INCOME TAX ACT, 1961

Section 40(a)(ia)

Business disallowance under section 40(a)(ia) - Payment to residents without deduction of tax - Whether amendment made to section 40(a)(ia) by Finance Act, 2010 would apply retrospectively -

Issue under consideration was whether Tribunal was right in holding that amendment made to section 40(a)(ia) by Finance Act, 2010 would apply retrospectively though the amendment was made with effect from 1-4-2010. Held: The purpose of the amendment made by the Finance Act, 2010 was to solve the anomalies that the insertion of section 40(a)(ia) was causing to the bona fide tax payer. Thus, the amended provision of section 40(a)(ia) should be interpreted liberally and equitably and applies retrospectively from the date when section 40(a)(ia) was inserted, i.e., with effect from the assessment year 2005-2006 so that an assessee should not suffer unintended and deleterious consequences beyond what the object and purpose of the provision mandates. Further, as the developments with regard to the section 40(a)(ia) showed that the amendment was curative in nature, it should be given retrospective operation as if the amended provision existed even at the time of its insertion. Hence, the Tribunal was right in holding that amendment made to section 40(a)(ia) by Finance Act, 2010 would apply retrospectively although the amendment was made with effect from 1-4-2010.

Followed:CIT v. Calcutta Export Company (2018) 404 ITR 654 (SC): 2018 TaxPub(DT) 2136 (SC)

REFERRED :

FAVOUR : In assessee's favour

A.Y. :

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