Non-Deduction of TDS – Amendment in Budget 2012 – Section 40a(ia)

The amendment to Section 201, not to treat the deductor in default is proposed to be effective from 1st July, 2012 whereas amendment to Section 40(a)(ia) is poposed w.e.f 1st April, 2013. It is interesting but not surpirsing to note that so many amendments favouring revenue are proposed to be retrospective being clarificatory in nature and the one favouring tax payer which in real sense is clarificatory in nature in proposed to be effective prospectively. Despite this considering the fact that a deeming fiction is being created under the proposed amendment it may be interpreted by court to be clarificatory and hence applicable retrospectively.
The Calcutta High Court recently in the case of CIT vs. Virgin Creations has held that the amendement made to Section 40a(ia) by Finance Act, 2010 of allowing the benefit of payment made before due date of filing return of income under Section 139(1) is clarificatory and have retrospective operation.
The Calcutta High Court has referred to the judgement of Supreme Court in the case of R.B. Jodha Kuthiala vs. CIT (1971) 82 ITR 570 (SC), whereby it was held that the provision which was inserted as a remedy to make the provision workable, requires to be treated with retrospective operation so that reasonable deduction can be given to section as well.