,53,779/- made by the Assessing Officer under section 40(a)(ia) of the Income-tax Act, 1961. The respondent-assessee, engaged in contracting business, had incurred sub-contract charges and deposited the tax deducted at source (TDS) after the due date. The Assessing Officer disallowed the expenditure under section 40(a)(ia) as the TDS was not deposited on time. However, the CIT(A) held that the Finance Act, 2010 amendment, which was retrospective, allowed the TDS payment before the due date of filing income tax return under section 139(1) to avoid disallowance. The Tribunal noted that the assessee had deposited the TDS before the due date of filing the return and upheld the CIT(A)'s decision based on the judgment of the Hon'ble Calcutta High Court in a similar case. The Tribunal affirmed that the amendment to section 40(a)(ia) was retrospective, and the disallowance was not justified in this case. No contrary decision from any other High Court was presented, leading to the affirmation of the CIT(A)'s order and the dismissal of the Revenue's appeal.

This judgment provides clarity on the retrospective application of amendments to tax laws and the timing of TDS deposits in relation to disallowance under section 40(a)(ia) of the Income-tax Act, 1961. The decision emphasizes the importance of meeting statutory deadlines and aligning with legal interpretations to avoid adverse tax implications.