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2015 (8) TMI 277 - HC - Income TaxDisallowance under Section 40(a)(ia) - professional services to the assessee's hospital - assessee deducted tax at the rate of 2% under Section 194C but assessment was completed on the basis that tax deductible was at 5% as prescribed under Section 194J - assessee in default under Section 201 - whether where tax is deducted by the assessee, even if it is under a wrong provision of law, as in this case, the provisions of Section 40(a)(ia) of the Act cannot be invoked? - Held that:- Any fees or professional services or fees for technical services payable to a resident '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 during the previous year, or in the subsequent year before the expiry of the 'time prescribed' under Section 200(1) of the Act, this provision is attracted. If Section 40(a)(ia) is understood in the manner as laid down in Gurusahai Saigal v. Commissioner of Income Tax, Punjab [1962 (8) TMI 66 - SUPREME COURT] it can be seen that the expression "tax deductible at source under Chapter XVII-B" occurring in the Section has to be understood as tax deductible at source under the appropriate provision of Chapter XVII-B. Therefore, as in this case, if tax is deductible under Section 194J but is deducted under Section 194C, such a deduction would not satisfy the requirements of Section 40(a)(ia). The latter part of this Section that such tax has not been deducted, again refers to the tax deducted under the appropriate provision of Chapter XVII-B. Thus, a cumulative reading of this provision, therefore, shows that deduction under a wrong provision of law will not save an assessee from Section 40(a)(ia). - Decided against assessee.
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