2014 (1) TMI 136 - HC - Income Tax

Failure to deposit tax deducted at source - Held that - Following H.S Mohindra Traders v. Income tax Officer, Ward 39 (2), New Delhi 2010 (7) TMI 801 - ITAT DELHI - The amended provision of Section 40 (a)(ia) clearly gives the time to the assessee to deposit the TDS on or before the due date specified in subsection (1) of Section 139 of the Act - The amendment came into effect from 1.04.2010. This is clearly erroneous in as much as Section 40(a)(ia) was amended by the Finance Act, 2008 with effect from 01.05.2005 whereby the words on or before the due date specified in subsection (1) of Section 139 was substituted by the words, has not been paid during the previous year, or in the subsequent year before the expiry of the time prescribed under subsection (1) of Section 200 of the Act - Decided against Revenue.

Summary

Issues:
1. Interpretation of Section 40(a)(ia) of the Income Tax Act regarding deduction of tax at source.
2. Application of retrospective amendment by the Finance Act 2010 to Assessment Year 2006-07.
3. Comparison of decisions between the Income Tax Appellate Tribunal and the Delhi High Court.

Analysis:
The primary issue in this case revolves around the interpretation of Section 40(a)(ia) of the Income Tax Act concerning the deduction of tax at source. The dispute arose when the assessee deducted the tax as required before 31st March 2006 but deposited it with the Revenue on 30th May 2006 for the Assessment Year 2006-07. The Revenue argued that this deposit was beyond the prescribed time, triggering the application of Section 40(a)(ia) of the Act.

The Income Tax Appellate Tribunal ruled in favor of the assessee, citing a decision from the Delhi Bench of the Tribunal in a similar case. The Tribunal's decision was further supported by the Delhi High Court, which dismissed the Revenue's appeal. The High Court emphasized that the provision of Section 40(a)(ia) allows the assessee to deposit the TDS on or before the due date specified in subsection (1) of Section 139 of the Act. The Court noted that the Tribunal correctly interpreted this provision and rejected the argument that the Tribunal wrongly relied on the amendment from 2010, clarifying that the relevant amendment actually occurred in 2008.

Given the alignment of the present case with the decision of the Delhi High Court, the Gujarat High Court upheld the view expressed by the Delhi High Court and dismissed the Tax Appeal. The judgment underscores the importance of timely deposit of tax deducted at source as per the provisions of the Income Tax Act, while also highlighting the significance of correct interpretation of statutory amendments in tax matters.