Disallowance for non-deduction of TDS - Payee declaring income - Second proviso to Section 40(a)(i) and Section 40)(a)(ia)

Facts:

Assessee was organizer of the Formula One races in India. They were deemed to be in default for non-deduction of TDS on payments made to Formula One. Subsequently judicial decisions held that Formula One races constituted a PE in India and accordingly the taxes were paid by them on the attributable PE income. Assessee's plea against the non-deduction was that since the payee has paid the tax on the income there cannot be any further liability on them. Thus they were not in default for non-deduction of TDs. The second proviso to Section 40(a)(i) ought to be given a retrospective beneficial reading. On appeal to ITAT -

Held in favour of the assessee that they were not in default when the payee has discharged the taxes by themselves. Second proviso to Section 40(a)(i) is analogous to Second proviso to Section 40(a)(ia), both inserted to nullify hardship thus declaratory and curative in nature and hence needs to be read retrospectively.

Case: Jaiprakash Associates Ltd. v. DCIT 2023 TaxPub(DT) 1608 (Del-Trib)