2014 (11) TMI 43 - AT - Income Tax

Disallowance u/s 40(a)(ia) TDS amount deposited before before the due date of filing of return Effect of amendment Held that - Following the decision in ITO vs Nem Chand Jain 2014 (1) TMI 1263 - ITAT JODHPUR - 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 - addition u/s 40(a)(ia) of the Act cannot be made if the payment of tax deducted at source has been made before the due date of filing the return of income for the year - payment of TDS has been made before the due date of filing of the return u/s 139(1) of the Act, therefore, the CIT(A) was fully justified in deleting the addition made by the AO Decided against revenue.

Summary

Issues:
1. Interpretation of Section 40(a)(ia) of the Income Tax Act, 1961 regarding disallowance of expenditure.
2. Retroactive application of the amendment in Section 40(a)(ia) introduced by the Finance Act, 2010.

Analysis:
1. The main issue in this case was the interpretation of Section 40(a)(ia) of the Income Tax Act, 1961, regarding the disallowance of expenditure. The Assessing Officer had added an amount to the total income of the assessee under this section due to a delay in depositing TDS. The assessee argued that the TDS was deposited before the due date of filing the income tax return, thus not contravening the provision of Section 40(a)(ia). The ld. CIT(A) agreed with the assessee's argument and deleted the addition after considering the clarificatory nature of the proviso introduced by the Finance Act, 2010. The Tribunal noted that the amendment was remedial and clarificatory, eliminating unintended consequences and hardships to taxpayers, and therefore, had to be treated as retrospective from the date of its original insertion in 2005.

2. The second issue revolved around the retroactive application of the amendment in Section 40(a)(ia) introduced by the Finance Act, 2010. The Tribunal cited previous decisions and held that if the TDS payment was made before the due date of filing the return of income, the addition under Section 40(a)(ia) could not be sustained. The Tribunal relied on precedents to support the retrospective effect of the amendment, emphasizing that the amendment aimed to clarify and remedy issues in the tax provision. The Tribunal dismissed the Department's appeal, stating that the facts of the case aligned with previous decisions and did not merit a different outcome.

In conclusion, the Tribunal upheld the decision of the ld. CIT(A) to delete the addition under Section 40(a)(ia) and dismissed the Department's appeal, emphasizing the retrospective application of the clarificatory amendment introduced by the Finance Act, 2010.