Applicability of amendment by the Finance Act, 2010 to section 40(a)(ia)

AO disallowed a sum of Rs. 47,26,577 for the reason that the assessee had failed to remit the tax deducted at source in time. Assessee submitted that though there was delay in remitting the TDS amount, yet it had remitted the same before the due date for filing return of income for the year under consideration. Assessee submitted that the Finance Act, 2010 has amended the provisions of section 40(a)(ia) w.e.f. 1-4-2010, whereby no disallowance is required to be made if the TDS is paid on or before the due date specified in section 139(1) of the Act. Assessee contended that the said amendment shall have retrospective operation, since it was a beneficial amendment. For this proposition, the assessee placed reliance on the decision dated 23-11-2011 rendered by Hon'ble Calcutta High Court in the case of CIT v. Virgin Creations GA No
3200/2011, dt. 23-11-2011 (Cal-HC). Accordingly he submitted that the impugned disallowance made by the AO was liable to deleted as the assessee had remitted the TDS amount before the due date for filing the return of income. With regard to the amendment brought out by the Finance Act, 2010 in section 40(a)(ia) of the Act, the revenue submitted that the same shall not have retrospective effect and placed reliance on the decision of Mumbai Special Bench of ITAT in the case of Bharti Shipyard Ltd. v. Dy. CIT (2011) 41 (II) ITCL 150 (Mum-Trib) : (2011) 132 ITD 53 (Mum-Trib).

It was held that there is no dispute that the decision rendered by the Hon'ble Calcutta High Court is the lone decision available on the issue under consideration as on date. Accordingly, one is inclined to follow the same in the instant case in preference to the decision rendered by the Special Bench of ITAT in the case of Bharti Shipyard Ltd., referred (supra). Accordingly, by following the decision of Hon'ble Calcutta High Court, the assessee was entitled to claim deduction of expenses if the TDS deducted thereon is remitted before the due date for filing the return of income. - Vide Rajamahendri Shipping & Oil Field Services Ltd. v. Additional Commissioner of Income Tax (2012) 45 (II) ITCL 2 (Visakha-Trib)