Does the Second Proviso to Section 40(a)(ia) Provide Relief to Taxpayers ? Does the Second Proviso to Section 40(a)(ia) Provide Relief to Taxpayers ?

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The Tax Publishers Does the Second Proviso to Section 40(a)(ia) Provide Relief to Taxpayers? V.K. Subramani This article is having a close look at the second proviso to Section 40(a)(ia) inserted by the Finance Act, 2012. The learned author examines the implications of this proviso in the light of a recent Ahmedabad Bench Tribunal decision and points out to a drafting error which had gone unnoticed by the appellate authorities. One of the measures brought in by way of tax reforms in the recent times for better tax compliance and creating trail of transactions could be found in Section 40(a)(ia). The section was originally inserted by the Finance (No. 2) Act, 2004 to allow expenditure only when the tax is deducted at source. Initially, the time limit was so rigid that the tax deduction must be remitted before the 7th day of the next month and for the month of March, it had an extended time period viz. till the date of filing the annual TDS return. Subsequently, the time limit for tax deduction was extended up to the end of the financial year and for the month of March, the extended time period was retained. Again, the time period was extended uniformly for the entire previous year up to the due date for filing the return specified in Section 139(1) of the Act. Recently, in Dy. CIT v. Esaote India (NS) Ltd. 2018 TaxPub(DT) 5401 (Ahd-Trib) : (2018) 172 ITD 299 (Ahd-Trib) : (2018) 196 TTJ 1091 (Ahd) : (2018) 172 DTR (Ahd)(Trib) 427 the validity of the recent amendment made by the Finance Act, 2012 w.e.f. 1-4-2013 for retrospective application was discussed. This write-up discusses the case law and the precedent where one important drafting error in the second proviso to Section 40(a)(ia) has gone unnoticed from the appellate authorities. 1. Esaote India's case The assessee for the assessment year 2012-13 claimed interest payment of Rs. 10.78 lakhs paid to NBFCs for which tax was deductible at source under Section 194A and the Assessing Officer disallowed the expenditure claim by invoking Section 40(a)(ia) of the Act. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

Does the Second Proviso to Section 40(a)(ia) Provide Relief to Taxpayers?

V.K. Subramani

This article is having a close look at the second proviso to Section 40(a)(ia) inserted by the Finance Act, 2012. The learned author examines the implications of this proviso in the light of a recent Ahmedabad Bench Tribunal decision and points out to a drafting error which had gone unnoticed by the appellate authorities.

One of the measures brought in by way of tax reforms in the recent times for better tax compliance and creating trail of transactions could be found in Section 40(a)(ia). The section was originally inserted by the Finance (No. 2) Act, 2004 to allow expenditure only when the tax is deducted at source. Initially, the time limit was so rigid that the tax deduction must be remitted before the 7th day of the next month and for the month of March, it had an extended time period viz. till the date of filing the annual TDS return.

Subsequently, the time limit for tax deduction was extended up to the end of the financial year and for the month of March, the extended time period was retained. Again, the time period was extended uniformly for the entire previous year up to the due date for filing the return specified in Section 139(1) of the Act.

Recently, in Dy. CIT v. Esaote India (NS) Ltd. 2018 TaxPub(DT) 5401 (Ahd-Trib) : (2018) 172 ITD 299 (Ahd-Trib) : (2018) 196 TTJ 1091 (Ahd) : (2018) 172 DTR (Ahd)(Trib) 427 the validity of the recent amendment made by the Finance Act, 2012 w.e.f. 1-4-2013 for retrospective application was discussed. This write-up discusses the case law and the precedent where one important drafting error in the second proviso to Section 40(a)(ia) has gone unnoticed from the appellate authorities.

1. Esaote India's case

The assessee for the assessment year 2012-13 claimed interest payment of Rs. 10.78 lakhs paid to NBFCs for which tax was deductible at source under Section 194A and the Assessing Officer disallowed the expenditure claim by invoking Section 40(a)(ia) of the Act.