IMPORTANT POINT
2010 amendment to Section 40(a)(ia), being curative, is retrospective in operation.

Headnote:(a) Income Tax act, 1961 – Section 40(a)(ia) – 2010 amendment – Whether retrospective – Purpose of amendment – To ensure tax compliance and not to punish the assessee – 2008 amendment given retrospective effect – 2010 amendment allowing assessees to deposit the TDS deducted in previous year before the date of filing return of income – Made effective from 1st April, 2010 – Amendments 2008 and 2010 aimed at ensuring payment and deposit of TDS with the Government – Held, 2010 amendment is curative and required to be given retrospective operation i.e., from the date of insertion of the said provision. (Para 16, 19, 24, 26, 28)
       (1997) 224 ITR 677(SC); (2000) 245 ITR 3; (2002) 255 ITR 117; (2009) 319 ITR 306 – Relied upon
       ITA No. 404/Mumb/2009; ITA No. 160/2015 – Referred
       (b) Administration of law – Obedience mandatory – But magnitude of punishment – Must not be disproportionate. (Para 26)
       (c) Interpretation of statute – Retrospectivity – Proviso – Inserted to remedy unintended consequences and to make the provision workable, supplying an obvious omission – Required to be read in the section – And required to be treated as retrospective in operation. (Para 27)
       Facts of the case:
       The Respondent filed its return of income for the Assessment Year 2005-06 for Rs. 4,18,17,910/-. The Assessing Officer disallowed the export commission charges paid by the assessee to M/s. Steel Crackers Pvt. Ltd. amounting to Rs. 40,82,089/- while stating that the tax deducted at source (TDS) on such commission amount on 07.07.2004, 07.09.2004 and 07.10.2004 ought to have been deposited by the Respondent before the end of the previous year i.e. 31.03.2005 to get the commission amount deducted from the total income in terms of the provisions of Section 40(a)(ia) of the IT Act as it stood then. But the same was deposited on 01.08.2005, hence, the Respondent cannot be allowed to claim deduction of the commission amount from the total income. The Assessing Officer revised the total income to Rs. 4,58,99,999/- with the requirement to pay the additional tax amount of Rs. 23,88,832/- by the Respondent.
       The Respondent preferred an appeal which was allowed holding that the commission amount is eligible for deduction under the said Assessment Year.
       The Revenue preferred an appeal before the Tribunal which came to be dismissed.
       The Revenue preferred an appeal before the High Court which has been dismissed.
       Finding of the Court:
       2010 amendment to Section 40(a)(ia), being curative, is retrospective in operation.
       Result: Appeals dismissed.

JUDGMENT :

R.K. Agrawal, J.

1. Leave granted.

2. The present appeal has been filed against the impugned final judgment and order dated 03.09.2012 passed by the High Court at Calcutta in GA No. 2029 of 2012 ITAT No. 175 of 2012 whereby a Division Bench of the High Court dismissed the appeal filed by the Appellant against the order dated 29.02.2012 passed by the Income Tax Appellate Tribunal (in short “the Tribunal”) in ITA No. 1487/Kol/2011.

3. Brief facts:-

(a) M/s. Calcutta Export Company - the Respondent is a partnership firm and is a manufacturer and exporter of casting materials having its principal place of business at Kolkata. The Respondent filed its return of income for the Assessment Year 2005-06 for Rs. 4,18,17,910/-. The case was selected for scrutiny and the assessment under Section 143(3) of the Income Tax Act, 1961 (in short ‘the IT Act’) was completed on 28.12.2007. The Assessing Officer, vide order dated 12.10.2009, disallowed the export commission charges paid by the assessee to M/s. Steel Crackers Pvt. Ltd. amounting to Rs. 40,82,089/- while stating that the tax deducted at source (TDS) on such commission amount on 07.07.2004, 07.09.2004 and 07.10.2004 ought to have been deposited by the Respondent before the end of the previous year i.e. 31.03.2005 to get the commission amount deducted from the total income in terms of the provisions of Section 40(a)(ia) of the IT Act as it stood then. But the same was deposited on 01.08.2005, hence, the Respondent cannot be allowed to claim deduction of the commission amount from the total income. The Assessing Officer revised the total income to Rs. 4,58,99,999/- with the requirement to pay the additional tax amount of Rs. 23,88,832/- by the Respondent.
(b) Being aggrieved by the order dated 12.10.2009, the Respondent preferred an appeal before the Commissioner of Income tax (Appeals). Learned CIT (Appeals), vide order dated 01.08.2011, allowed the appeal while holding that the commission amount is eligible for deduction under the said Assessment Year.
(c) Being aggrieved, the Revenue preferred an appeal being ITA No. 1487/Kol/2011 before the Tribunal which came to be dismissed on 29.02.2012.
(d) Being aggrieved by the order dated 29.02.2012, the Revenue preferred an appeal before the High Court. The High Court, vide judgment and order dated 03.09.2012, had dismissed the appeal.
(e) Aggrieved by the judgment and order dated 03.09.2012, the Revenue has preferred this appeal before this Court.

4. Heard learned senior counsel for the parties and perused the factual matrix of the case.

Point(s) for consideration:-

5. Whether the amendment made by the Finance Act, 2010 in Section 40(a)(ia) of the IT Act is retrospective in nature to apply to the present facts and circumstances of the case.

Rival contentions:-

6. Learned senior counsel appearing on behalf of the Revenue contended that the impugned judgment passed by the High Court is bad in law and is liable to be set aside by this Court.

7. Learned senior counsel further contended that the courts below have erred in extending the meaning of the amendment made in Section 40(a) (ia) and in not accepting the plain meaning of the Section as being prohibitory in nature which makes the Respondent to deduct the TDS and remit it in government account within the time limit prescribed under the Section. He further contended that the amendment made under Section 40 (a) (ia) by the Finance Act, 2010, clearly states that the amendment has the retrospective effect from the Assessment Year 2010-11 and it cannot be held to be retrospective from the Assessment Year 2005-2006.

8. Learned senior counsel further contended that the High Court erred in relying on the decision given by the jurisdictional High Court in ITAT No. 302/2011 (G.A. No. 3200/2011) considering the fact that no appeal was preferred against the said judgment considering the low tax effect in the said matter.

9. Learned senior counsel finally contended that though the tax effect is low in

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2018 Supreme(SC) 558

IMPORTANT POINT2010 amendment to Section 40(a)(ia), being curative, is retrospective in operation.

Cases Referred (2)

IMPORTANT POINT
2010 amendment to Section 40(a)(ia), being curative, is retrospective in operation.