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2016 (11) TMI 446 - AT - Income TaxEffect of retrospectivity of Section 40(a)(ia) - taxes paid to the credit of Central government before the due date of filing of return - Held that - We have observed that the assessee has made payment to contractors and also on account of brokerage and professional fees which were made before 1-3-2007 i.e. within first eleven months of the financial year 2006-07 and taxes were deducted at source under Chapter XVII-B of the Act and admittedly the said taxes deducted at source were deposited to the Credit of Central Government by the assessee after the end of financial year 2006-2007 but before the due date of filing of return of income u/s 139(1) of the Act. It is an undisputed position that the assessee has duly paid the taxes deducted at source under Chapter XVII-B of the Act during the first eleven months of the financial year ended 31-03-2007 before the due date of filing of return u/s. 139(1) of the Act . Section 40(a)(ia) was amended by Finance Act, 2010 whereby under the amended provisions, the tax deducted at source under Chapter XVII-B of the Act if paid to the credit of Central government before the due date of filing of return u/s 139(1) of the Act, no disallowance u/s. 40(a)(ia) of the Act is called for . The decisions relied upon by the assessee supports the claim of the assessee, we hold that the assessee having made payment of tax deducted at source in the first eleven month of financial year ending 31-03-2007 to the credit Central Government before the due date of filing of return of income u/s. 139(1) of the Act, no disallowance can be made u/s 40(a)(ia) of the Act and accordingly we delete the disallowance made by the A.O. by holding that the amendment made by the Finance Act, 2010 to Section 40(a)(ia) of the Act is retrospective - Decided against revenue
Issues Involved:
1. Retrospective effect of the amendment to Section 40(a)(ia) of the Income Tax Act, 1961. 2. Validity of reopening the assessment under Section 147/148 of the Act. Issue-wise Detailed Analysis: 1. Retrospective Effect of the Amendment to Section 40(a)(ia): The primary issue revolved around whether the amendment introduced by the Finance Act, 2010 to Section 40(a)(ia) of the Income Tax Act, 1961, which allowed for the deposit of TDS before the due date for filing the return under Section 139(1) of the Act, had retrospective effect. The assessee argued that the amendment was retrospective, relying on the decision of the Hon’ble Calcutta High Court in the case of CIT v. Virgin Creations and the Mumbai Tribunal in Piyush C. Mehta v. ACIT. The Revenue, however, contended that the amendment was prospective, as held by the Special Bench of ITAT in the case of Bharti Shipyard Ltd. The Tribunal observed that the assessee had deducted TDS on payments made to contractors, brokerage, and professional fees within the first eleven months of the financial year 2006-07 and deposited the TDS before the due date for filing the return under Section 139(1) of the Act. The Tribunal noted that the amendment to Section 40(a)(ia) by the Finance Act, 2010, was indeed held to be retrospective by various judicial pronouncements, including the Hon’ble Calcutta High Court in Virgin Creations and the Hon’ble Gujarat High Court in CIT v. Standard Buildcon. Consequently, the Tribunal upheld the CIT(A)'s decision that no disallowance under Section 40(a)(ia) was warranted, as the TDS was deposited before the due date for filing the return. 2. Validity of Reopening the Assessment Under Section 147/148: The assessee challenged the reopening of the assessment on the grounds that it was a mere change of opinion and that all relevant facts were already available with the AO during the original assessment. The CIT(A) rejected this contention, stating that the AO had not examined the issue of TDS compliance during the original assessment proceedings, and therefore, the reopening was justified. The CIT(A) relied on the Full Bench decisions of the Hon’ble Delhi High Court in Usha International Limited and Kelvinator of India Limited, which were affirmed by the Hon’ble Supreme Court, to conclude that the reopening within four years was valid as no opinion was formed by the AO during the original assessment. The Tribunal, after considering the submissions and the material on record, agreed with the CIT(A) that the reopening was valid. The Tribunal noted that the AO had not formed any opinion on the issue of TDS compliance during the original assessment, and thus, the reopening did not constitute a change of opinion. The Tribunal upheld the CIT(A)'s decision that the reopening was justified and valid under the provisions of Section 147/148 of the Act. Conclusion: The Tribunal dismissed the Revenue's appeal, holding that the amendment to Section 40(a)(ia) by the Finance Act, 2010, was retrospective and that the reopening of the assessment was valid. The Tribunal confirmed the CIT(A)'s order, directing the AO to delete the disallowance of ?1,29,63,647/- made under Section 40(a)(ia), as the TDS was deposited before the due date for filing the return under Section 139(1) of the Act. The appeal filed by the Revenue was dismissed.
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