2016 (3) TMI 756 - HC - Income Tax

Retrospectivity of amendment to the provisions of section 40(a)(ia) of the Act, by the Finance Act, 2010 - w.e.f. 01.04.2005 - Held that - As decided in CIT Vs. Shri Santosh Kumar Shetty 2015 (8) TMI 232 - KARNATAKA HIGH COURT this question came up for consideration before the Gujarat High Court in the case of Commissioner of Income Tax, Ahmedabad IV Vs. Om Prakash R Chaudhary 2015 (2) TMI 150 - GUJARAT HIGH COURT after referring to the judgments of Allied Motors (P.) Ltd. Vs. CIT 1997 (3) TMI 9 - SUPREME Court and CIT Vs. Alom Extrusions Limited 2009 (11) TMI 27 - SUPREME COURT in giving retrospective operation to the said amendment notwithstanding that the parliament has expressly stated that it comes into effect from 01.04.2010. The said amendment is curative in nature. The tribunal committed an error in holding it as prospective. The substantial questions of law is answered in favour of the assessee and against the revenue.

Summary

Issues:
Interpretation of the retrospective effect of an amendment to section 40(a)(ia) of the Act by the Finance Act, 2010.

Analysis:
The appellant-revenue challenged the Tribunal's decision regarding the retrospective application of the amendment to section 40(a)(ia) of the Act by the Finance Act, 2010. The Tribunal relied on previous decisions and held that the amendment should be considered retrospective from 01.04.2005, despite the Finance Act, 2010, specifying its effect from 01.04.2010. The Gujarat High Court's judgment in Commissioner of Income Tax vs. Om Prakash R Chaudhary emphasized the legislative changes and the need to address unintended consequences. The court analyzed the amendment's curative nature, aiming to rectify anomalies and hardships faced by taxpayers due to the TDS provisions. The amendment relaxed the time limit for TDS payment, aligning it with the due date of filing returns, thereby allowing deductions on expenditures. The court highlighted the legislative intent to provide relief and enhance compliance with TDS provisions.

The court further discussed the increased interest charges for late TDS payments and the severe impact of disallowing legitimate business expenditures. The judgment referenced decisions by the Delhi High Court and the Calcutta High Court, supporting the retrospective application of the amendment. Emphasizing the curative nature of the amendment, the court disagreed with the Tribunal's prospective view and ruled in favor of the assessee. The judgment reinforced the importance of interpreting statutes purposively to fulfill legislative intent and avoid undue hardships on taxpayers.

The court noted that the issue had been previously addressed in a decision involving Shri Santosh Kumar Shetty, establishing a precedent. While acknowledging the possibility of the issue being taken to the Apex Court, the court concluded that, as of the current status, the decision stood, and no substantial questions of law remained for consideration. The appellant was advised to await any further developments at the Supreme Court level before pursuing additional legal action. Consequently, the court dismissed the appeal, maintaining the existing decision based on established legal principles and precedents.