2014 (1) TMI 1330 - AT - Income Tax

Deletion of disallowance u/s 40(a)(ia) of the Act Requirement of depositing TDS before due date u/s 139(1) of the Act Held that - The provisions of Section 40(a)(ia) have been amended by Finance Act, 2010 to allow the deduction of expenses if the tax is paid before the due date of filing of the return, which has been done by the appellant - amendment to the provisions of Section 40(a)(ia) of the Act, by the Finance Act, 2010 is retrospective from 01.4.2005 - Consequently, any payment of tax deducted at source during previous years relevant to and from A.Y. 2005-06 can be made to the Government on or before the due date for filing return of income under section 139(1) of the Act. The decision in ITO vs. Shri Nem Chand Jain followed - 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 - amendments in Section 40(a)(ia) is having retrospective operation the addition u/s 40(a)(ia) of the Act cannot be made if the payment of tax deducted at source has been before the due date of filing the return of income for the year under consideration - payment of TDS has been made before the due date of filing of the return u/s 139(1) of the Act thus, the CIT(A) was fully justified in deleting the addition made by the Assessing Officer decided against Revenue.

Summary

Issues:
Disallowance of truck hire expenses under section 40(a)(ia) of the Income Tax Act, 1961.

Analysis:

1. Facts and Assessment Proceedings:
The case involves an appeal by the department against the order of Ld. CIT(A), Udaipur, regarding the disallowance of truck hire expenses amounting to Rs. 2,42,50,582. The AO observed discrepancies in the TDS deposited on truck hire expenses and requested explanations from the assessee.

2. Assessee's Arguments:
The assessee contended that the TDS was deducted and deposited before the due date of filing the return under section 139(1) of the Act. They argued that the provisions of Section 40(a)(ia) were not applicable to the expenditure paid, citing relevant case laws to support their position.

3. AO's Disallowance:
The AO disallowed the expenses under section 40(a)(ia) as the TDS amount on the payments was not deposited before the specified date. The AO held the payments liable for TDS and made the addition to the income.

4. CIT(A)'s Decision:
The CIT(A) deleted the addition, noting that the TDS was deposited before the due date of filing the return, as required by the amended provisions of Section 40(a)(ia). The CIT(A) relied on previous decisions supporting the retrospective application of the amended provisions.

5. Tribunal's Ruling:
The Tribunal, after considering the arguments and precedents, upheld the CIT(A)'s decision. They found the issue to be similar to previous cases where additions under section 40(a)(ia) were not justified if the TDS was paid before the due date of filing the return. The Tribunal dismissed the department's appeal.

6. Conclusion:
The Tribunal dismissed the department's appeal, affirming the CIT(A)'s decision to delete the disallowance of truck hire expenses. The case highlights the importance of timely TDS deposits and the retrospective application of amended provisions under Section 40(a)(ia) for deductions on expenses.