2017 (4) TMI 1273 - AT - Income Tax

TDS liability u/s 40(a)(ia) - scope of second proviso to Section 40(a)(ia) as been inserted by the Finance Act, 2012, w.e.f. 01.04.2013 - Held that - In the case of Ansal Land Mark Township P. Ltd. 2015 (9) TMI 79 - DELHI HIGH COURT pertaining to the retrospectivity of the second proviso to section 40(a)(ia) held as provided further that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B on any such sum but is not deemed to be an assessee in default under the first proviso to sub-section (1) of Section 201, then, for the purpose of this sub-clause, it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee referred to in the said proviso. - Decided against revenue

Summary

Issues:
Appeal against order of Commissioner (Appeals) regarding addition of expenses without TDS deduction under Section 40(a)(ia) of the Income Tax Act, 1961.

Analysis:
1. The appeal by the revenue challenged the deletion of the addition of ?71,17,450 due to non-deduction of TDS under Section 40(a)(ia) of the Income Tax Act, 1961.
2. The Assessing Officer disallowed the entire expenses as no TDS was deducted on printing charges, transportation charges, and brokerage/commission paid by the assessee.
3. The Commissioner (Appeals) remanded the matter back to the AO for verification, and upon receiving the remand report, observed that necessary tax had been paid by the deductees, causing no loss to the exchequer.
4. The CIT(A) noted that the amendment to Section 40(a)(ia) with the insertion of the proviso would be applicable to the assessee and allowed the appeal.
5. The revenue contended that the second proviso to Section 40(a)(ia) was inserted by the Finance Act, 2012, not applicable retrospectively, supporting the AO's order.
6. The assessee argued for retrospective application of the second proviso, citing various decisions, claiming that the amendment by Finance Act, 2010 should apply retrospectively.
7. Referring to decisions like Ansal Land Mark Township and Tirupati Construction, the Tribunal found that the second proviso to Section 40(a)(ia) was declaratory and curative, holding retrospective effect from 01.04.2005.
8. Based on the above analysis, the Tribunal upheld the CIT(A)'s order and dismissed the appeal by the revenue.

This detailed analysis covers the issues involved in the legal judgment, including the arguments presented by both parties, the decision of the Commissioner (Appeals), and the Tribunal's final ruling based on the retrospective application of the relevant provisions of the Income Tax Act, 1961.