INCOME TAX ACT, 1961

Section 40(a)(ia)

Business disallowance under section 40(a)(ia) - Assessee failed to deduct and remit tax on contract and professional charges payable within due date - Retrospective effect of amendment made by Finance Act, 2010 in section 40(a)(ia) -

Assessee was a builder and case was selected for scrutiny and assessment under section 143(3) was completed. AO disallowed the contract and professional charges paid by assessee while stating that assessee failed to deduct and remit tax on contract and professional charges payable within due date. Therefore, assessee cannot be allowed to claim deduction of contract and professional charges from the total income. Held: The proviso ensured reasonable interpretation and retrospective effect would serve the object behind the enactment. Amended provision of section 40(a)(ia) should be interpreted liberally and equitable and applies retrospectively from the date when section 40(a)(ia) was inserted, i.e., with effect from assessment year 2005-06 so that an assessee should not suffer unintended and deleterious consequences beyond what the object and purpose of provision mandates. Since assessee had filed its returns on 1-8-2005, i.e., in accordance with the due date under the provisions of section 139, hence, was allowed to claim the benefit of amendment made by Finance Act, 2010 to provisions of section 40(a)(ia). Issue involved in this appeal being no more res integra in light of law declared by Apex Court in CIT V. Calcutta Export Company [2018 TaxPub(DT) 2136 (SC)] and accordingly appeal of assessee was allowed.

Followed:CIT Vs. Calcutta export company [2018 TaxPub(DT) 2136 (SC)]

REFERRED :

FAVOUR : In assessee's favour

A.Y. :

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