2016 (2) TMI 508 - AT - Income Tax

Applicability of the provisions of section 40(a)(ia) - whether the provisions of section 40(a)(ia) are attracted to the facts of the present case after the amendment introduced by the Finance Act, 2010 where the tax has not been paid by the specified date but paid before the due date of filing of return u/s.139(1) - Held that - Since in the instant case the assessee has admittedly deposited the tax so deducted before the due date of filing of return of income u/s.139(1) of the I.T. Act, therefore, respectfully following the decision of ITO Vs. Anand Buildcon (2012 (9) TMI 987 - ITAT PUNE) and in absence of any contrary decision brought to our notice we uphold the order of the CIT(A) in deleting the disallowance. - Decided in favour of assessee

Summary

Issues:
- Disallowance of expenses under section 40(a)(ia) of the I.T. Act, 1961.

Analysis:

Issue 1: Disallowance of expenses under section 40(a)(ia) of the I.T. Act, 1961

The appeal pertains to the disallowance of expenses amounting to Rs. 60,02,351/- under section 40(a)(ia) of the I.T. Act, 1961 for Assessment Year 2007-08. The Assessing Officer disallowed the expenses as the tax on these expenses was not deducted at the source before the due date. However, the assessee contended that the amendment introduced by the Finance Act, 2010 made the provisions retrospective, allowing expenses if TDS is made during the previous year and credited to the Government Treasury before the due date of filing the return of income u/s.139(1) of the I.T. Act. The CIT(A) held in favor of the assessee, citing various decisions including the decision of the Calcutta High Court in the case of Virgin Creations, supporting the retrospective application of the amendment. The Revenue challenged this decision before the ITAT Pune.

The ITAT Pune, after considering the arguments and precedents, upheld the decision of the CIT(A). It noted that the tax deducted at source was deposited before the due date of filing the return of income, thereby meeting the requirements of the amended provision. Referring to the decision of the Calcutta High Court in Virgin Creations, the ITAT Pune concluded that the disallowance of expenses under section 40(a)(ia) was unjustified in this case. The ITAT Pune dismissed the appeal filed by the Revenue, affirming the decision of the CIT(A) and holding that the amendment to section 40(a)(ia) by the Finance Act, 2010 was retrospective from 1-4-2005, allowing for the deduction of expenses if TDS was deposited before the due date of filing the return of income.

Therefore, the ITAT Pune's judgment clarified the retrospective application of the amendment to section 40(a)(ia) of the I.T. Act, 1961, emphasizing the importance of timely deposit of TDS to avoid disallowance of expenses.