2017 (5) TMI 301 - HC - Income Tax

Disallowance made under section 40(a)(ia) - retrospectivity - effect of amendment to section 40(a)(ia) - Held that - The issue involved in the present appeal is squarely covered against the revenue and in favour of the assessee in light of the decision of the Division Bench of this Court in the case of Commissioner of Income Tax, Ahmedabad Versus Omprakash R. Chaudhary 2015 (2) TMI 150 - GUJARAT HIGH COURT by which the view has been taken that the amendment made in section 40 (a)(ia) of the Income Tax Act, 1961 by Finance Act 2010 is retrospective in operation and having effect from 1st April 2005 i.e. from the date of insertion of Section 40 (a)(ia) of the Act. It is reported that decision of the Division Bench of this court in the case of Omprakash R. Chaudhary (supra) has been approved by the Hon ble Supreme Court subsequently. In view of the above, no error has been committed by the learned tribunal in deleting the disallowance made by the A.O. made u/s. 40(a)(ia) of the Act. - Decided in favour of assessee.

Summary

Issues:
Challenge to the order of the Income Tax Appellate Tribunal regarding disallowance under section 40(a)(ia) of the Income Tax Act, 1961 for A.Y. 2005-06.

Analysis:
The High Court heard the appeal against the Income Tax Appellate Tribunal's decision to dismiss the appeal by the revenue and confirmed the order deleting the disallowance under section 40(a)(ia) of the Income Tax Act, 1961. The main question raised was whether the ITAT was justified in deleting the disallowance of a specific amount, overriding a circular from the Board. The Court noted that the issue was already settled in favor of the assessee by a previous decision of the Division Bench in a similar case. The Division Bench had held that the amendment to section 40(a)(ia) by the Finance Act 2010 was retrospective and effective from April 1, 2005, the date of insertion of the section. The High Court pointed out that the Supreme Court had subsequently approved the Division Bench's decision in the case mentioned.

The Court found that since the issue had already been conclusively decided against the revenue in a previous case and subsequently approved by the Supreme Court, there was no error in the ITAT's decision to delete the disallowance made by the Assessing Officer under section 40(a)(ia) of the Act. Consequently, the Court held that no substantial question of law arose in the present appeal, and therefore, the appeal by the revenue was dismissed. The Court concluded that the petition was to be dismissed based on the settled legal position and reasons stated in the judgment.