2020 (8) TMI 677 - HC - Income Tax

Disallowance u/s 40(a)(ia) - appellant failed to deduct and remit tax on contract and professional charges payable within due date - Retrospective effect of amendment made by the Finance Act, 2010 in Section 40(a)(ia) - HELD THAT - Substantial question of law has been answered against the revenue by the Supreme Court in COMMISSIONER OF INCOME-TAX, KOLKATA Vs. CALCUTTA EXPORT COMPANY 2018 (5) TMI 356 - SUPREME COURT - Decided in favour of the assessee.

Summary

Issues involved:
1. Justification of not canceling the order under Section 263 when the condition precedent for invoking 263 was absent.
2. Justification of holding that Section 40(a)(ia) as amended by Finance Act, 2010, does not have retrospective effect.
3. Justification of holding that disallowance under Section 40(a)(ia) of the Act was possible when the appellant failed to deduct and remit tax on contract and professional charges within due date.

Analysis:

Issue 1:
The appeal questioned the Tribunal's decision not to cancel the order under Section 263 due to the absence of the condition precedent for invoking Section 263. The advocates for both parties referenced a judgment of the Apex Court and a Co-ordinate Bench to support their arguments. The High Court admitted the appeal to consider this substantial question of law. Ultimately, the High Court, after considering the submissions, disposed of the appeal by answering the substantial questions of law in favor of the assessee and against the revenue.

Issue 2:
Another issue raised in the appeal was the justification of the Tribunal's decision that Section 40(a)(ia) as amended by the Finance Act, 2010, does not have retrospective effect. The Tribunal's stance on this matter was challenged, and the High Court had to analyze the legal implications of this decision. The High Court, after considering the arguments presented by the counsels, disposed of the appeal by answering the substantial questions of law in favor of the assessee and against the revenue.

Issue 3:
The third issue in the appeal revolved around the Tribunal's decision regarding the disallowance under Section 40(a)(ia) of the Act concerning the failure of the appellant to deduct and remit tax on contract and professional charges within the due date. The appellant's argument was based on the provision for deduction being made in March and remitted to the Government account before the due date for filing the return under Section 139(1) of the Act. The High Court had to assess the legality of this decision in light of the arguments presented. Ultimately, the High Court disposed of the appeal by answering the substantial questions of law in favor of the assessee and against the revenue, considering the law declared by the Apex Court.

In conclusion, the High Court's judgment in this case addressed multiple substantive questions of law related to the Income Tax Act, ultimately ruling in favor of the assessee and against the revenue based on the legal precedents and arguments presented during the proceedings.