The Cochin Bench of the Income Tax Appellate Tribunal (ITAT) has recently deleted the retrospective application of disallowance under Section 40(a)(ia) of the Income Tax Act, 1961 by the Assessing Officer against the assessee-Hi-Lite Builders Private Limited.
The assessee is carrying on business as builder/developer of residential and commercial complexes. The assessee filed the return of income for AY 2009-10 on 30.9.2009 declaring a total income of Rs. 98,41,018. The case was selected for scrutiny and assessment was completed under Section 143(3) of the Income Tax Act, assessing an income of Rs.1,03,48,780.
Subsequently, the CIT, Kozhikode, set aside the order of assessment under Section 263 of the Income Tax Act with a direction to make fresh assessment on the ground that the tax deducted at source by the assessee during the period from 1.10.2008 to 28.2.2009 was credited to the Govt. account during May, 2009 to July, 2009 only and the AO did not make any disallowance under Section 40(a)(ia) of the Act. The AO subsequently passed an order under Section 143(3) read with Section 263, and disallowed a sum of Rs.7.49 Crores under Section 40(a)(ia) of the Income Tax Act.
Aggrieved assessee approached the CIT(A) who upheld the disallowance.
Raising the contention that, “the provisions of section 40(a)(ia) cannot be invoked and the disallowance made is unjustified”, the assessee approached the Tribunal with the present appeal.
Shameem Ahamed, appeared for the assessee and contended that, “the amendment made to section 40(a)(ia) being curative in nature will have retrospective operation and will take effect from 1.4.2005”
He further submitted that the provisions of Section 40(a)(ia) are meant to ensure that the assessee performs the obligation to deduct tax at source and in assessee’s case, it is duly complied with.
The revenue was represented by J M Jamuna Devi.
“The Hon’ble Supreme Court has clearly laid down the ratio that the amendment to section 40(a)(ia) with respect allowability of the expenses on which tax is deducted incurred during the year that is remitted to Government account on or before the due date for filing the return of income u/s.139(1) being curative in nature is retrospective.”, the Tribunal Bench of Judicial Member Beena Pillai and Accountant Member Padmavathy S observed.
It was further observed that, “In assessee’s case the tax deducted during the period from 1.10.2008 to 28.2.2009 was credited to the Govt. account during May, 2009 to July, 2009 i.e. before the due date for filing the return of income u/s.139(1)”.
It was thus held that, “no disallowance is warranted in assessee’s case for the impugned amount and the disallowance made by the AO is deleted.
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