Amendment in Section 40(a)(ia) of Income Tax Act is not retrospective

Bharati Shipyard Ltd. Vs DCIT (ITAT Mumbai Special Bench) – The Finance Act, 2010 has extended the time limit for depositing tax deducted at source by the due date u/s 139(1) of the Act from the earlier lesser time available for compliance. If the tax is deposited by the due date, it would mean escape from the clutches of section 40(a)(ia) for assessment year 2010-2011, but if it is deposited even the next day beyond the due date, natural consequences would follow and it would call for dis-allowance u/s 40(a)(ia) in the year of incurring the expenditure. In the like manner, in the year under appeal, if the tax deducted at source up to February, 2005 had been deposited up to 3 1^st March, it would have amounted to compliance of the provision, but the late deposit even on 1^st April, 2005 would amount to noncompliance warranting interference by section 40(a)(ia) entailing dis-allowance of expenditure in the Assessment year 2005-06. However the fact that the assessee deposited it beyond the prescribed period, would amount to compliance of the prescription of the proviso, entitling the assessee to deduction in the A.Y. 2006-07.  Amendment carried out by the Finance Act, 2010 with retrospective effect from assessment year 2010- 2011 cannot be held to be retrospective from assessment year 2005-2006.

INCOME TAX APPELLATE TRIBUNAL, MUMBAI SPECIAL BENCH  

ITA No. 2404/Mum/2009

Asst. Year- 2005- 2006

M/s. Bharati Shipyard Limited

Vs.

The Dy. Commissioner of Income Tax

Date of Pronouncement: 09.09.2011

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