Section 40(a)(ia) Disallowance For Short-Deduction TDS Default: Calcutta High Court

Dear Subscriber,

 

The following important judgement is available for download at itatonline.org.

CIT vs. M/s. S. K. Tekriwal (Calcutta High Court)

No s. 40(a)(ia) disallowance for short-deduction TDS default

 

The assessee paid machinery hire charges on which it deducted TDS at 1% u/s 194C. The AO claimed that the amount was in the nature of "rent" and TDS at 10% ought to have deducted u/s 194-I. A proportionate disallowance u/s 40(a)(ia) was made on the ground that there was a "failure" to deduct TDS on the payment. The Tribunal upheld the assessee's plea that s. 40(a)(ia) disallowance could not be made when there was a shortfall in TDS deduction. On appeal by the department to the High Court, HELD dismissing the appeal:

 

S. 40(a)(ia) can be invoked only when the two conditions, namely, that tax is deductible at source and such tax has not been deducted is satisfied. Where tax is deducted by the assessee under a wrong provisions of TDS and there is a shortfall, s. 40(a)(ia) disallowance cannot be made.

 

See also Chandabhoy & Jassobhoy (included in ITAT file), BLR India (ITA 5793/M/10) & Bapushaeb Nanasaheb Dhumal (ITAT Mumbai)



(Click Here To Read More)


Regards,

Editor,

itatonline.org
--------------------
Latest:

Monthly Digest Of Imp Case Laws (October 2012) Is Available For Download