Amendment in 40a(ia) by finanace Act , 2010 is clarrifactory

[pawansingla]

Income-tax : Amendments made in provisions of section 40(a)(ia) by the Finance Act, 2010 are remedial/curative in nature and the same would apply retrospectively w.e.f. Ist April, 2005 - [2010] 8 TAXMANN.COM 40 (MUM. - ITAT)

[JB]

can you please send a copy of the judgment?

[pawansingla]

Golden Stables Lifestyle Centre Pvt. Ltd. v. CIT

Month-Year : Nov - 2010
Author/s : ITA No. 5145/Mum./2009 [BCAJ]
Title : Golden Stables Lifestyle Centre Pvt. Ltd. v. CIT
Details :

Per Asha Vijayaraghavan :

Facts :

The Assessing Officer (AO) disallowed amounts aggregating to `29,52,389 u/s.40(a)(ia) on the ground that assessee had deposited TDS late in the Government Account. Aggrieved the assessee preferred an appeal to the CIT(A).

The CIT(A) rejected the contention made on behalf of the assessee that S. 40(a)(ia) as amended with retrospective effect by the Finance Act, 2008 and Explanatory Notes to the Finance Bill, 2004 issued by the CBDT vide Circular No. 5/2005, dated 15-7-2005 were brought in to existence after the end of the financial year 2004-05. He also rejected the contention that the assessee had complied with the very intention of introduction of S. 40(a)(ia) i.e., compliance of TDS provisions in case of residents and curbing bogus payments.

Aggrieved the assessee preferred an appeal to the Tribunal.

Held :

The Tribunal noted that the CBDT has in its Circular No. 1 of 2009, dated 27-3-2009 clarified the amendment made to S. 40(a)(ia) by the Finance Act, 2008 with retrospective effect from 1-4-2005 was to mitigate hardship caused by the above provisions of S. 40(a)(ia) while maintaining TDS discipline. The Tribunal also noted that there has been a further amendment to this Section by the Finance Act, 2010 whereby time limit for payment of TDS deducted/deductible during the year has been extended till the due date of filing return of income. The Tribunal observed that this is similar to provisions of S. 43B. The Supreme Court has in the case of CIT v. Alom Extrusions Ltd., (319 ITR 306) held the amendment to S. 43B to be retrospective in operation. The amendment made by the Finance Act, 2008 to the provisions of S. 40(a)(ia) being with retrospective effect shows that it was curative in nature and was brought in to ameliorate the hardship caused on account of nominal delay in payment of TDS. Applying the ratio of the decision of the Apex Court, the Tribunal held the amendment brought in by Finance Act, 2010 to be curative in nature and therefore applicable to all earlier years also. The Tribunal directed the AO not to disallow the expenditure (i) which has accrued prior to 10-9-2004 when the Finance Act (No. 2) 2004 got the presidential approval, up to which date the provisions of S. 40(a) (ia) will not be applicable and (ii) expenditure in respect of which TDS has been paid by the assessee before the due date of filing of the return.

The ground of appeal filed by the assessee was allowed.

[pawansingla]

2010-TIOL-765-ITAT-AHM

IN THE INCOME TAX APPELLATE TRIBUNAL
BENCH 'B' AHMEDABAD

ITA No.3983/Ahd/2008
Assessment Year:-2005-2006

SHRI KANUBHAI RAMJIBHAI MAKWANA
RANGOLI COMPLEX, BHALEJ ROAD, ANAND
PAN NO: ACYPM8211D

Vs

INCOME TAX OFFICER
WARD-1, ANAND

Mahavir Singh, JM and D C Agrawal, AM

Dated: December 3, 2010

Appellant Rep by: Shri M G Patel, AR
Respondents Rep by: Shri K Madhusudan, SR-DR

Income tax – Section 40(a)(ia) - Whether the amendment brought out in Section 40(a)(ia) are clarificatory in nature and retrospective w.e.f 1st April 2005.

The assessee is a contractor and required to get work done through sub-contractors. During the course of assessment proceedings, AO required the assessee to produce the details of TDS deducted on sub-labour contract payments paid. The assessee intimated as regards to inadmissibility with regard to non-deduction of TDS. AO made addition for non deduction of tax. In appeal, CIT (A) partly allowed the appeal of the assessee within the amended provisions of section 40(a)(ia) which state that if tax had been deducted in the month of March and deposited with the Government before submission.

After hearing both the parties, the ITAT held: -

++ that the amendments brought out in Section 40(a)(ia) of the Act from time-to-time was clarificatory and when an amendment is declaratory and clarificatory in nature, the presumption against its retrospectivity is not applicable and amendments of this kind only declare. It is no doubt true that, ordinarily, a statute, and particularly when the same has been made applicable with effect from a particular date should be construed prospectively and not retrospectively. But this principle will not be applicable in a case where the provision construed is merely explanatory, clarificatory or declaratory it cannot be disputed that the object of the Explanation is to explain the meaning and intendment of the Act itself;

++ that the provisions of Section 40(a)(ia) as amended by the Finance Act, 2010 w.e.f 1-4-2010, which has newly been inserted by the Finance (No.2) Act, 2004, with effect from 1st April, 2005 to section 40 of the Act is remedial in nature, designed to eliminate unintended consequences which may cause undue hardship to the taxpayers and which made the provision unworkable or unjust in a specific situation, and is of clarificatory nature and, therefore, has to be treated as retrospective with effect from 1st April, 2005, the date on which section 40(a)(ia) has been inserted by the Finance (No.2) Act, 2004.