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2015 (8) TMI 232 - HC - Income TaxRetrospectivity of the amendment to Section 40(a)(ia) by the Finance Act, 2010 given effect from 01.04.2010 - Held that - This question came up for consideration before the Gujarat High Court in the case of Commissioner of Income Tax, Ahmedabad IV Vs. Om Prakash R Chaudhary 2015 (2) TMI 150 - GUJARAT HIGH COURT after referring to the judgments of Allied Motors (P.) Ltd. Vs. CIT 1997 (3) TMI 9 - SUPREME Court and CIT Vs. Alom Extrusions Limited 2009 (11) TMI 27 - SUPREME COURT in giving retrospective operation to the said amendment notwithstanding that the parliament has expressly stated that it comes into effect from 01.04.2010. The said amendment is curative in nature. The tribunal committed an error in holding it as prospective. The substantial questions of law is answered in favour of the assessee and against the revenue.
Issues:
Retrospective nature of the amendment to Section 40(a)(ia) by the Finance Act, 2010. Analysis: The High Court considered the appeals filed by the Revenue challenging the tribunal's order. The key issue in all appeals was the retrospective nature of the amendment to Section 40(a)(ia) by the Finance Act, 2010, effective from 01.04.2010. The Revenue argued that the tribunal erred in holding the amendment as retrospective despite the clear declaration by the parliament regarding its effective date. The Court referred to the Gujarat High Court's decision in a similar case and analyzed the legislative changes made over time. It discussed whether the amendment aimed to address unintended consequences and whether it should be considered clarificatory or curative in nature. The Court highlighted that the amendment relaxed the rigors of the provision, allowing payment of tax until the filing of the return, thereby preventing disallowance of entire expenditure under Section 40(a)(ia). Further, the Court emphasized that the amendment was intended to remedy unintended consequences, enhance compliance with TDS provisions, and provide relief to taxpayers facing hardships due to the previous provisions. It noted that the retrospective effect of the amendment was necessary to achieve the legislative intent and avoid undue hardship on taxpayers. The Court also cited judgments from the Delhi High Court and Calcutta High Court supporting the retrospective operation of the amendment. It agreed with the Gujarat High Court's view that the amendment was curative in nature and should be given retrospective effect, contrary to the tribunal's decision. The Court held that the substantial questions of law favored the assessee and ruled against the Revenue. Regarding specific appeals, the Court mentioned that certain appellants were entitled to benefits under the old provision, even though a more liberal provision had replaced it. Ultimately, the Court found no merits in the appeals and dismissed them without costs. In conclusion, the High Court upheld the retrospective nature of the amendment to Section 40(a)(ia) by the Finance Act, 2010, emphasizing its curative purpose and the need to prevent undue hardships on taxpayers. The judgment favored the assessee and ruled against the Revenue, dismissing the appeals.
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