TDS deposited before the filling of return cannot be disallowed under sec 40(a)(ia)

IN THE INCOME TAX APPELLATE TRIBUNAL

DELHI BENCH “E”, NEW DELHI

BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER

AND

SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER

I.T.A. No. 1300/Del/2012

A.Y. : 2008-09

Income Tax Officer,

Ward 38(2), Room No. 234A,

2nd floor, CR Bldg., IP Estate,

New Delhi

(Appellant)

Vs.

Sh. Naresh Kumar

Through Legal Heir Sh. Naveen

Kumar,

9307, Gaushala Marg,

Kishan Ganj

Delhi – 110 006

(PAN/GIR NO.:AALPK0199D)

 (Respondent)

Assessee by: Sh. J.C. Aggarwal, CA

Department by: S h. R.S. Negi, Sr. D.R.

ORDER

PER SHAMIM YAHYA: AM

This appeal by the Revenue is directed against the order of the Ld. Commissioner of Income Tax (Appeals)-XXVIII, New Delhi dated 05.1.2012 pertaining to assessment year 2008-09.

2. The grounds raised read as under:-

“1. The Ld. Commissioner of Income Tax (Appeals) grossly erred in deleting the addition of ` 52,10,873/- made by the Assessing Officer u/s. 40(a)(ia) on account of late deposit of TDS made

by the assessee with respect to rent, commission and maintenance expenses not appreciating fact that the amendment brought in the Income Tax Act u/s. 40(a)(ia) was only effective from 01.4.2010 and not retrospective in nature.

2. The appellant craves to add, amend or modify the ground of appeal at any time.”

3. In this case Assessing Officer noted that as per column 27(b) of the Audit Report the following TDS has been deposited late.

3.1 Assessing Officer further held that since the assessee was required to deduct TDS @ 1.03% the amount on which TDS has been deducted late comes to ` 5210873/-. Assessing Officer held that in  view of the provisions of section 40a(ia), an addition of ` 5210873/- would be made while computing the income of the assessee.

4. Before the Ld. Commissioner of Income Tax (Appeals) it was submitted that the Assessing Officer has erred on the facts and circumstances of the case in invoking the provisions of section40(a)(ia). It was further submitted that the only question that could arise in the instant case is whether the TDS deducted during the financial year 2007-08 which was deposited on 23.9.2008 i.e. before the date of filing of return of income for A.Y. 2008-09 relevant to F.Y. 2007-08 attracted the provisions of section 40A(ia) so that the amount on which tax was deducted could be held to be not deductible under that section. Assessee further referred to the provisions of section 40A(ia)as under:-

“(ia) any interest………. or amounts payable to a contractor or sub-contractor, being resident,………….. on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid on or before the due date specified in sub section (1) of section 139.

4.1 Referring to the above, assessee submitted that the aforesaid section is attracted in either of the following situations:-

a) If the TDS is deductible but has not been deducted.

b) If the TDS has been deducted but has not been paid before 30.9.2008.

4.2 It was submitted neither of the situations is attracted in the case of the assessee. The deductible tax has been deducted and the deducted tax has been deposited before 30.9.2008.

4.3 Assessee further placed reliance on the following case laws:-

a) Calcutta High Court in the C.I.T., Kol-XI, Kol vs. Virgin Creations (ITA No. 302 of 2011, GA 32000/2011).

b) ITAT, Mumbai ‘B’ Bench in Bansal Parivahan (India) Pvt. Ltd. vs. ITO (2011) 137 TT (Mumbai) 319 : (2011) 43 SOT 619: (2011) 53 DTR 40 : (2011) 9 ITR 565.

c) ITAT, Ahmedabad ‘A’ Bench in Dynamic Builders vs. ITO (ITA No. 1625/Ahd./2008)

d) ITAT, Ahmedabad ‘A’ Bench in Aavkar Developers vs. ITO (ITA No. 3165 / Ahd./ 2009).

e) ITAT, Mumbai ‘G’ Bench in Golden Stables Life Centre Pvt. Ltd. vs. C.I.T. (ITA No. 5145/Mum/2009) reported at 2010-TIOL-596-ITAT-Mum.

4.4 It was submitted in all the above cases, it has been held that provision inserted by Finance Act, 2010 is retrospective in nature. Ld. Commissioner of Income Tax (Appeals) considered the above, he referred to the decision of ITAT, Mumbai ‘B’ Bench in Bansal Parivahan (India) Pvt. Ltd. vs. ITO (2011) 9 ITR 565 and held as under:-

“…..The provisions of s. 40(a)(ia) as stood prior to the amendments made by the Finance Act, 2010 thus were resulting into unintended consequences and causing grave and genuine hardships to the assessee who had substantially complied with the relevant TDS provisions by deducting the tax at source and by paying the same to the credit of the Government before the due date of filing of their returns under s. 139(1). In order to remedy this position and to remove the hardships which was being caused to the assessee’s belonging to such category, amendments have been made in the provisions of s. 40(a)(ia) by the Finance Act, 2010. The said amendments, in our opinion, thus are clearly remedial / curative in nature as held by Hon’ble Supreme Court in the case of Allied Motors (P) Ltd. (supra) and Alom Extrusions Ltd. (supra) and the same therefore would apply retrospectively w.e.f. 1st April, 2005. In the case of R.B. Jodha Mal Kuthiala vs. C.I.T. (1971) 82 ITR 570 (Supreme Court), it was held by the Hon’ble Supreme Court that a proviso which is inserted to remedy intended consequences and to make the provisions workable, requires to be treated as retrospective in operation so that a reasonable interpretation can be given to the section as a whole. In the present case,\ the amount of TDS from the freight charges during the period 1st April, 2005 to 28th Feb, 2006 was paid by the assessee in the months of July and August, 2006 i.e., well before the due date of filing of its return of income for the year under consideration. This being the undisputed position, we hold that the disallowance made by the Assessing Officer and confirmed by the Ld. Commissioner of Income Tax (Appeals) on account of freight charges by invoking the provisions of s. 40(a)(ia) is not sustainable as per the amendments made in the said provisions by the Finance Act, 2010 which, being remedial /curative in nature have retrospective application. Accordingly, we delete the said disallowance and allow ground no. 2 of this appeal.”

4.5 Ld. Commissioner of Income Tax (Appeals) further referred the decision of the Hon’ble Calcutta High Court in the case of Commissioner of Income Tax, Kol vs. Virgin Creations (ITA No. 302 of 2011, GA 32000/2011) where it was held that the amendment in section 40(a)(ia) is remedial /curative in nature and has retrospective effect. In view of these decisions and the facts of the case, the disallowance made by the Assessing Officer u/s. 40(a)(ia) to the tune of ` 52,10,873/- was deleted.

5. Against the above order the Revenue is in appeal before us.

6. We have heard the rival contentions in light of the material produced and precedent relied upon. We find that the only grievance of the Revenue is that the amendment brought in the Income Tax Act u/s. 40(a(ia) was only effective from 1.4.2010 and not retrospective in nature. However, we find that in a catena of case laws as mentioned, it has been held that the amendment in section 40(a)(ia) is remedial and curative in nature and has retrospective effect. In this case, admittedly, the TDS deducted was deposited before the date of the filing of the return and under such situation, there cannot be any disallowance u/s. 40(a)(ia). Thus we find that Ld. Commissioner of Income Tax (Appeals) has taken a correct view in the matter, which does not need any interference on our part. Accordingly, we uphold the same.

7. In the result, the appeal filed by the Revenue stands dismissed.

Order pronounced in the open court on 21/5/2012, upon conclusion of hearing.

                                                     Sd/-                                     Sd/-

                                               [A.D. JAIN]               [SHAMIM YAHYA]

                                        JUDICIAL MEMBER ACCOUNTANT MEMBER

Date 21/5/2012

“SRBHATNAGAR”

Copy forwarded to: -

1. Appellant

2. Respondent

3. CIT

4. CIT (A)

5. DR, ITAT

TRUE COPY

By Order,

Assistant Registrar,

ITAT, Delhi Benches