Summary
The Supreme Court held that the Finance Act, 2010 amendment relaxing the TDS-payment deadline in section 40(a)(ia) operated retrospectively from assessment year 2005–06. The change was curative: it removed hardship where tax deducted during the previous year was deposited by the return-filing due date. The respondent’s commission expenditure therefore was not disallowed on the asserted timing ground. The Revenue’s appeals were dismissed.
Issues
- Whether the Finance Act, 2010 relaxation in section 40(a)(ia) applied from the provision’s inception.
- Whether the respondent could obtain that benefit for assessment year 2005–06.
Provisions considered
- Section 40(a)(ia), as amended by the Finance Act, 2010, Income-tax Act, 1961The Court treated the amendment permitting payment of deducted tax by the section 139(1) due date as curative and retrospective from assessment year 2005–06. It compared the earlier and amended texts and provisos. (¶¶ 14, 18, 23, 24, 27, 28, 30)
Held
- The provision sought compliance with tax deduction and deposit requirements. Earlier deadlines produced genuine hardship, including a distinction between deductions in March and deductions during the other eleven months. The 2010 amendment addressed the remaining anomaly. (¶¶ 15, 16, 17, 18, 19, 20, 21, 22, 24)
- The amendment was curative and supplied relief against unintended consequences, warranting retrospective application from the inception of section 40(a)(ia), assessment year 2005–06, rather than restricting its benefit to assessment year 2010–11 onwards. (¶¶ 25, 26, 27, 28, 29, 30)
- The respondent had deposited the deducted tax on 1 August 2005 within the applicable return-filing deadline. It could claim the amendment’s benefit for the disputed commission expenditure in assessment year 2005–06. The decision did not excuse failure to deduct tax or deposit beyond the relaxed statutory deadline. (¶¶ 3(a), 13, 23, 24, 30)
Result
Revenue’s appeals dismissed; connected appeals, applications, transferred cases and diary matters disposed of accordingly. Parties to bear their own costs.