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2016 (4) TMI 430 - KARNATAKA HIGH COURT

2016 (4) TMI 430 - KARNATAKA HIGH COURT - [2016] 387 ITR 196 - Disallowance u/s 40(a)(ia) - lesser deduction of tds - ITAT allowed the claim - Held that:- There are two angles to the matter: The first is, whether it was a case of `no deductioní or not in the present case. The answer would be in the negative because, the deduction was already made at the rate of 1%. The second angle would be as to whether it was under a bona fide wrong impression that only 1% was deducted instead of 2%. The conte .....

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the aspects of the bona fide wrong impression keeping in view the contention of the assessee that in the middle of year, there is change of law about the deduction, as well as on the non-availability of the provisions of Section 40(a)(ia), when the issue is covered by the Calcutta High Court Judgment in case of S.K.Tekriwal [2012 (12) TMI 873 - CALCUTTA HIGH COURT ], we do not find that any substantial question of law would arise for consideration as sought to be canvassed. - Decided against rev .....

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not proper by relying upon the decision which is not applicable to facts of the present case and when the ingredients of Section 194H and 40(a) (ia) are satisfied in the instant case? 2. We have heard Mr.Arvind, learned counsel appearing for appellant-Revenue. 3. The relevant discussion in the impugned order of the Tribunal on the aforesaid aspect is at paragraphs 5.3 to 5.3.3 which read as under: "5.3.1 We have heard the rival contentions on the ground at S.No.5 and perused and carefully .....

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re to be made @ 2% thereon, instead of 1% as had been done by the assessee, the balance TDS was paid on 31.1.2011 along with interest under Section 201(1A) of the Act. The Assessing Officer, on examination of the assessee's claim, was of the view that deduction of tax at a lower rate cannot be taken as TDS made in accordance with the provisions of Chapter XVII-B and, following the decisions of the Chennai ITAT in the case of Frontier Offshore Exploration (I) Ltd. (supra) and Pixie Enterprise .....

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understanding or opinion as to the taxability of any payment or the nature of payments made under TDS provisions, no disallowance can be made by invoking the provisions of Section 40(a)(ia) of the Act. We have had occasion to peruse the decision of the Hon'ble High Court of Calcutta in the case of S.K. Tekriwal (supra), wherein their Lordships had considered the very same issue of the applicability of the provisions of Section 40(a)(ia) of the Act in a case where there was short deduction of .....

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w that the cited case would cover the issue squarely in favour of the assessee and against Revenue. At paras 2 and 3 of its order, the Hon'ble High Court of Calcutta has held as under:- "2. The reasoning appearing at paragraph 6 of the judgment and/or order under challenge reads as follows: "In the present case before us the assessee has deducted tax under Section 194C(2) of the Act being payments made to subcontractors and it is not a case of nondeduction of tax or no deduction of .....

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ion of tax and that also under different head and accordingly disallowed the payments proportionately by invoking the provisions of section 40(a)(ia) of the Act. The ld. CIT, DR also argued that there is no word like failure used in section 40(a)(ia) of the Act and it referred to only nondeduction of tax and disallowance of such payments. According to him, it does not refer to genuineness of the payment or otherwise but addition under section 40(a)(ia) of the Act can be made even though payments .....

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ection 40(a)(ia) of the Act cannot be invoked. Here in the present case before us, the assessee has deducted tax under Section 194C(2) of the Act and not under Section 194I of the Act and there is no allegation that this TDS is not deposited with the Government account. We are of the view that the provisions of section 40(a)(ia) of the Act has two limbs one is where, inter alia, assessee has to deduct tax and the second where after deducting tax, inter alia, the assessee has to pay into Govt. Ac .....

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n 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 under Section 201 of the Act and no disallowance can be made by invoking the provisions of section 40(a)(ia) of the Act. Accordingly, we confirm the order of CIT (Appeals) allo .....

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Act if there was any shortfall in deduction of tax at source due to any difference of understanding or opinion as to the taxability of any item or the nature of payments falling under various TDS provisions and therefore reverse the findings of the authorities below and allow the assessee s appeal in respect of Ground No.5." The aforesaid shows that the Tribunal has gone by the decision taken by the High Court of Calcutta and has found that it was not a case of no deduction of TDS whatsoev .....

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case, the TDS was deducted at a lesser percentage but the payment was credited in the Revenue in time whereas, in the present case, the TDS was deducted at a lesser rate but no payment was credited with the revenue in time. 5. He submitted that, as per Scheme of Sec.40(a) (ia) of the Act read with proviso, if no deduction is made, the amount is disallowable as revenue expenditure and if TDS is made succeeding year, it would be admissible in that year and not the year in which the claim has been .....

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