S 40(a)(ia). Provisions of S. 40(a)(ia) are not applicable to expenditure which has accrued prior to 10-9-2004 when the Finance Act, (No. 2) 2004 got the presidential approval — Amendment to S. 40(a)(ia) by the Finance Act, 2010 which extends the time lim

ITAT ‘G’ Bench, Mumbai

A.Y. : 2005-06. Decided on :
30-9-2010

Counsel for assessee/revenue
: Anil Sathe/

Abani Kanta Nayar

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.

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.