INCOME TAX ACT, 1961

Section 40(a)(ia)

Business disallowance under section 40(a)(ia) - Non-deduction of tax at source - Applicability of amendment inserted by Finance Act, 2010 to section 40(a)(ia) during concerned year - TDS was deposited with the Government after the expiry of period allowed for such deposit but before due date of filing of return

Assessee claimed deduction of transportation charges. AO held that since assessee-company had deducted tax for the entire amount only in the month of March and remitted the same on 4-4-2005 and 7-4-2005 after closure of the relevant previous year, deduction was to be disallowed as per section 40(a)(ia). Assessee took plea of amendment inserted by Finance Act, 2010. Revenue's case was that said amendment was applicable prospectively only from 1-4-2010, and not applicable to the assessment year 2005-06. Held: Finance Act, 2010 relaxed rigours of section 40(a)(ia) to provide that all TDS made during the previous year could be deposited with Government by the due date of filing of return of income. The amended provision of section 40(a)(ia) should be interpreted liberally and equitably and applied retrospectively from the date when section 40(a)(ia) was inserted, i.e., with effect from the assessment year 2005-06 so that an assessee should not suffer unintended and deleterious consequences beyond what the object and purpose of the provision mandates.

Followed: [CIT v. Calcutta Export Company](2018) 404 ITR 654 (SC) : 2018 TaxPub(DT) 2136 (SC)