2016 (4) TMI 262 - HC - Income Tax

Amendment to section 40(a)(ia) - retrospectivity or prospectivity - Held that - The controversy involved in the present case stands concluded in favour of the assessee and against the revenue by the decision of this court in the case of Commissioner of Income Tax v. BMS Projects, (2014 (4) TMI 242 - GUJARAT HIGH COURT ) and Commissioner of Income Tax, Ahmedabad-IV v. Omprakash R Chaudhary 2015 (2) TMI 150 - GUJARAT HIGH COURT wherein it has been held that the amendment to section 40(a)(ia) of the Income Tax Act, 1961 by the Finance Act, 2010 has retrospective effect.

Summary

Issues:
1. Disallowance of contract payment under section 40(a)(ia) of the Income Tax Act, 1961.
2. Applicability of the decision in the case of cit Vs. J.K. Construction Co to the present case.

Analysis:
1. The primary issue in this case revolves around the disallowance of a contract payment under section 40(a)(ia) of the Income Tax Act, 1961. The appeal was filed by the revenue against the order of the Income Tax Appellate Tribunal (ITAT) which deleted the disallowance of a specific amount in relation to contract payments made by the assessee. The central question was whether the ITAT was justified in deleting the disallowance, despite the TDS payment being made to the government account after the contract payment. The controversy was related to the provisions of section 40(a)(ia) of the Act for the Assessment Year 2005-06.

2. The second issue pertained to the applicability of a previous decision in the case of Commissioner of Income Tax v. BMS Projects and Commissioner of Income Tax, Ahmedabad-IV v. Omprakash R Chaudhary, where it was held that the amendment to section 40(a)(ia) of the Income Tax Act, 1961 by the Finance Act, 2010 has retrospective effect. The question was whether the decision in the case of cit Vs. J.K. Construction Co could be directly applied to the present case without considering the retrospective application of the amendment made to the Act.

3. The court, after considering the arguments presented, referred to the previous decisions where it was established that the amendment to section 40(a)(ia) of the Income Tax Act, 1961 by the Finance Act, 2010 has retrospective effect. The court noted that the controversy in the present case had already been settled in favor of the assessee and against the revenue based on these previous decisions. Therefore, the court found no substantial question of law warranting interference in the impugned order passed by the Tribunal. Consequently, the appeal was dismissed based on the precedents and established legal principles.

This detailed analysis of the judgment highlights the key issues, arguments, and the court's reasoning in arriving at the decision to dismiss the appeal.