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2013 (7) TMI 454 - HC - Income TaxViolation of Section 40(a)(ia) - TDS not paid in same financial year on Professional payments - Cash system of accountancy followed - Tribunal deleted addition u/s 40(a)(ia) - Held that:- Assessee paid professional payments in March, 2007 and accordingly deducted TDS and the same was deposited within the due date from the date of said deduction in April, 2007. Prior to that, the assessee had deducted TDS on professional charges in February, 2007. TDS on the said amount which was deducted in the month of February was deposited on 7th March, 2007, within the due date - It is an accepted position that in case tax was deductible in March, 2007 the due date of payment was in April, 2007 and before due date payment TDS was paid - it is logical that there would be some time gap between date of deduction of tax at source and when payment is deposited - Therefore provision of Section 40(a)(ia) could not be invoked - Decided against Revenue. Increase in rate of interest - Held that:- Even prior to the amendment made by Finance Bill, 2010, Section 40(a)(ia) had stipulated that in case where the tax was deductable and so deducted during the last month of the previous year but was paid on or before the due date specified in Section 139(1) of the Act, deduction/expenditure will be allowed in the previous year notwithstanding the main Section - The object of introduction of Section 40(a)(ia) is to ensure that TDS provisions are scrupulously implemented without default in order to augment recoveries. It is not to penalise an assessee when payment has been made within the time stated. Failure to deduct TDS or deposit TDS results in loss of revenue and may deprive the Government of the tax due and payable. The provision should be interpreted in a fair, just and equitable manner. It should not be interpreted in a manner which results in injustice and creates tax liabilities when TDS has been deposited/paid and the respondent who is following cash system of accountancy has made actual payment to the third party for services rendered - Decided against Revenue.
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