2019 (7) TMI 1435 - AT - Income Tax

Scope of amendment to Section 40(a)(ia) - Retrospective effect of amendment made by the Finance Act, 2010 in Section 40(a)(ia) - whether the amendment being curative in nature should be applied retrospectively i.e., from the date of insertion of the provisions of Section 40(a)(ia) or to be applicable from the date of enforcement - deduction for the tax deducted and paid to the government? - HELD THAT - Amended provision of Sec 40(a)(ia) should be interpreted liberally and equitable and applies retrospectively from the date when Section 40(a) (ia) was inserted i.e., with effect from the Assessment Year 2005-2006 so that an assessee should not suffer unintended and deleterious consequences beyond what the object and purpose of the provision mandates. As the developments with regard to the Section recorded above shows that the amendment was curative in nature, it should be given retrospective operation as if the amended provision existed even at the time of its insertion. Since the assessee has filed its returns on 01.08.2005 i.e., in accordance with the due date under the provisions of Section 139 IT Act, hence, is allowed to claim the benefit of the amendment made by Finance Act, 2010 to the provisions of Section 40(a)(ia) of the IT Act. See M/s Calcutta Export Company 2018 (5) TMI 356 - Supreme Court

Summary

Issues: Appeal against addition made u/s 40(a)(ia) of the Income-tax Act, 1961 for A.Y 2013-14.

Analysis:
1. Issue of Addition u/s 40(a)(ia): The Assessing Officer disallowed the testing charges of &8377; 1,64,120/- under section 40(a)(ia) of the Act, as the TDS was deposited after the due date. The assessee contended that the TDS was deposited before filing the return of income, citing an amendment to section 40(a)(ia) of the Act. However, the Assessing Officer rejected this claim, stating that the amendment was not applicable for the relevant assessment year. The CIT(A) upheld the addition.

2. Decision and Legal Interpretation: The ITAT, Delhi, referred to a Supreme Court judgment in the case of M/s Calcutta Export Company, which addressed the retrospective nature of the amendment to section 40(a)(ia) of the IT Act. The Supreme Court held that the amended provision should be interpreted liberally and applied retrospectively from the date of its insertion, i.e., from the Assessment Year 2005-2006. The Court emphasized that the amendment was curative in nature and should not lead to unintended consequences for the assessee. Therefore, the ITAT, following the Supreme Court's decision, directed the Assessing Officer to delete the addition of &8377; 1,64,120/-.

3. Conclusion: Consequently, the ITAT allowed the appeal of the assessee, emphasizing the retrospective application of the amendment to section 40(a)(ia) of the IT Act. The decision was based on the principle of avoiding unintended adverse consequences for the assessee and ensuring equitable treatment. The judgment highlights the importance of interpreting tax provisions in a manner that upholds the object and purpose of the law while safeguarding the interests of taxpayers.