CBDT Order: extension of due date

The CBDT has today (30th September, 2015) extended the due date for filing return of income and tax audit report to 31st October, 2015 for assessees in Gujarat and Punjab & Haryana who were due to file this by 30th September, 2015. This order is in compliance with the directions of the jurisdictional High Courts in the cases of Vishal Garg & Ors v Union of India & Anr (CWP 19770-205) as well as All Gujarat Federation of Tax Consultants v CBDT (Special Civil Application No. 15075 of 2015).

This appears to be an aggressive stand of the CBDT and the relation has probably not been extended to other states because no Court has directed the CBDT to do so. The order is subject to the outcome of any further appeal/SLP that the CBDT may file against the judgments referred to above.

Disallowance u/s 40(a)(ia)

Section 40 of the Income Tax Act, 1961 deals with amounts not deductible in computing the income chargeable under the head “Profits and gains of business and profession”. According to sub-section (ia), as amended by the Finance (No. 2) Act, 2014 w.e.f. 01.04.2015, 30% of any sum payable to a resident on which tax was deductible at source but on which tax has either not been deducted or, after deduction has not been paid on or before the due date for filing return of income was to be disallowed in the hands of the deductor at the time of computing income under the head of “Profits and gains of business and profession”. In such cases, the sum could be claimed as a deduction in the year in which the tax was actually paid [first proviso to section 40(a)(ia)].


The Finance Act, 2013 introduced a second proviso to section 40(a)(ia). According to this, if the deductor has failed to deduct the whole or any part of tax that was deductible on payment of any sum to a resident but is not deemed to be an assessee in default as per section 201, then the tax shall be deemed to have been deducted and paid on the date on which the payee (recipient) has filed his/her/its return of income.


For the deductor to be deemed to be not an assessee in default as per section 201, the following are to be satisfied vide proviso to section 201(1) inserted by the Finance Act, 2012 w.e.f. 01.07.2012:


  1. The deductor has failed to deduct the whole or any part of the tax deductible on sum paid/credited to a resident;
  2. The payee has furnished his return of income u/s 139;
  3. The payee has taken into account such sum for computing his income in his return of income;
  4. The payee has paid the tax due on the income declared by him in the return of income; and
  5. Form 26A is furnished by the payee vide Rule 31ACB.


Therefore, government was not really losing any revenue because the tax was being paid by the resident payee although it was not deducted at source /not paid after deduction by the deductor. Although in such cases the deductor was not being considered an assessee in default vide section 201, during the course of assessment, the deductor was not being able to claim the benefit of deduction of the sum in computing his return of income for assessment years up to the date of amendment by the Finance Act, 2013. The revenue authorities continued to disallow the amount u/s 40(a)(ia) up to AY 2012-13 because the amendment in this section was effected from AY 2013-14.


In an order that has recently been confirmed by the Hon’ble High Court (in the case of Ansal Land Mark Township Pvt. Ltd.), Delhi, the ITAT, Agra Bench considered the entire issue in the case of Rajiv Kumar Agarwal in ITA 337/Agra/2013. The ITAT analysed the provisions in detail and reasoned that the insertion of the second proviso to section 40(a)(ia) was declaratory and curative in nature and should be given retrospective effect from 01.04.2005.


This judgment of the Hon’ble High Court, Delhi should be of assistance to those who face disallowance u/s 40(a)(ia) of such sums, although they are not be held assessees in default as per section 201.

Regarding extension of due date of filing return of income to 07th September, 2015

On 2nd September, 2015, it was notified by the CBDT that the due date for filing return of income for all assesses who were required to file their returns electronically by 31st August, 2015 had been extended to 07th September, 2015.

Many people seem to have missed the fact that the extension has been granted only for those who were required to file their returns electronically and not to all taxpayers. The extension, therefore, applies only to the following:

  1. Individual or HUF filing return of income in ITR 3 or ITR 4, that is, earning income from being Partners in Firm or having income from proprietorship business, but not liable for tax audit;
  2. Resident individual having income from any source outside India;
  3. Individual claiming any relief under DTAA with another jurisdiction;
  4. Individuals filing return in Form ITR 1 or ITR 2 and having total income in excess of INR 5 Lakhs or claiming refund of taxes;
  5. Firm not liable for tax audit u/s 44AB.

The extension of due date for filing return of income does not apply to those who were required to file their return of income by 31st August, 2015 but who do not fall in the above category.


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