Case Law Details
Brief of the case:
The High Court of New Delhi has held in case of CIT-1 Vs Ansal Landmark Township P Ltd that second proviso to sec 40(a)(ia) will have retrospective effect from 01-04-2005 which means that if the assessee had forgot to deduct the TDS on payment made to the resident and that payee had filed its return of income u/s 139 and also paid the tax on that income on which payer failed to deduct TDS then the payer would not be treated as an assessee in default as per first proviso to sec 201(1) and this second proviso to sec 40(a)(ia) would be applicable from 01-04-2005.
Facts of the case:
The assessee had made payment to Ansal Properties and Infrastructure P Ltd without deducting the TDS u/s 194J. So revenue was treating the assessee as an assessee in default as it has not deducted the tax in accordance with the provisions of Chaper-XVII B. But the assessee was of the view that as per second proviso to sec 40 (a)(ia) the assessee would not be treated as an assessee in default if the payee had considered that amount on which the payer failed to deduct the TDS in his computation of income and paid tax on that. No doubt that the second proviso to sec 40 (a)(ia) was inserted from finance act 2012 but the same would have retrospective effect. But Revenue was of the view that the second proviso to sec 40 (a)(ia) would be applicable from 01-04-2013.This issue was followed in appeal before the High Court.
Contention of the assessee:
Assessee was of the view by relying on the case of Rajiv Kumar Agarwa V. ACIT in which it was held that the second proviso to sec 40(a)(ia) was inserted to cure the undue hardship on the assessee when the assessee forgot to deduct the TDS and the payee had taken the same amount in its return of income while filing its return of income and also paid tax on the same. The main reason to disallow the amount without deducting the TDS was to save the loss of revenue and if the payee had paid the tax on that particular amount in his computation of income then there was no loss to revenue so the disallowance should not be there. So second proviso to sec 40 (a)(ia) would have retrospective effect i.e from 01-04-2005 though the same was inserted by finance act 2012.
Contention of the revenue:
Revenue was of the view that the second proviso to sec 40 (a)(ia) would come into effect from finance act 2012 as it was inserted by finance act 2012 so it would be applicable from 01-04-2013 not from 01-04-2005.As the above case belongs to A.Y which was before 2014-15 so the assessee should be considered as an assessee in default as he failed to deduct the TDS on the payment made to the payee on which TDS should be deducted.
Held by High Court:
High Court also relied on the decision in Rajiv Kumar Agarwa V. ACIT and held that the second proviso to sec 40 (a)(ia) would had retrospective effect from 01-04-2005 so that the purpose of introducing this proviso would be fulfilled which was to cure the hardship on the assessee. As in the above case the payee had considered the amount in his computation of income and had also paid tax on the same , with this there was no loss to the revenue so assessee should not be considered as an assessee in default because the main aim to introduce second proviso to sec 40 (a)(ia) was that if the revenue had got its part of tax then the assessee should not be treated as an assessee in default So assessee would not be treated as an assessee in default u/s 201(1).
Appeal of the revenue stood dismissed.
Will the same can be invoked in a case in which the assessee company failed to remit the tax deducted into the CG A/c due to funds crunch, but, the payee has taken into a/c the income in its calculation and paid the tax on that at the time of filing their ITR for the relevant Asst Year?