Amendment in 40a(ia) by finanace Act , 2010 is clarrifactory

2010-TIOL-765-ITAT-AHM

IN THE INCOME TAX APPELLATE TRIBUNAL
BENCH 'B' AHMEDABAD

ITA No.3983/Ahd/2008
Assessment Year:-2005-2006

SHRI KANUBHAI RAMJIBHAI MAKWANA
RANGOLI COMPLEX, BHALEJ ROAD, ANAND
PAN NO: ACYPM8211D

Vs

INCOME TAX OFFICER
WARD-1, ANAND

Mahavir Singh, JM and D C Agrawal, AM

Dated: December 3, 2010

Appellant Rep by: Shri M G Patel, AR
Respondents Rep by: Shri K Madhusudan, SR-DR

Income tax – Section 40(a)(ia) - Whether the amendment brought out in Section 40(a)(ia) are clarificatory in nature and retrospective w.e.f 1st April 2005.

The assessee is a contractor and required to get work done through sub-contractors. During the course of assessment proceedings, AO required the assessee to produce the details of TDS deducted on sub-labour contract payments paid. The assessee intimated as regards to inadmissibility with regard to non-deduction of TDS. AO made addition for non deduction of tax. In appeal, CIT (A) partly allowed the appeal of the assessee within the amended provisions of section 40(a)(ia) which state that if tax had been deducted in the month of March and deposited with the Government before submission.

After hearing both the parties, the ITAT held: -

++ that the amendments brought out in Section 40(a)(ia) of the Act from time-to-time was clarificatory and when an amendment is declaratory and clarificatory in nature, the presumption against its retrospectivity is not applicable and amendments of this kind only declare. It is no doubt true that, ordinarily, a statute, and particularly when the same has been made applicable with effect from a particular date should be construed prospectively and not retrospectively. But this principle will not be applicable in a case where the provision construed is merely explanatory, clarificatory or declaratory it cannot be disputed that the object of the Explanation is to explain the meaning and intendment of the Act itself;

++ that the provisions of Section 40(a)(ia) as amended by the Finance Act, 2010 w.e.f 1-4-2010, which has newly been inserted by the Finance (No.2) Act, 2004, with effect from 1st April, 2005 to section 40 of the Act is remedial in nature, designed to eliminate unintended consequences which may cause undue hardship to the taxpayers and which made the provision unworkable or unjust in a specific situation, and is of clarificatory nature and, therefore, has to be treated as retrospective with effect from 1st April, 2005, the date on which section 40(a)(ia) has been inserted by the Finance (No.2) Act, 2004.