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Commissioner of Income Tax, Kolkata-XII v. M/s Calcutta Export Company

Civil Appeal · 2018 INSC 411Decided 24 Apr 2018
Civil Appeal Nos. 4339-4340 of 2018
Justice R.K. Agrawal · Justice Abhay Manohar Sapre

Background

The respondent, a partnership firm exporting casting materials from Kolkata, had export commission payments disallowed by the Assessing Officer because the tax deducted at source (TDS) on those payments was deposited with the government a few months after the close of the relevant financial year, though before the firm's income-tax return was actually filed. The Commissioner (Appeals) and the Income Tax Appellate Tribunal both ruled in the firm's favour, and the Calcutta High Court upheld that view, prompting the Revenue to appeal to the Supreme Court along with dozens of similar connected appeals.

Decision Breakdown

The core question was whether a 2010 amendment to Section 40(a)(ia) of the Income Tax Act, which allowed deduction of such expenses so long as TDS was paid any time before the due date for filing the return, should apply retrospectively to an earlier assessment year (2005-06), even though the amendment's own text said it took effect only from 2010-11. The Supreme Court held that the amendment was "curative" in nature, meant to fix an unintended hardship in the original provision rather than create a new benefit, and that curative/clarificatory amendments must be read retrospectively from the date the original provision was inserted. Since the respondent had deposited the TDS before filing its return (in line with the due date under Section 139), it was entitled to the deduction, and the Court dismissed the Revenue's appeals along with all connected appeals.

Lesson Learnt

When a tax amendment is designed to cure an admitted hardship or anomaly in the original law (rather than grant a brand-new concession), courts will generally apply it retrospectively, so taxpayers facing disallowance under an older, harsher version of a provision may still benefit from a later "curative" amendment, even for past assessment years.

Official source (sci.gov.in)View Judgment (PDF)

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