2010 (12) TMI 710 - AT - Income Tax

Disallowance u/s 40(a)(ia) - Penalty - Interest u/s 234B 234C & 234D - TDS u/s 194C - Reassessment - whether the amendments made in the provisions of section 40(a)(ia) of the Act are applicable w.e.f. 1.4.2010 or with retrospective effect from 1.4.2005 - Since it is necessary to spell out the degree of retrospectivity from the language of the relevant provisions itself close attention has to be paid to the provisions of the said section - The proviso to the section 40(a)(ia) stipulated that if tax is deducted in subsequent year or having been deducted in the relevant previous year paid after the stipulated time limits the assessee would be entitled to claim deduction in the year in which payment is actually made - It cannot be said to be an invariable rule that a statute could not be retrospective unless so expressed in the very terms of the section which had to be construed - Held that retrospectively may result not only from the express language employed in a statute but also by necessary implication - Appeal is allowed No additional ground having been raised in terms of the residuary ground accordingly this ground is dismissed - In the result appeal is partly allowed

Issues Involved:
1. Addition under Section 40(a)(ia) of the Act
2. Allowance of expenses in subsequent year
3. Excess claim of depreciation
4. Ad hoc disallowance of tyre expenses
5. Initiation of penalty under Section 271(1)(c) of the Act
6. Levy of interest under Sections 234B, 234C, and 234D of the Act

Detailed Analysis:

1. Addition under Section 40(a)(ia) of the Act:
The assessee contested the addition of Rs. 87,05,272 made by the AO under Section 40(a)(ia) due to the late deposit of TDS. The AO disallowed the amount as the tax deducted at source was not paid within the stipulated time under Section 200(1). The CIT(A) upheld the AO's decision but allowed the deduction in the subsequent year when the TDS was deposited. The Tribunal analyzed whether the amendments to Section 40(a)(ia) by the Finance Act, 2010, which relaxed the conditions, should apply retrospectively from 1.4.2005. The Tribunal concluded that the amendments were curative and remedial, thus applicable retrospectively from 1.4.2005, and allowed the assessee's claim.

2. Allowance of expenses in subsequent year:
The CIT(A) directed the AO to allow the expenses in the subsequent year (AY 2006-07) as the TDS was deposited in April and June 2005. The Tribunal, agreeing with the CIT(A)'s direction, stated that the amendments to Section 40(a)(ia) should apply retrospectively, allowing the deduction in the year of actual payment.

3. Excess claim of depreciation:
The AO disallowed Rs. 69,806 due to the assessee's failure to reduce the depreciation claim by 50% for an asset used for less than 180 days. The CIT(A) upheld this disallowance as the assessee did not contest it. The Tribunal, finding no submissions or infirmities pointed out by the assessee, dismissed this ground.

4. Ad hoc disallowance of tyre expenses:
The AO disallowed Rs. 50,000 out of tyre expenses due to unsupported vouchers. The CIT(A) upheld this disallowance, and the Tribunal, noting the lack of evidence or material from the assessee to challenge the findings, dismissed this ground.

5. Initiation of penalty under Section 271(1)(c) of the Act:
The Tribunal dismissed this ground, stating that no appeal lies against the mere initiation of penalty proceedings.

6. Levy of interest under Sections 234B, 234C, and 234D of the Act:
The Tribunal noted that the levy of interest under Sections 234B and 234C is mandatory, dismissing these grounds. For Section 234D, the Tribunal referred to the ITAT Special Bench decision in Ekta Promoters (P.) Ltd., holding that Section 234D applies from AY 2004-05 onward, thus rejecting the ground for earlier years.

Conclusion:
The appeal was partly allowed, with the Tribunal granting relief on the applicability of amendments to Section 40(a)(ia) retrospectively, while upholding the disallowances and interest levies in other respects.

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