M/S. Aishu Fincorp Limited vs The Assistant Commissioner Of Income ...
2025 Latest Caselaw 1650 Tel

Citation : 2025 Latest Caselaw 1650 Tel
Judgement Date : 11 August, 2025

Telangana High Court

M/S. Aishu Fincorp Limited vs The Assistant Commissioner Of Income ... on 11 August, 2025

Author: P.Sam Koshy

Bench: P.Sam Koshy

     THE HONOURABLE SRI JUSTICE P.SAM KOSHY
                     AND
           THE HONOURABLE SRI JUSTICE
            SUDDALA CHALAPATHI RAO

                 ITTA Nos.198 & 234 OF 2012

COMMON J UDGMENT:

(per Hon'ble Sri Justice P.Sam Koshy)

Heard Mr.A.V.A.Siva Kartikeya, learned counsel

representing Mr. A.V.Krishna Koundinya, learned counsel for the

appellants and Ms. B.Sapna Reddy, learned Standing Counsel for

the Income Tax Department for the respondent. Perused the

record.

2. The instant appeals have been filed assailing the order

dated 16.07.2010 passed by the learned Income Tax Appellate

Tribunal, Hyderabad, Bench 'A' in I.T.A.No.67/Hyd/09 and

I.T.A.No. 66/Hyd/09 for the assessment year 2005-06.

3. The substantial question of law framed while admitting the

appeals was whether the ITAT was right in upholding the

disallowance made by the Assessing Officer for the amounts of

Rs.1,88,85,983/- and Rs.1,13,18,977/- made under Section 40(a)(i

a) of the Income Tax Act, 1961.

4. Today, when the matters are taken up for hearing, the

learned counsel for the appellants submits that the issue involved in

the instant cases have already come up for hearing before the

Hon'ble Supreme Court arising out of Calcutta High Court

judgment and the Hon'ble Supreme Court in Commissioner of

Income Tax vs. Calcultta Export Company 1 has decided the

issue, wherein at paragraphs 19, 21, 24, 25 to 28 has held as under:

"21) The amendment though has addressed the concerns of the assesses falling in the first category but with regard to the case falling in the second category, it was still resulting into unintended consequences and causing grave and genuine hardships to the assesses who had substantially complied with the relevant TDS provisions by deducting the tax at source and by paying the same to the credit of the Government before the due date of filing of their returns under Section 139(1) of the IT Act.

The disability to claim deductions on account of such lately credited sum of TDS in assessment of the previous year in which it was deducted, was detrimental to the small traders who may not be in a position to bear the burden of such disallowance in the present Assessment Year".

xxxxx xxxxx

"24) Thus, the Finance Act, 2010 further relaxed the rigors of Section 40(a)(ia) of the IT Act 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. The idea was to allow additional time to the deductors to deposit the TDS so made. However, the Memorandum explaining the provisions

[2018] 404 ITR 654 (SC)

of the Finance Bill, 2010 expressly mentioned as follows: "This amendment is proposed to take effect retrospectively from 1st April, 2010 and will, accordingly, apply in relation to the Assessment Year 2010-11 and subsequent years".

"25) The controversy surrounding the above amendment was whether the amendment being curative in nature should be applied retrospectively i.e., from the date of insertion of the provisions of Section 40(a)(ia) or to be applicable from the date of enforcement".

"26) TDS results in collection of tax and the deductor discharges dual responsibility of collection of tax and its deposit to the Government. Strict compliance with Section 40(a)(ia) may be justified keeping in view the legislative object and purpose behind the provision but a provision of such nature, the purpose of which is to ensure tax compliance and not to punish the tax payer, 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. Legislature can and do experiment and intervene from time to time when they feel and notice that the existing provision is causing and creating unintended and excessive hardships to citizens and subject or have resulted in great inconvenience and uncomfortable results.

Obedience to law is mandatory and has to be enforced but the magnitude of punishment must not be disproportionate to what is required and necessary. The consequences and the injury caused, if disproportionate do and can result in amendments which have the effect of streamlining and correcting anomalies. As discussed above, the amendments made in 2008 and 2010 were steps in the said direction only. The legislative purpose and the object of the said amendments were to ensure payment and deposit of TDS with the Government".

"27) A proviso which is inserted to remedy unintended consequences and to 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".

"28) The purpose of the amendment made by the Finance Act, 2010 is to solve the anomalies that the insertion of section 40(a)(ia) was causing to the bona fide tax payer. The amendment, even if not given operation retrospectively, may not materially be of consequence to the Revenue when the tax rates are stable and uniform or in cases of big assessees having substantial turnover and equally huge expenses and necessary cushion to absorb the effect. However, marginal and medium taxpayers, who work at low gross product rate and when expenditure which becomes subject matter of an order under Section 40(a)(ia) is substantial, can suffer severe adverse consequences if the amendment made in 2010 is not given retrospective operation i.e., from the date of substitution of the provision. Transferring or shifting expenses to a subsequent year, in such cases, will not wipe off the adverse effect and the financial stress.

Such could not be the intention of the legislature. Hence, the amendment made by the Finance Act, 2010 being curative in nature is required to be given retrospective operation i.e., from the date of insertion of the said provision".

and as such the issue raised stands decided against the Revenue and

in favour of the appellants and the instant two appeals can also be

disposed of in similar terms.

5. Learned Standing Counsel appearing for the department on

verification of facts did accept the fact that the issue involved in the

instant appeals in fact stands covered against the Revenue vide the

aforesaid judgment of the Hon'ble Supreme Court.

6. In view of the same, the present appeals stand allowed in

favour of the assessees and against the Revenue holding that the

disallowance made by the Assessing Officer which stood

confirmed by the Appellate Tribunal was bad in law and which

stands adjudicated by the Hon'ble Supreme Court in the aforesaid