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2023 (6) TMI 879 - AT - Income TaxShort deduction of TDS - Disallowance u/s 40(a)(ia) - payment to sub-contractors - default u/s. 201 - assessee while making payments exceeding Rs. 10 lakhs at the time of deducting TDS on such amounts, surcharge was not levied on the tax amount, thereby leading to short deduction of TDS - HELD THAT - In the case of CIT vs. S.K. Tekriwwal 2012 (12) TMI 873 - CALCUTTA HIGH COURT the Kolkata High Court held that if there is any shortfall due to any difference of opinion as to taxability of any item or nature of payments falling under various TDS provisions, assessee can be declared to be an assessee in default u/s. 201, but no disallowance can be made by invoking provisions of section 40(a)(ia). In the case of Dish T.V. India Ltd. 2017 (10) TMI 539 - ITAT MUMBAI held that where tax was deductable u/s. 194J but was actually deducted u/s. 194C, such a short deduction would not meet requirements of section 40(a)(ia) of the Act as assessee could not be held as defaulter when there was only shortfall in deduction of TDS - Decided against revenue.
Issues involved:
The appeal filed by the Revenue against the order of the ld. CIT(A)-6, Ahmedabad, in proceeding u/s. 250 for the assessment year 2008-09. Details of the Judgment: Issue 1 - Disallowance of TDS under section 40(a)(ia) of the IT Act: During assessment, the Assessing Officer noted that the assessee credited payment to subcontractors without deducting surcharge on tax amounts exceeding Rs. 10 lakhs, resulting in short deduction of TDS amounting to Rs. 69,98,644. The AO disallowed this amount u/s. 40(a)(ia) of the Act. The ld. CIT(A) allowed the appeal of the assessee based on the decision of the Kolkata High Court in CIT vs. S.K. Tekriwal, stating that the shortfall in TDS deduction does not warrant disallowance under section 40(a)(ia) of the Act. The CIT(A) emphasized that the TDS was duly deducted as per Section 194C of the Act, and the shortfall in surcharge deduction should not lead to disallowance. The ITAT Ahmedabad, in line with the Kolkata High Court decision, upheld the CIT(A)'s order, stating that no disallowance should be made under section 40(a)(ia) for short deduction of tax. The ITAT emphasized that the provision focuses on the duty to deduct tax and pay to the government account, and any shortfall should not automatically result in disallowance. Key Points: - The Kolkata High Court's decision in CIT vs. S.K. Tekriwal was pivotal in establishing that a shortfall in TDS deduction does not warrant disallowance under section 40(a)(ia) of the Act. - Various other decisions by different Courts and Tribunals supported the stance that no disallowance should be made for short deduction of tax under this section. - The ITAT Ahmedabad concurred with these decisions and upheld the CIT(A)'s order, emphasizing that the focus should be on the duty to deduct tax and not penalize for minor shortfalls. Conclusion: The ITAT dismissed the Department's appeal, affirming the CIT(A)'s decision to delete the disallowance of Rs. 69,98,644 under section 40(a)(ia) of the IT Act for short deduction of TDS. The judgment was pronounced in the open court on 16-06-2023.
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