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| DATE: | September 12, 2011 (Date of publication) |
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| Click here to download the judgement (bharati_shipyard_40_a_ia_retrospective_amendment.pdf) |
S. 40(a)(ia) amendment by FA 2010 is not retrospective
In respect of AY 2005-06, the assessee paid fees to professionals and contractors in respect of which the TDS was deposited after the prescribed due date but before the due date for filing the return of income. The Finance Act, 2010 amended s. 40(a)(ia) w.r.e.f 1.4.2010 to provide that no disallowance would be made if the TDS was deposited on or before the due date for filing the return. The assessee claimed that the said amendment was “remedial and curative in nature” and applicable from AY 2005-06. The issue was referred to a Special Bench. HELD by the Special Bench:
The amendment to s. 40(a)(ia) by the FA 2010 was made retrospectively applicable only from AY 2010-11 and not earlier. It is nowhere stated that the amendment is curative or declaratory in nature nor is such an intention discernible. Ordinarily, a substantive provision is “prospective” in operation and courts cannot give it “retrospective effect” except in limited circumstances where, say, the amendment makes explicit what was earlier implicit or where the amendment was to remove unintended consequences in the existing provison and to make it workable. A provision giving relief cannot be regarded as retrospective only because the original provision caused hardship to the assessee. S. 40(a)(i) caused “intended difficulty” with the object of discouraging non-compliance with the TDS provisions. A partial relaxation in its rigor, inserted with prospective effect, cannot be treated as “retrospective“.
The legal interpretation appear to be correct. Mere delay should not deprive a citizen tax payer of the benefit of tax paid. In such an the State should either refund the amount else adjust the amount paid against the due amount. Some penalty may be justified to secure compliance of statutory provision.