TDS — Payment without TDS — Disallowance u/s. 40a(ia) — Applicability of proviso to 40a(ia) — Inserted by Finance Act 2013 with effect from 01/04/2013 — Curative and beneficial in nature —Retrospective effect from 01/04/2005 — No dispute as that the recipients had paid taxes on such payments — No disallowance can be made u/s. 40a(ia)

40. [2025] TS – 1087 – HC (Bom.)

Principal CIT vs. Morgan Stanley India Capital Pvt. Ltd. A. Y. 2009-10 Date of order 14/08/2025

S. 43B of ITA 1961

TDS — Payment without TDS — Disallowance u/s. 40a(ia) — Applicability of proviso to 40a(ia) — Inserted by Finance Act 2013 with effect from 01/04/2013 — Curative and beneficial in nature —Retrospective effect from 01/04/2005 — No dispute as that the recipients had paid taxes on such payments — No disallowance can be made u/s. 40a(ia)

In the course of scrutiny assessment for the A. Y. 2009-10, the Assessing Officer disallowed certain expenses of approximately ₹17.64 crores u/s. 40a(ia) of the Income-tax Act, 1961, on the ground that the assessee had not deducted tax at source.

The CIT(A) deleted the disallowance and held that it was merely a case of short deduction and in doing so relied upon the decision of the Calcutta High Court in the case of CIT vs. S. K. Tekriwal (2012 SCC Online Cal13210). The Tribunal dismissed the appeal of the Department.

The Bombay High Court concurred with the decision of the Calcutta High Court's regarding the retrospective application of the second proviso to Sect