2013 (10) TMI 1078 - AT - Income Tax

Exercising power u/s 263 of the Income Tax Act TDS not deposited within the due date Disallowance u/s 40(a)(ia) of the Income Tax Act Held that - Reliance has been placed upon the Delhi High Court judgment in the case of CIT vs. Rajinder Kumar 2013 (7) TMI 454 - DELHI HIGH COURT , wherein it has been held that impugned amendment to section 40(a)(ia) permits remittance of TDS to the Central Government account on or before the due date of filing return of income u/s. 139(1) of the Act is retrospective in nature In the present case, though deducted TDS before 31st March of the previous year relevant to the assessment year and paid the same in to the Central Government Account before the due date of filing of return of income, the expenditure cannot be disallowed u/s. 40(a)(ia) of the Act - There is no dispute regarding the payment of TDS amount in to the Central Government account before the due date of filing the return of income of the assessee. Being so, exercising the power u/s. 263 of the Act by the CIT on this issue is not justified Decided in favor of Assessee.

Summary

Issues:
1. Jurisdiction of CIT under section 263 of the IT Act
2. Applicability of section 40(a)(ia) regarding TDS disallowance
3. Retrospective application of amendments to section 40(a)(ia)

Jurisdiction of CIT under section 263 of the IT Act:
The appeal challenged the CIT's order under section 263 of the IT Act for the assessment year 2007-08. The appellant contended that the CIT exceeded jurisdiction by assuming authority under section 263 when the assessment order was passed in accordance with the law. The appellant argued that the expenditure disallowance was based on surmises without substantial evidence. The Tribunal referred to previous cases and held that the CIT's jurisdiction was not justified, especially considering the retrospective application of section 40(a)(ia) and the timely deposit of TDS amounts.

Applicability of section 40(a)(ia) regarding TDS disallowance:
The Tribunal analyzed the issue of TDS disallowance under section 40(a)(ia) in light of retrospective amendments. Citing cases like CIT vs. Virgin Creations and ITO vs. Anil Kumar & Co., the Tribunal emphasized that if TDS amounts were deposited before the due date of filing the return, no disallowance could be made under section 40(a)(ia). The Tribunal upheld decisions where TDS was deposited timely, leading to the deletion of disallowance amounts, thereby providing relief to the assessee.

Retrospective application of amendments to section 40(a)(ia):
The Tribunal extensively discussed the retrospective application of amendments to section 40(a)(ia) in various cases. Referring to judgments like CIT vs. M/s. J.K. Construction Co. and DCIT vs. M/s. Liquidz India Pvt. Ltd., the Tribunal reiterated that timely deposit of TDS amounts before the due date of filing the return exempted the assessee from disallowance under section 40(a)(ia). The Tribunal highlighted that the retrospective nature of the amendments benefited the assessee, leading to the dismissal of appeals by the Revenue and upholding the orders favoring the assessee. Consequently, the Tribunal ruled in favor of the assessee, allowing the appeal and emphasizing the importance of timely TDS deposits to avoid disallowances under section 40(a)(ia).

In conclusion, the Tribunal's detailed analysis focused on the jurisdiction of the CIT under section 263, the applicability of section 40(a)(ia) concerning TDS disallowance, and the retrospective effect of amendments to section 40(a)(ia). The judgments cited underscored the significance of timely TDS deposits in determining the allowability of expenditures, ultimately leading to the allowance of the appellant's appeal.