2014 (10) TMI 586 - HC - Income Tax

Effect of amendment u/s 40(a)(ia) w.e.f. 1.4.2010 - TDS deducted deposited after 31.5.2005 Contractor s payment and professional expenses made after due date - Held that - Tribunal was rightly of the view that relying upon CIT Vs. Virgin Creations 2011 (11) TMI 348 - CALCUTTA HIGH COURT - if payment of TDS is made before the due date of filing of the return as envisaged u/s 139(1), addition could not be made - Since the payment of balance amount of TDS has been made in the month of June, 2005, which is much before the due date for filing of the return as envisaged u/s 139(1), therefore, addition U/s 40(a)(ia) could not be made the order of the Tribunal is upheld Decided against revenue.

Summary

Issues:
Challenge to the order passed by the Income Tax Appellate Tribunal regarding the applicability of an amendment to Section 40(a)(ia) introduced by the Finance Act, 2010 to a case related to the assessment year 2005-06.

Analysis:
The High Court examined the appeal challenging the order of the Income Tax Appellate Tribunal (ITAT) regarding the applicability of the amendment to Section 40(a)(ia) introduced by the Finance Act, 2010 to a case concerning the assessment year 2005-06. The assessee, engaged in the export business, was questioned during assessment proceedings about the delayed deposit of Tax Deducted at Source (TDS) after 31.5.2005. The Assessing Officer disallowed corresponding expenditure due to the late TDS deposit, adding the amount to the company's income. The Commissioner of Income Tax (Appeals) allowed certain deductions but disallowed others. The ITAT, referencing a Calcutta High Court ruling, held that if TDS payment is made before the due date of filing the return, no addition can be made under Section 40(a)(ia). The High Court agreed with this reasoning and cited a Delhi High Court judgment stating that the amendment in Section 40(a)(ai) is retrospective. The Court found no grounds to differ with these judgments and upheld the ITAT's decision to rectify the error made by the Assessing Officer in disallowing the expenditure.

The High Court concluded that since the assessee had deposited the TDS before the return filing date, the Assessing Officer's disallowance of expenditure was erroneous. Upholding the ITAT's decision, the Court dismissed the appeal, affirming that the amendment to Section 40(a)(ia) introduced by the Finance Act, 2010 was retrospective and did not apply to the case related to the assessment year 2005-06. The Court found no legal basis to deviate from the judgments cited and concurred with the ITAT's rectification of the error made by the Assessing Officer.