TMI Blog2012 (8) TMI 1009X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri B.R. Mittal, Judicial Member and Shri B. Ramakotaiah, Accountant Member For the Appellant: Shri Rajesh Shah For the Respondent: Shri V. Krishnamoorthy, DR O R D E R Per B. Ramakotaiah, A.M. These are appeals by assessee and Revenue for assessment years 2007-08 and 2008-09. In AY 2007-08 there is only an assessee appeal, whereas the cross appeals in AY 2008-09. These appeals are arising against the orders of the CIT (A)-20, Mumbai dated 05.10.2010 21.07.2011 for the respective assessment years. Since common issues are involved, these are heard together and decided by this common order. ITA No.8966/Mum/2010: 2. In this appeal assessee raised three grounds on the issue of disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Without prejudice it contended that it had correctly deducted tax as the payment in question was only labour payment covered under section 194C. Without prejudice, it also contends that mere short deduction of TDS does not attract section 40(a)(ia). Assessee pleaded before the CIT (A) that the addition of amount of ₹ 17,52,134/- should be deleted. 4. The CIT (A) did not agree and held that the payments paid on behalf of M/s Aeromatic Industrial Chemical Pvt. Ltd for whom it was given job work cannot be considered as reimbursement of fee between assessee and the ultimate recipient M/s Aeromatic Industrial Chemical Pvt. Ltd. He considered the payment made are fees for technical services and analyzing the word any used in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tention that the amounts paid are not in the nature of technical fees but only reimbursement of expenditure. Without going to the merits of the aspect, whether it is in the nature of technical services or contract payment, assessee has already deducted the tax on this amount under section 194C on which there is no dispute. It is already decided by the Coordinate Benches that wherever there is a short deduction of tax, provisions of section 40(a)(ia) cannot be applied as it can only be invoked in the event of non deduction of tax but not for lesser deduction of tax. This issue was considered by the Coordinate Bench in the case of DCIT vs. Chandabhoy Jassobhoy (ITA No.20/Mum/2010), vide Para 3 as under: 3. We have heard the rival arg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ara 6 as under: 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 nondeduction 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here is a shortfall in deduction. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ances under section 40(a)(ia). Hence on the same issue assessee and the Revenue are in appeal. 12. As discussed in appeal No.8966/Mum/2010 on the issue, respectfully following the decision taken therein, we hold that provisions of section 40(a)(ia) cannot be invoked for short deduction of tax. Since assessee has already deducted the tax at 2% of the entire amount, AO is directed to allow the amount as claimed. As rightly held by the Coordinate Bench in the case of DCIT vs. S.K. Tekriwal, if any amount is not falling under particular TDS provisions, assessee can be declared to be an assessee in default under section 201 of the Act but no disallowance can be made by invoking the provisions of section 40(a)(ia). Accordingly assessee s gro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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