Wednesday, 2 May 2018

SC : Rescues 'marginal taxpayers', holds amendment relaxing Sec. 40 (a) (ia) disallowance rigours as retrospective

SC upholds HC rulings giving retrospective effect to Finance Act, 2010 amendment that relaxed the rigours of Sec. 40(a)(ia), providing that all TDS made during the previous year can be deposited with the Government by the due date of filing the return of income; Rejects Revenue's argument for a 'plain'/literal reading of the amendment, notes carefully both the Finance Act 2008 & 2010 amendments; SC observes that while the Finance Act, 2008 amendment (amended retrospectively w.e.f 1.4.2005 ) gave relief in cases where TDS had been deducted in the month of March but deposited before due date of filing return, the Finance Act, 2010 amendment (applicable from AY 2010-11) extended this relief to TDS deducted in the earlier 11 months as well and deposited before the return filing due date; SC, on perusal of the Memorandum explaining the reasons behind the Sec. 40(a)(ia) amendment, observes that the same came with a purpose of ensuring tax compliance, not to punish the assessee and hence the same should not be allowed to be converted into an 'iron rod' provision which metes out stern punishment and results in malevolent results; SC holds " A proviso which is inserted to remedy unintended consequences and to make the provision workable, a proviso which supplies an obvious omission in the Section, is required to be read into the Section to give the Section a reasonable interpretation and requires to be treated as retrospective in operation so that a reasonable interpretation can be given to the Section as a whole..." ; Court justifies this liberal interpretation citing the adverse consequences on 'marginal' and 'medium' taxpayers if the amendment is not given retrospective operation; Relies on co-ordinate bench ruling in Allied Motors (P) Limited case wherein Sec. 43B proviso was held as retrospective in nature:SC 

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