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TMI Blog2021 (4) TMI 1029X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 - Decided in favour of the assessee. - T.C.A.No.374 of 2014 - - - Dated:- 19-3-2021 - Hon'ble Mr. Justice M.Duraiswamy And The Hon'ble Mrs.Justice T.V.Thamilselvi For the Appellant : Mr. M.Swaminathan Senior Standing Counsel For the Respondent : Mrs. Sri Niranjani Srinivasan JUDGMENT M. DURAISWAMY, J. Challenging the order passed in I.T.A.No.636/Mds/2012 in respect of the Assessment Year 2005-06. on the file of the Income Tax Appellate Tribunal, Chennai, D Bench (for brevity, the Tribunal), the Revenue has filed the above appeal. 2. The above appeal was admitted on the following substantial questions of law: (i) Whether on the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in holding that the disallowance made u/s 40(a)(ia) for non deduction of tax at source on transport charges amounting to ₹ 4,57,10,818/- is to be allowed? (ii) Whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vided that where in respect of any such sum, tax has been deducted in any subsequent year or, has been deducted during the previous year but paid in any subsequent year after the expiry of the time prescribed under sub-section (1) of section 200, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid. 15) The purpose of bringing the said amendment to the existing provision of Section has been highlighted in the memorandum explaining the provision which reads as under:- With a view to augment compliance of TDS provisions, it is proposed to extend the provisions of the section 40(a)(ia) to payments of interest, commission or brokerage, fee for professional services or fee for technical services to the residents and payments to a residential contractor or sub-contractor for carrying out any work (including supply of labour for carrying out any work), on which tax has not been deducted or after deduction, has not been paid before the expiry of the time prescribed under sub-section(1) of section 200 and in accordance with the provisions of other provisions of Chapter XVII-B. 16) The purpose is very much clear fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her case, on or before the last day of the previous year; Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted (A) during the last month of the previous year but paid after the said due date; or (B) during any other month of the previous year but paid after the end of the said previous year, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid. 19) The above amendments made by the Finance Act, 2008 thus provided that no disallowance under Section 40 (a) (ia) of the IT Act shall be made in respect of the expenditure incurred in the month of March if the tax deducted at source on such expenditure has been paid before the due date of filing of the return. It is important to mention here that the amendment was given retrospective operation from the date of 01.04.2005 i.e., from the very date of substitution of the provision. 20) Therefore, the assesses were, after the said amendment in 2008, classified in two categories namely; one; those who have deducted that tax during the last month of the previous year and two; those who have deducted the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not been deducted or; after deduction, has not paid on or before the due date specified in sub-section (1) of Section 139: Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in subsection (1) of section 139, such sum shall be allowed as a deducted in computing the income of the previous year in which such tax has been paid. 24) Thus, the Finance Act, 2010 further relaxed the rigors of Section 40(a)(ia) of the IT Act to provide that all TDS made during the previous year can be deposited with the Government by the due date of filing the return of income. The idea was to allow additional time to the deductors to deposit the TDS so made. However, the Memorandum explaining the provisions of the Finance Bill, 2010 expressly mentioned as follows: This amendment is proposed to take effect retrospectively from 1st April, 2010 and will, accordingly, apply in relation to the Assessment Year 2010- 11 and subsequent years. 25) The controversy surrounding the above amendment was whether the amendment being curative in nature should be applied retrospectiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w gross product rate and when expenditure which becomes subject matter of an order under Section 40(a)(ia) is substantial, can suffer severe adverse consequences if the amendment made in 2010 is not given retrospective operation i.e., from the date of substitution of the provision. Transferring or shifting expenses to a subsequent year, in such cases, will not wipe off the adverse effect and the financial stress. Such could not be the intention of the legislature. Hence, the amendment made by the Finance Act, 2010 being curative in nature required to be given retrospective operation i.e., from the date of insertion of the said provision. 29) Further, in Allied Motors (P) Limited (supra), this Court while dealing with a similar question with regard to the retrospective effect of the amendment made in section 43-B of the Income Tax Act,1961 has held that the new proviso to Section 43B should be given retrospective effect from the inception on the ground that the proviso was added to remedy unintended consequences and supply an obvious omission. The proviso ensured reasonable interpretation and retrospective effect would serve the object behind the enactment. The aforesaid view ..... X X X X Extracts X X X X X X X X Extracts X X X X
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