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2012 (6) TMI 293 - AT - Income TaxDis-allowance u/s 40(a)(ia) - belated deduction of tax from April 2007 to February 2008 in the month of March 2008 and deposit of same before the due date for filing the return u/s.139(1) - Held that - It is not in dispute that that the assessee deducted TDS which was not paid to the account of Central Govt. within the prescribed time however it was paid before the due date of filing the return specified in section 139(1) of the Act. On a similar issue the Calcutta High Court held that amendment in sec. 40(a)(ia) is having retrospective operation in the case of CIT v. Virgin Creations(2011 (11) TMI 348 (HC)). Therefore CIT(A) has rightly deleted addition on account of such dis-allowance - Decided in favor of assessee.
Issues Involved:
1. Whether the CIT(A) was correct in deleting the addition of Rs. 17,30,932/- made by the Assessing Officer under section 40(a)(ia) of the Income-tax Act, 1961. 2. Interpretation of the provisions of section 40(a)(ia) concerning the timing of TDS deduction and payment. Issue-wise Detailed Analysis: 1. Deletion of Addition of Rs. 17,30,932/- by CIT(A): The department appealed against the CIT(A)'s order which deleted the addition of Rs. 17,30,932/- made by the Assessing Officer (AO). The AO had disallowed this amount by invoking section 40(a)(ia) of the Income-tax Act, 1961, on the grounds that the assessee had deducted tax belatedly and deposited the same after the end of the previous year but before the due date for filing the return under section 139(1). The CIT(A) found that the assessee had deducted TDS in the last month of the previous year (March 2008) and deposited it before the due date for filing the return of income. The CIT(A) relied on the decision of the ITAT Mumbai Bench in the case of Bapusaheb Nanasaheb Dhumal v. ACIT, which held that if tax is deducted in the last month of the previous year and paid on or before the due date of filing the return, the expenditure should be allowed as a deduction. 2. Interpretation of Section 40(a)(ia): The department argued that section 40(a)(ia) should be interpreted to disallow expenditure if the tax deducted at source (TDS) was not deposited within the prescribed time. The AO's interpretation was that for payments made from April 2007 to February 2008, the TDS should have been deposited before the end of the previous year (31/03/2008) to avoid disallowance. The CIT(A) and the Tribunal, however, interpreted section 40(a)(ia) differently. They held that if TDS is deducted in the last month of the previous year and deposited before the due date for filing the return under section 139(1), the expenditure should be allowed. This interpretation was supported by various decisions of the Tribunal and the Hon'ble Calcutta High Court in the case of CIT v. Virgin Creations, which held that the amendment to section 40(a)(ia) has retrospective effect. The Tribunal noted that the Hon'ble Calcutta High Court's decision is binding as it is the only High Court judgment on this issue. The Tribunal also referenced the Third Member decision in the case of Kanel Oil & Export Inds. Ltd. v. JCIT, which emphasized that a High Court decision prevails over a Special Bench decision of the Tribunal. Conclusion: The Tribunal upheld the CIT(A)'s order, confirming that the expenditure of Rs. 17,30,932/- should be allowed as a deduction since the TDS was deposited before the due date for filing the return under section 139(1). The appeal by the department was dismissed. The Tribunal's decision was pronounced in the open court on 10.05.2012.
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