COMMISSIONER OF INCOME TAX KOLKATA XIIV. M/S CALCUTTA EXPORT COMPANY versus M/S CALCUTTA EXPORT COMPANY

Citation: [2018] 5 S.C.R. 731 · Decided: 24-04-2018 · Supreme Court of India · Bench: R.K. AGRAWAL · Disposal: Disposed off

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Judgment (excerpt)

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COMMISSIONER OF INCOME TAX KOLKATA XII
v.
M/S CALCUTTA EXPORT COMPANY
(Civil Appeal Nos. 4339-4340 of 2018)
APRIL 24, 2018
[R. K. AGRAWAL AND ABHAY MANOHAR SAPRE, JJ.]
Income Tax Act, 1961 – s.40(a)(ia) and ss.139(1), 200(1) –
Amendment in s.40(a)(ia) by Finance Act, 2010 – If retrospective –
Respondent-assessee, a partnership firm and a manufacturer and
exporter of casting materials, filed its return of income for the
Assessment Year 2005-06 – Assessing Officer disallowed
respondent’s claim for deduction of export commission charges paid
by it stating that the tax deducted at source (TDS) on such commission
amount on 07.07.2004, 07.09.2004 and 07.10.2004 ought to have
been deposited by the respondent before the end of the previous
year i.e. 31.03.2005 to get the commission amount deducted from
the total income u/s.40(a)(ia), as it stood then – Respondent’s appeal
before CIT (Appeals), allowed – Order of CIT (Appeals) upheld by
Tribunal as also by High Court – Held: Finance Act, 2010 relaxed
the rigors of s.40(a(ia) to provide that all TDS made during the
previous year can be deposited with the Government by the due
date of filing the return of income by allowing additional time to the
deductors to deposit the TDS so made – Purpose of s.40(a)(ia) is to
ensure tax compliance and not to punish the tax payer, thus, it should
not be allowed to be converted into an iron rod provision which
metes out stern punishment and results in malevolent results,
disproportionate to the offending act and aim of the legislation –
Purpose of the amendment made by the 2010 Act is to solve the
anomalies that the insertion of s.40(a)(ia) was causing to the bona
fide tax payer – Amendment made by the 2010 Act being curative in
nature is to be given retrospective operation i.e from the date of
insertion of s.40(a)(ia), AY 2005-2006 – Tax paid by the respondent
on 01.08.2005 is in accordance with law and it is allowed to claim
deduction for the tax deducted and paid in the previous year in
which the tax was deducted – Finance Act, 2010 – Finance Act,
2008.
   [2018] 5 S.C.R. 731
   731
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SUPREME COURT REPORTS
[2018] 5 S.C.R.
Interpretation of Statutes – Curative amendments – Nature of
operation – Held: A proviso inserted to remedy unintended
consequences and make the provision workable, a proviso which
supplies an obvious omission in the Section, is required to be read
into the Section to give the Section a reasonable interpretation and
requires to be treated as retrospective in operation so that a
reasonable interpretation can be given to the Section as a whole.
Disposing of the matters, the Court
HELD: 1.1 The provisions of Section 40(a)(ia) of the Income
Tax Act, 1961 came into force in the year 2005. The intention of
the legislature was not to punish the assessee is further reflected
from a bare reading of the provisions of Section 40(a)(ia). It only
results in shifting of the year in which the expenditure can be
claimed as deduction. In a case where the tax deducted at source
was duly deposited with the government within the prescribed
time, the said amount can be claimed as a deduction from the
income in the previous year in which the TDS was deducted.
However, when the amount deducted in the form of TDS was
deposited with the government after the expiry of period allowed
for such deposit then the deductions can be claimed for such
deposited TDS amount only in the previous year in which such
payment was made to the government. However, it caused some
genuine and apparent hardship to the assessees especially in
respect of tax deducted at source in the last month of the previous
year, the due date for payment of which as per the time specified
in Section 200 (1) of IT Act was only on 7th of April in the next
year.  The assessee in such case, thus, had a period of only seven
days to pay the tax deducted at source from the expenditure
incurred in the month of March so as to avoid disallowance of the
said expenditure under Section 40(a)(ia) of IT Act. [Paras 14, 16,
17] [740-B; 741-B-E]
1.2 With a view to mitigate this hardship, Section 40(a)(ia)
was amended by the Finance Act, 2008. The amendments made
by the Finance Act, 2008 provided that no disallowance under
Section 40(a)(ia) of the IT Act shall be made in respect of the
expenditure incurred in the month of March if the tax deducted
at source on such expenditure has been paid before the due date
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of filing of the return. The amend

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