2013 (2) TMI 54 - HC - Income Tax

Disallowance made u/s.40(a)(ia) - CIT(A) deleted the addition - Held that - Assessee had to make deduction before 31st March of the year in question and as long as such amounts were deposited before last date of filing of the return, requirements of law would be fulfilled. It was on this basis that tribunal was of the opinion that the assessee committed no wrong and was therefore, entitled to seek deduction of Rs.32,94,149/- from the income which amount the assesee had deducted from payments of contractors and had also deposited with Revenue before the last date of filing of the return - in favour of assessee.

Summary

Issues:
Challenge to tribunal's judgment on disallowance under section 40(a)(ia) of the Income Tax Act.

Analysis:
The issue in this case revolves around the deduction of Tax Deducted at Source (TDS) and its timely deposit with the Government. The tribunal reversed the order of the Commissioner of Income Tax (Appeals) which disallowed Rs.32,94,149 under section 40(a)(ia) of the Income Tax Act. The tribunal found that the assessee had made the necessary deductions from payments to contractors as required by law and had deposited the amounts with the Government before the due date. The tribunal interpreted the amended provisions of section 40(a)(ia) which required tax deduction at source and payment before the due date specified in the Act. The tribunal concluded that as long as the deductions were made before the end of the financial year and the amounts were deposited before the last date of filing the return, the legal requirements were met.

The specific provision in question, section 40(a)(ia) of the Income Tax Act as amended with effect from 1.4.2005, deals with payments to contractors or subcontractors on which tax is deductible at source under Chapter XVII-B. The provision mandates that such tax must be deducted and paid before the due date specified in the Act. In this case, the assessee had deducted the required amounts from payments to contractors before 31st March and had deposited these amounts with the Revenue by the last date of filing the return. The tribunal's interpretation was based on the plain language of the law, which required deduction before the end of the financial year and deposit before the return filing date for compliance.

The High Court, in its order, upheld the tribunal's decision and found no illegality in the tribunal's judgment. The Court dismissed the Tax Appeal, affirming the tribunal's conclusion that the assessee had not breached the requirements of deduction and depositing of TDS as per the provisions of section 40(a)(ia) of the Income Tax Act. The Court's decision was based on the factual findings and the interpretation of the law by the tribunal, emphasizing the importance of complying with the statutory requirements regarding TDS deductions and deposits.