Date of payment of TDS on or after due date of filling return is not the ground to disallowe the deduction of the amount related to TDS

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH “A”, KOLKATA

[Before Hon’ble Sri C. D. Rao, AM & Hon’ble Sri George Mathan, JM]

ITA No.1153/Kol/2011

Assessment Year: 2005-06

I.T.O., Ward-4,

Haldia

(APPELLANT)

Versus

Sk.Mofizul Ali

Purba Medinipur

(PAN: ARPPS 1201 D)

(RESPONDENT)

For the Appellant: Shri S.P.Lahiri

For the Respondent: Shri A.K.Tibrewal

Date of Hearing: 15.05.2012.

Date of Pronouncement: 15.05.2012.

ORDER

Per Shri C.D.Rao, AM

This is an appeal filed by the Revenue against order dated 08.07.2011 of CIT(A) –XXXIII, Kolkata pertaining to A.Yr. 2005-06

2. The revenue has raised the following grounds of appeal:-

“1.That on the facts and in circumstances of the case the ld. CIT(A) erred in holding that once the profit is estimated after rejecting books of accounts, there is no scope for further disallowance of deduction, whereas the provisions of Section 40(a)(ia)is penal in nature and independently attracted even if income is estimated.

2. That the ld. CIT(A erred in estimating the profit from the business of the assessee relying on the rate of profit declared by the assessee without having any basis thereof.”

3. At the time of hearing before us both the parties have conceded that the issues are fully covered against the revenue by Hon’ble Jurisdictional High Court in the case of CIT vs Virgin Creations in ITAT No.302 of 2011, GA No.3200/2011 dated 23.11.2011 in respect of addition made towards delay payment of TDS u/s 40(a)(ia) of the IT Act

4. After hearing the rival submissions and on careful perusal of materials available on record, it is observed that the issue of TDS u/s 40(a)(ia) of the IT Act raised by the assessee is covered by earlier order of this Tribunal in the case of M/s. Designer Exports vs DCIT vide ITA No.1532/Kol/2010 dated 20.04.2012. The relevant findings of order of this Tribunal in para 4,5 and 6 are as under :-

“4. We find that the facts are not in dispute and this issue is now squarely covered in favour of the assessee and against revenue by the decision of Hon’ble Calcutta High Court in the case of CIT Vs. Virgin Creations in ITAT No.302 of 2011, GA No.3200/2011 dated 23.11.2011, wherein Hon’ble High Court has confirmed coordinate bench decision of ITAT in ITA No.267/K/2009 “A” Bench, in the case of Virgin Creations Vs. ITO dated 15.12.2010. Tribunal has considered the decisions of Mumbai Bench of this ITAT in the case of M/s. Bansal Parivahan (India) P. Ltd. Vs. ITO in ITA No.2355/Mum/10 and of Ahmedabad Bench “B” in ITA No. 3983/Ahd/2008 for AY 2005-06 dated 03.12.2010. Tribunal considered the amendment made in the provisions of section 40(a)(ia) of the Act by the Finance Act, 2010 as curative and remedial in nature by holding as under:

“After hearing the rival submissions and on careful perusal of the materials available on record, keeping in view of the fact that though the Ld. D.R. submitted that the decisions of the Coordinate Benches are not binding and the Kolkata benches may take a different view, since Mumbai Bench after analyzing the provisions of section 40(a)(ia) since its inception and various amendments made to the same including the suggestion made by the Industry in the form of representation in their pre-budget memorandum to the Hon’ble Finance Minister and by applying the decision of the Hon’ble Apex Court in the case of Alom Extrusions Ltd., has observed that “The provisions of section 40(a)(ia) as stood prior to the amendments made by the Finance Act 2010 thus were resulting into unintended consequences and causing grave and genuine hardships to the assessees who had substantially complied with the relevant TDS provisions by deducting the tax at source and by paying the same to the credit of the Government before the due date of filing of their returns u/s 139(1). In order to remedy this position and to remove the hardships which was being caused to the assessees belonging to such category, amendments have been made in the provisions of section 40(a)(ia) by the Finance Act 2010. The said amendments, in our opinion, thus are clearly remedial/curative in nature as held by Hon’ble Supreme Court in the case of Allied Motors Pvt. Ltd. (supra) and Mom Extrusions Ltd. (supra) and the same therefore would apply retrospectively w.e.f. 1^st April, 2005. In the case of R.B. Jodha Mal Kuthiala 82 ITR 570, it was held by the Hon’ble Supreme Court that a proviso which is inserted to remedy unintended consequences and to make the provision workable, requires to be treated as retrospective in operation so that a reasonable interpretation can be given to the section as a whole. In the present case, the amount of tax deducted at source from the freight charges during the period 01/04/2005 to 28/02/2006 was paid by the assessee in the months of July and August 2006 i.e. well before the due date of filing of its return of income for the year under consideration. This being the undisputed position, we hold that the disallowance made by the A.O. and confirmed by the learned CIT(A) on account of freight charges by invoking the provisions of section 40(a)(ia) is not sustainable as per the amendments made in the said provisions by the Finance Act, 2010 which, being remedial/curative in nature, have retrospective application”, we find no reason to deviate from the decisions of the ITAT’s Mumbai Bench and Ahmedabad Bench, in the absence of a contrary view, except the other benches decision or any other High Court. Therefore, respectfully following the decision of the Coordinate Benches (supra), we allow the ground nos. 1 to 3 of the assessee’s appeal.”

5. We find that the above view of this Tribunal was confirmed by Hon’ble Calcutta High Court in the case of Virgin Creations (supra) by holding as under:

“We have heard Mr. Nizamuddin and gone through the impugned judgment and order. We have also examined the point formulated for which the present appeal is sought to be admitted.

It is argued by Mr. Nizamuddin that this court needs to take decision as to whether section 40(A) (ia) is having retrospective operation or not. The learned Tribunal on fact found that the assessee had deducted tax at source from the paid charges between the period April 1, 2005 and April 28, 2006 and the same were paid by the assessee in July and August 2006, i.e. well before the due date of filing of the return of income for the year under consideration. This factual position was undisputed. Moreover, the Supreme Court, as has been recorded by the learned Tribunal, in the case of Allied Motors Pvt. Ltd. and also in the case of Alom Extrusions Ltd., has already decided that the aforesaid provision has retrospective application. Again, in the case reported in 82 ITR 570, the Supreme Court held that the provision, which has inserted the remedy to make the provision workable, requires to be treated with retrospective operation so that reasonable deduction can be given to the section as well.

In view of the authoritative pronouncement of the Supreme Court, this court cannot decide otherwise. Hence we dismiss the appeal without any order as to costs.”

6. Once the issue is decided by Hon’ble jurisdictional High Court that the amendment in the provisions of section 40(a)(ia) of the Act by Finance Act, 2010 is remedial and curative in nature and TDS paid on or before the due date of filing of return u/s. 139(1) of the Act, deduction in respect to the amount on which TDS is so paid, is allowable. In the present case the assessee deducted tax in February, 2007 but the same was deposited in May, 2007 for the AY 2007-08 that means the TDS was paid before due date of filing of return u/s. 139(1) of the Act by the assessee, hence, we allow the claim of assessee. This issue of assessee’s appeal is allowed.”

4.2. Respectfully following the same we dismiss the issue raised by the revenue.

5. In the result the appeal of revenue is dismissed.

Order pronounced in the open court on 15.05.2012.

                                                            Sd/-                         Sd/-

                                                   [George Mathan]       [C. D. Rao]

                                                   Judicial Member    Accountant Member

Date: 15.05.2012.

R.G.(.P.S.)

Copy of the order forwarded to:

1. Sk.Mofizul Ali, Vill & P.O. Sonoamul, Dist.Purba Medinipur, West Bengal, PIN: 721648.

2 The I.T.O., Ward-4, Haldia.

3. The CIT- 4. The CIT(A)-XXXIII, Kolkata

5. DR, Kolkata Benches, Kolkata

Copy,

By order,

Deputy /Asst. Registrar, ITAT, Kolkata Benches