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2021 (4) TMI 276 - HC - Income TaxAssessee in default u/s 201(1) - non deduction of tax at source from the amount when such amount had not accrued to payee or any person at all - HELD THAT:- If an assessee fails to deduct the TDS as required under the provisions of the Act, he is treated as assessee in default. Section 194C(1) of the Act mandates that a person who makes a payment to any non resident Indian, has to deduct the tax at the time of payment. Similar language is employed in Section 194J, 194H and 194I. Thus, the tax is required to be deducted at the time when the payment is made. The Supreme Court in SHOORJI VALLABH DAS [1962 (3) TMI 6 - SUPREME COURT]has held that income tax is a levy on income and the Act takes into account two points of time at which the liability to tax is attracted i.e., accrual of income or its receipt but substance of the matter is the income. It has further been held that if the income does not result at all, there cannot be a levy of tax even though in book keeping entry is made about a hypothetical income which does not materialize. In the instant case, the provisions were created during the course of the year and reversal of entry was also made in the same accounting year. The Assessing Officer erred in law in holding that assessee should have deducted tax as per the rate applicable along with interest. The authorities under the Act ought to have appreciated that in the absence of any income accruing to anyone under the Act, the liability to deduct TDS on the assessee could not have been fastened and consequently, the proceeding under Section 201 and 201(1A) could not have been initiated. For the aforementioned reasons, the substantial question of law is answered in favour of the assessee and against the revenue.
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