Facts
Taru Leading Edge (P) Ltd., (“Taxpayer”) claimed a deduction for certain expenses in the return of income filed for the assessment year 2008-09. The Tax Deducted at Source (“TDS”) on the said expenses was deposited beyond the stipulated time prescribed under the Act, but before the due date of fling of return of income.
The Assessing Officer (“AO”) disallowed the said expenditure as per the provisions of the section 40(a)(ia) of the Act on the ground that the proviso to section 40(a)(ia) of the Act was inserted by Finance Act, 2010 and is applicable prospectively from 1 April 2010
The Commissioner of Income-tax (Appeals) [“CIT(A”] allowing the appeal of the taxpayer, held that the proviso to section 40(a)(ia) was to be applied retrospectively from 1 April 2005 and hence the expenses claimed were to be allowed as a deduction for the relevant assessment year.
Aggrieved by the CIT(A) order, the Revenue preferred an appeal before the ITAT.
Issue before the Delhi Tribunal
Whether the provisions of section 40(a)(ia) of the Act as amended by Finance Act, 2010, with effect from 1.04.2010 should be applicable retrospectively?
Observations and Ruling of the Delhi Tribunal
Tthere are several decisions1 by various coordinate benches of Tribunal wherein it was held that the said amendment would operate retrospectively. However, the Special Bench of Mumbai Tribunal decision of Bharti Shipyard Ltd2, had held that the amendment would be applicable prospectively.
However, the Calcutta High Court3, has held in the context of section 40(a)(ia) that it is a well settled law that when a provision is inserted as a remedy to make the provision workable, it is required to be considered to be applicable retrospectively.
Hence in the absence of any higher court ruling or a contrary ruling, the amendment to section 40(a)(ia) made by Finance Act, 2010 was to be applied retrospectively.
Conclusion
The amendment to section 40(a)(ia) of the Act by the Finance Act, 2010 extending time limit for deposit of TDS till the due date of filing the income tax return is remedial in nature and is applicable retrospectively
Source: ITO v.Taru Leading Edge (P) Ltd. (ITA No. 3592/Del/2011 dated 22 May 2012)
Taru Leading Edge (P) Ltd., (“Taxpayer”) claimed a deduction for certain expenses in the return of income filed for the assessment year 2008-09. The Tax Deducted at Source (“TDS”) on the said expenses was deposited beyond the stipulated time prescribed under the Act, but before the due date of fling of return of income.
The Assessing Officer (“AO”) disallowed the said expenditure as per the provisions of the section 40(a)(ia) of the Act on the ground that the proviso to section 40(a)(ia) of the Act was inserted by Finance Act, 2010 and is applicable prospectively from 1 April 2010
The Commissioner of Income-tax (Appeals) [“CIT(A”] allowing the appeal of the taxpayer, held that the proviso to section 40(a)(ia) was to be applied retrospectively from 1 April 2005 and hence the expenses claimed were to be allowed as a deduction for the relevant assessment year.
Aggrieved by the CIT(A) order, the Revenue preferred an appeal before the ITAT.
Issue before the Delhi Tribunal
Whether the provisions of section 40(a)(ia) of the Act as amended by Finance Act, 2010, with effect from 1.04.2010 should be applicable retrospectively?
Observations and Ruling of the Delhi Tribunal
Tthere are several decisions1 by various coordinate benches of Tribunal wherein it was held that the said amendment would operate retrospectively. However, the Special Bench of Mumbai Tribunal decision of Bharti Shipyard Ltd2, had held that the amendment would be applicable prospectively.
However, the Calcutta High Court3, has held in the context of section 40(a)(ia) that it is a well settled law that when a provision is inserted as a remedy to make the provision workable, it is required to be considered to be applicable retrospectively.
Hence in the absence of any higher court ruling or a contrary ruling, the amendment to section 40(a)(ia) made by Finance Act, 2010 was to be applied retrospectively.
Conclusion
The amendment to section 40(a)(ia) of the Act by the Finance Act, 2010 extending time limit for deposit of TDS till the due date of filing the income tax return is remedial in nature and is applicable retrospectively
Source: ITO v.Taru Leading Edge (P) Ltd. (ITA No. 3592/Del/2011 dated 22 May 2012)
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