2017 (2) TMI 583 - AT - Income Tax

Section 40(a)(ia) disallowance - assessee s failure in not remitting the TDS deducted as per the scheme of the Act - retrospectivity - Held that - We find that the issue as to whether TDS deducted by an assessee and remitted before the end of the relevant previous year or paid before the due date of filing of return is no more res integra since hon ble Calcutta high court in Virgin Creations case (2011 (11) TMI 348 - CALCUTTA HIGH COURT) has already settled the law that amendment to Section 40(a)(ia) made by the Finance Act, 2010 is retrospectively applicable w.e.f. 01.04.2005 thereby impliedly reversing this tribunal s special bench decision in Bharti Shipyard Ltd. vs. DCIT (2011 (9) TMI 258 - ITAT MUMBAI ). DR fails to dispute this legal position. We thus find no reason to interfere with the CIT(A) s findings deleting Section 40(a)(ia) disallowance in question. The Revenue s sole substantive ground as well as its main appeal fails.

Summary

Issues:
1. Disallowance under Section 40(a)(ia) of the Income Tax Act for failure to remit TDS deductions.
2. Validity of re-opening proceedings by the assessing authority.

Analysis:
1. Disallowance under Section 40(a)(ia): The Revenue's appeal challenged the deletion of disallowance of ?30,78,700 made by the Assessing Officer for the assessee's failure to remit TDS deductions on time. The CIT(A) ruled in favor of the assessee, stating that if TDS was deducted and paid before the due date of filing the return of income, there is no justification for disallowance. The judicial pronouncements, including the Calcutta High Court's decision in Virgin Creations case, clarified that the amendment to Section 40(a)(ia) by the Finance Act, 2010, is retrospective. This impliedly reversed the tribunal's decision in Bharti Shipyard Ltd. vs. DCIT. The Tribunal upheld the CIT(A)'s decision, stating that the law has been settled, and there is no basis to interfere with the deletion of the disallowance.

2. Validity of Re-opening Proceedings: The assessee's cross objection challenged the validity of the re-opening proceedings initiated by the assessing authority. However, the counsel representing the assessee decided not to press this objection further, especially in light of the Tribunal's findings on the merits of the case. As a result, the Tribunal dismissed the assessee's cross objection as not pressed. Consequently, the Revenue's appeal was also dismissed, and the assessee's cross objection was dismissed accordingly.

In conclusion, the Tribunal upheld the CIT(A)'s decision to delete the disallowance under Section 40(a)(ia) based on the established legal principles and precedents, including the retrospective applicability of the relevant amendment. The validity of the re-opening proceedings was not pursued further by the assessee, leading to the dismissal of both the Revenue's appeal and the assessee's cross objection.