Dismissing the appeal of the revenue the Court held that ,the rationale behind the insertion of the second proviso to section 40(a)(ia) was declaratory and curative and thus, applicable retrospectively with effect from April 1, 2005. However under the first proviso to section 201(1) inserted with effect from July 1, 2012, an exception had been carved out which showed the intention of the Legislature not to treat the assessee as a person in default subject to fulfilment of the conditions as stipulated thereunder. No different view could be taken regarding the introduction of the second proviso to section 40(a)(ia) , which was intended to benefit the assessee, with effect from April 1, 2013 by creating a legal fiction in the assessee’s favour and not to treat him in default of deducting tax at source under certain contingencies and that it should be presumed that the assessee had deducted and paid tax on such sum on the date of furnishing of the return by the resident payee. (AY.2012-13)
CIT v. Shivpal Singh Chaudhary. (2018) 409 ITR 87 (P&H) (HC)
S. 40(a)(ia) : Amounts not deductible – Deduction at source -Insertion of second proviso by the Finance Act , 2012 , with effect from Apri1, 2003, is declaratory and curative and applicable retrospectively with effect from 1-4-2005 — Payee offering to tax sum received in its return — No disallowance can be made.[S. 37(1), 201 (1)]