Amendment in section 40(a)(ia) by Finance Act 2010 is not retrospective-Mumbai ITAT

Mumbai ITAT has held that amendment made in section 40(a)(ia) by Finance Act 2010 to the effect that no disallowance of an expense would be made if TDS on it was deposited on or before the due date of filing the return, is not applicable retrospectively but w.e.f 01-04-2010 only.

Facts: In respect of AY 2005-06, the assessee paid fees to professionals and contractors in respect of which the TDS was deposited after the prescribed due date but before the due date for filing the return of income. The Finance Act, 2010 amended s. 40(a)(ia) w.r.e.f 1.4.2010 to provide that no disallowance would be made if the TDS was deposited on or before the due date for filing the return. The assessee claimed that the said amendment was “remedial and curative in nature” and applicable from AY 2005-06. The issue was referred to a Special Bench. HELD by the Special Bench:

Held: The amendment to s. 40(a)(ia) by the FA 2010 was made retrospectively applicable only from AY 2010-11 and not earlier. It is nowhere stated that the amendment is curative or declaratory in nature nor is such an intention discernible. Ordinarily, a substantive provision is “prospective” in operation and courts cannot give it “retrospective effect” except in limited circumstances where, say, the amendment makes explicit what was earlier implicit or where the amendment was to remove unintended consequences in the existing provison and to make it workable. A provision giving relief cannot be regarded as retrospective only because the original provision caused hardship to the assessee. S. 40(a)(i) caused “intended difficulty” with the object of discouraging non-compliance with the TDS provisions. A partial relaxation in its rigor, inserted with prospective effect, cannot be treated as “retrospective“.

Full Order can be downloaded herebelow:

Bharti Shipyard Ltd V DCIT


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