2015 (5) TMI 43 - AT - Income Tax

Contravention of section 40(a)(ia) - Whether CIT(A), has erred in deleting the addition made by the AO on account of expenses not deductible - Held that - A sum ₹ 10,66,200/- was paid by the assessee to the sub-contractors on which the assessee had deducted TDS but the same was deposited to the credit of the central government before the due date of filing of return under section 139(1) of the Act. The disallowance of the expenditure of ₹ 10,66,200/- was made by the AO invoking the provisions of section 40(a)(ia) on the ground that the amendment made by the Finance Act, 2010 which allowed payment of TDS within due date of filing of return under section 139(1) without inviting invocation of provisions of section 40(a)(ia) was prospective and applicable w.e.f. 1.4.2010 only, and not applicable for the year under consideration i.e. Asstt.Year 2005-06. The CIT(A) has allowed appeal of the assessee by following decisions of the Tribunal as quoted above in this order and held that the amendment was retrospective in nature. - payment of TDS has been made before the due date of filing of the return under section 139(1) of the Act, and therefore, the CIT(A) was fully justified in deleting the addition made by the AO by following the decisions of the Tribunal. Hence, we confirm the order of the CIT(A)

Summary

Issues:
Appeal against order of Commissioner of Income-Tax regarding deletion of expenses disallowance under section 40(a)(ia) of the Act.

Analysis:
The Revenue appealed against the Commissioner's order deleting the addition of expenses not deductible due to contravention of section 40(a)(ia) of the Act. The Assessing Officer (AO) disallowed deduction for expenditure of Rs. 10,66,200 paid to subcontractors as TDS was not paid within the prescribed time. However, the Commissioner observed that TDS was deposited before the due date of filing the return under section 139(1) of the Act. The Commissioner relied on ITAT decisions in favor of the assessee, stating that the amendment to section 40(a)(ia) was retrospective, allowing deduction for expenses with timely TDS deposit.

The Revenue, represented by the DR, supported the AO's order. Despite the notice sent to the respondent-assessee being returned unserved, the appeal was heard ex parte, considering the DR's submission. The Tribunal noted that the assessee had deducted TDS on the payment to subcontractors and deposited it before the return filing due date. The AO's disallowance under section 40(a)(ia) was based on the view that the amendment by the Finance Act, 2010 was not retrospective for the relevant assessment year. However, the Commissioner's decision was upheld, citing lack of contrary decisions and the retrospective nature of the amendment.

Additionally, the Tribunal referred to the judgment of the Hon'ble Calcutta High Court in a similar case, holding that if TDS payment is made before the due date of filing the return, no addition under section 40(a)(ia) can be made. As the TDS payment was made timely in this case, the Commissioner's deletion of the addition was justified. Consequently, the Tribunal confirmed the Commissioner's order and dismissed the Revenue's appeal.

In conclusion, the appeal of the Revenue was dismissed, affirming the Commissioner's decision.