2020 (4) TMI 437 - AT - Income Tax

Deduction of TDS u/s 194C at lower rate - sec.40(a)(ia) disallowance - HELD THAT - As clear from a perusal of the foregoing lower appellate discussion that this is not an instance of non-deduction of TDS per se. DR fails to dispute that gong by the AO s detailed discussion in his assessment order dated 07.01.2016, the assessee had indeed deducted TDS u/s.194C albeit at a lesser rate followed by three other head(s) of 194-H, 194-I and 194- J involving nil deduction. Assessing Officer had disallowed the impugned sum under the first head only. We observe in this factual backdrop that hon'ble jurisdictional high court s decision in Commissioner of Income Tax vs. S.K. Tekriwal 2012 (12) TMI 873 - CALCUTTA HIGH COURT holds that the impugned disallowance u/s 40(a)(ia) does not apply in a case involving short deduction of TDS. We therefore go by the very reasoning and direct the Assessing Officer to delete the impugned disallowance. - Decided in favour of assessee.

Summary

Issues:
1. Disallowance under sec.40(a)(ia) for non-deduction of TDS u/s. 194C
2. Applicability of sec.40(a)(ia) in case of short deduction of TDS

Analysis:
1. The appeal pertains to assessment year 2009-10 against the CIT's order involving sec.147 r.w.s 143(3) of the Income Tax Act, 1961. The lower authorities disallowed 1,19,95,048/- under sec.40(a)(ia) for non-deduction of TDS u/s. 194C. The appellant's submissions challenged this disallowance, citing higher assessed income, judicial pronouncements, and CBTD circulars. The AO observed short deduction of TDS and disallowed the sum. The AR contended that TDS was deducted at a lower rate, but failed to provide evidence. The Tribunal upheld the AO's decision, stating that the appellant violated sec.194C by not deducting the required TDS, leading to the disallowance. The AR's argument regarding relief granted by the AO under sec.154 was dismissed, and the appeal was rejected.

2. The Tribunal noted that the appellant did deduct TDS u/s.194C but at a lower rate, with nil deductions under other sections. The jurisdictional high court's decision in a similar case held that sec.40(a)(ia) does not apply in cases of short TDS deduction. Relying on this reasoning, the Tribunal directed the AO to delete the disallowance under sec.40(a)(ia). Consequently, the appeal was allowed, and the impugned disallowance was removed.

In conclusion, the Tribunal's judgment addressed the disallowance under sec.40(a)(ia) for non-deduction of TDS u/s. 194C, emphasizing the importance of complying with TDS provisions. The decision also clarified the applicability of sec.40(a)(ia) in cases of short TDS deduction, providing relief to the appellant based on relevant judicial precedents.