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TMI Blog2012 (5) TMI 439X X X X Extracts X X X X X X X X Extracts X X X X ..... gh, C.D. Rao, JJ. Ravi Tulsiyan for the Appellant M. Bhattacharya for the Respondent ORDER Per Bench: 1. These appeals by revenue and Cross Objections by assessee are arising out of orders of CIT(A)-XII, Kolkata in appeal Nos.416/CIT(A)-XII/Cir-11/09-10/Kol and 691/CIT(A)-XII/Ward-11(4)/09-10/Kol dated 25.03.2010. Assessment for Assessment Year 2006-07 was framed by DCIT, Circle-11, Kolkata dated 30.10.2008 and assessment for Assessment Year 2007-08 was framed by ITO, Ward-11(4), Kolkata dated 30.11.2009 u/s. 143(3) of the Income Tax Act, 1961(hereinafter referred to as "the Act"). For the sake of brevity and clarity, we dispose of both these appeals and cross objections by this consolidated order. 2. The only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the same to directors in both the years. The assessee made TDS u/s. 192 of the Act but Assessing Officer while framing assessment made a disallowance of this expenditure by applying the provision of section 40(a)(ia) of the Act as according to him assessee has not deducted TDS on commission as per provisions of section 194H of the Act. Hence, he made disallowance by invoking the provisions of section 40(a)(ia) of the Act. Aggrieved, assessee preferred appeal before CIT(A). CIT(A) deleted the addition by treating the commission paid to directors as part of salary and held that the assessee has rightly applied the provisions of section 192 of the Act for deducting TDS under the head salary. The CIT(A) while deciding the issue has relied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal has held that the commission paid to directors as per terms of employment for the work done in their capacity as whole-time directors is to be treated as incentive in addition to salary, etc. and did not come within the purview of commission and brokerage as defined in section 194H or fee for professional or technical services as defined in s. 194J and therefore, same cannot be disallowed under s. 40(a)(ia) of the Act. 5. After hearing the rival submissions, we find that, admittedly, the assessee has deducted tax u/s. 192 of the Act under the head salary and this fact has not been denied by revenue. Revenue's contention is that this particular payment i.e. commission paid to directors was not part of salary and it is only commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r brokerage, rent, royalty, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under chapter XVII-B and such tax has not been deducted or after deduction has not been paid on or before the due date specified in subsection (1) of section 139:" In this provision it is provided that where in respect of any sum, as referred in this section, tax has not been deducted or after deduction has not been paid on or before the due date specified in sub-section (1) of section 139 of the Act, such sum shall be disallowed as a deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 6. In the present case before us the assessee has deducted tax u/s. 194C(2) of the Act being payments made to sub-contractors and it is not a case of non-deduction of tax or no deduction of tax as is the import of section 40a(ia) of the Act. But the revenue's contention is that the payments are in the nature of machinery hire charges falling under the head 'rent' and the previous provisions of section 194I of the Act are applicable. According to revenue, the assessee has deducted tax @ 1% u/s. 194C(2) of the Act as against the actual deduction to be made at 10% u/s. 194I of the Act, thereby lesser deduction of tax. The revenue has made out a case of lesser deduction of tax and that also under different head and accordingly disallowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . With regard to the shortfall, it cannot be assumed that there is a default as the deduction is not as required by or under the Act, but the facts is that this expression, 'on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction has not been paid on or before the due date specified in sub-section (1) of section 139'. This section 40(a)(ia) of the Act refers only to the duty to deduct tax and pay to government account. If there is any shortfall due to any difference of opinion as to the taxability of any item or the nature of payments falling under various TDS provisions, the assessee can be declared to be an assessee in default u/s. 201 of the Act and no disallowance can be made by i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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