2012 (7) TMI 1022 - AT - Income Tax

Addition u/s 40(a)(ia) - Held that - Since the TDS was deposited on 25/5/05 therefore we hereby direct to delete the addition - Decided in favour of assessee.

Summary

Issues:
Appeal against order confirming addition under section 40(a)(ia) of the IT Act, 1961.

Analysis:
1. Issue of Correct Amount: The appellant contended that the correct amount of TDS payable under Sec. 94C of the IT Act, 1961 was different from the amount mentioned in the ground. The correct amount was stated to be &8377; 20,02,500, and a request was made to correct the amount noted in the grounds of appeal.

2. Non-Deduction of TDS: The Assessing Officer observed that certain payments were made to sub-contractors without deduction of tax at source, amounting to &8377; 31,84,737, contravening section 40(a)(ia) of the IT Act. The appellant argued that TDS under section 194C was deducted and paid on 25.5.2005, along with filing Form No.26 on 02/06/2005. However, the AO disallowed the expenditure of &8377; 29,97,552 for late deposit of TDS.

3. Decision of CIT(A): The CIT(A) partially upheld the addition, noting that TDS on payments made in March 2005 was deposited in the government account on 25.5.05. The CIT(A) allowed relief of &8377; 9,68,087 based on an amendment to section 40(a)(ia) with retrospective effect from 1.4.2005. The CIT(A) dismissed the appellant's claim regarding payments exceeding &8377; 20,000 to each contractor.

4. Legal Precedents: The Tribunal referred to a decision of the Hon'ble Calcutta High Court in a similar case, where it was held that section 40(a)(ia) has retrospective operation. Another case cited was M/s. Alpha Projects Society P.Ltd. vs. DCIT, where the Special Bench of ITAT Mumbai held a different view. However, the Tribunal followed the decision of the Calcutta High Court, directing the deletion of the addition due to the deposit of TDS on 25/5/05.

5. Final Decision: Considering the legal precedents and the retrospective application of section 40(a)(ia), the Tribunal allowed the appeal, directing the deletion of the addition made by the AO. The Tribunal's decision was in line with the judgments of the Calcutta High Court and the factual position regarding the timely deduction and payment of TDS.