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2022 (11) TMI 1337 - AT - Income TaxDisallowance u/s 40(a)(ia) - non-deduction of TDS - liable to be restricted to 30% as against 100 made by the AO and confirmed by the CIT(A) - Scope of amendment to Section 40(a)(ia) of the Act by the Finance Act (No.2) Act 2014 - HELD THAT - A perusal of the amendment by the Finance (No.2) Act 2014 made to the provision of Section 40(a)(ia) of the Act clearly shows that the amendment has been brought to remove hardship caused to the assessee. As understood that the disallowance of 100% by the said amendment was restricted to 30% thus clearly the amendment was brought in to remove the hardship caused to the assessee. The principle laid down in the case of Vatika Township (P.) Ltd. 2014 (9) TMI 576 - SUPREME COURT the AO is directed to restrict the disallowance u/s.40(a)(ia) of the Act to 30%. As argued by the ld. Sr. DR that at the time of hearing of miscellaneous application the Bench was convinced that the said amendment was not retrospective and for that purpose only the earlier order of the Tribunal had been recalled. The said argument would not hold good insofar as when the miscellaneous application is heard its prima facie case that is looked at. It is at the time of hearing of the appeal that a perusal of the various decisions and the amendments are looked into. In these circumstances the appeal of the assessee is partly allowed.
Issues: Appeal against disallowance of TDS under Section 40(a)(ia) for AY 2014-2015.
Analysis: 1. The appeal was filed against the order of the ld. CIT(A)-1, Bhubaneswar, for the assessment year 2014-2015, regarding the disallowance of TDS under Section 40(a)(ia) of the Income Tax Act. 2. The original order by the Tribunal restricted the disallowance to 30% instead of 100% made by the AO. However, a miscellaneous application was filed by the revenue citing the decision of the Supreme Court in a specific case, leading to the recall of the Tribunal's order due to a perceived mistake. 3. The assessee argued that the Supreme Court's decision did not mention the retrospective nature of the amendment to Section 40(a)(ia) by the Finance Act, 2014. The assessee referred to other Tribunal cases supporting the retrospective application of the amendment. 4. The DR supported the original orders, stating that while the Supreme Court did not explicitly declare the amendment as non-retrospective, the interpretation should lean towards non-retrospectivity. 5. The Tribunal analyzed the nature of amendments brought by various Finance Acts, emphasizing that if an amendment aims to alleviate hardships faced by the assessee, it is clarificatory in nature. Referring to the decision in Vatika Township case, the Tribunal concluded that the amendment to Section 40(a)(ia) was to reduce the disallowance from 100% to 30%, indicating a move to relieve assessee hardships. 6. The Tribunal directed the AO to restrict the disallowance to 30% based on the retrospective nature of the amendment and the principles established by previous Tribunal decisions and the Supreme Court's Larger Bench ruling in the Vatika Township case. 7. The Tribunal clarified that the decision to recall the earlier order was based on a prima facie view during the hearing of the miscellaneous application, and the appeal hearing involved a detailed analysis of decisions and amendments. Consequently, the appeal of the assessee was partly allowed. 8. The final order stated that the appeal of the assessee was partly allowed, with the decision pronounced in open court on a specified date.
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