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2016 (4) TMI 1048 - ITAT PUNE

2016 (4) TMI 1048 - ITAT PUNE - TMI - TDS u/s 192 - Non deduction of tds - assessee in default in respect of salary remaining unpaid to its employees till the end of the relevant assessment year - Held that:- In view of the express provision of S. 192, the Assessee cannot be deemed to be in default under S. 201(1) and S. 201(1A) to this extent. The liability to deposit sum, not deducted or collected, with the Govt. treasury does not arise under Chapter XVII-B of the Act read with Rule 30(2) of t .....

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e book entries made in this regard are not conclusive. As a corollary, patent mistake has been committed by the AO in applying the statutory provisions of S. 192 while framing impugned order which is rectifiable under S. 154. In this view of the matter, we direct the Assessing Officer not to hold the assessee as assessee in default under section 201(1) & 201(1A) of the Act in respect of TDS liability attributable to unpaid salary. While computing the revised liability for default under S. 201(1) .....

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hingte For The Respondent : Smt. Shailaja Rai ORDER PER BENCH: The captioned appeal arises out of the order of the Assessing Officer (TDS) under S. 154 dated 10.01.2012 rejecting petition of the assessee seeking rectification of order passed under section 201(1) & 201(1A) of the Income Tax Act, 1961 (in short the Act ) dated 30.03.2011 relevant to assessment year 2009-10 and which rejection is sustained by the CIT(A) vide its order dated 25.06.2013. 2. In the present appeal, the assessee has .....

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trial materials. In the course of carrying on of the business, the assessee company makes a number of payments towards various expenses inter-alia towards salary which is subjected to liability of deduction of tax at source (TDS) while making such payments. The liability to deduct TDS concerning salary expenditure is regulated by section 192 under Chapter XVII-B of the Act. The AO observed certain defaults in compliances of liability to deduct at source as provided under Chapter XVII-B of the Ac .....

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section 154 of the Act before the Assessing Officer (TDS) to correct the apparent error allegedly crept in the aforesaid order. With respect to alleged default in short deduction of TDS under the head salary, the Assessee took a stand by invoking S. 154 that the AO committed error in including unpaid salary for determining the quantum of default under S. 201(1) and consequential S. 201(1A). Accordingly to the Assessee, S. 192 envisage liability for deduction of tax only at the time of payment an .....

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n of quantum of default under S. 201(1) and under S. 201(1A), the unpaid salary is not includible. So to say in nutshell, it is the case of the assessee company that it is not liable for depositing TDS on salary remaining unpaid to its employees which is outstanding and consequently no default can be quantified under S. 201(1) and S. 201(1A) for unpaid sum. 4. The Assessing Officer rejected the application of the assessee under section 154 of the Act on the solitary ground that unpaid salary out .....

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fore the CIT(A), the assessee reiterated that entire salary was not paid during the year under consideration and the assessee was not required to deduct tax towards unpaid salary and deposit the amount to the credit of Government Treasury. He submitted that the outstanding salary is duly appearing in the Balance Sheet under the head sundry creditors and therefore the assertions of Assessing Officer while rejecting the application under section 154 is wholly incorrect. A certificate to this effec .....

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sessee impugned the action of the authorities below and submitted that the Assessing Officer has wrongly applied the provisions of section 192 of the Act for the purposes of determination of quantum of default on the face of the apparent facts available on record. The Ld. Authorized Representative for the assessee adverted our attention to Schedule 7 of the Balance Sheet of the assessee as on 31.03.2009 as appearing at Page No.12 of the Paper Book filed and submitted that the current liabilities .....

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ity in the Balance Sheet runs contrary to the records ex facie. He thereafter submitted that notwithstanding the fact that the provision for salary and TDS liability thereon has been made by the assessee by way of mere book entry by following mercantile basis of accounting as per the statutory mandate. The liability to pay TDS under section 192 of the Act arises only at the time of actual payment to its employees as distinct from the time of making credit in the books for such liability. He ther .....

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ules, 1962 and submitted that all sums which are deducted in accordance with provisions of Chapter XVII-B of the Act shall be deposited with the Central Government on or before the date specified therein. Section 192 of the Act forms part of Chapter XVII-B of the Act. The liability to deposit the tax will arise only when the liability to collect TDS arises under section 192 of the Act. In the instant case, the liability to deduct the tax did not arise and consequently liability to deposit the sa .....

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ssment year 2010-11 where the CIT(A) has correctly accepted the plea of the assessee that TDS liability under section 192 of the Act arises qua actual payment of salary. 8. The Ld. Departmental Representative of the Revenue, on the other hand, relied upon the orders of the authorities below and in furtherance submitted that outstanding TDS liability would imply that assessee has deducted tax at source on salary including unpaid salary and therefore obligation to deposit the same with the Governm .....

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iability towards salary payable does not match with the subsequent payments in the case of some of the employees. She therefore pleaded that no interference is warranted with the order of the CIT(A). 9. We have perused the orders of the authorities below and material placed before us. The short controversy arising before us is to determine whether the Revenue was justified in holding the assessee as assessee in default under section 201(1) & 201(1A) for failure to deduct TDS on salary as con .....

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TDS has been reflected as liability in the Balance Sheet, such book entry for unpaid and uncollected TDS does not give rise to any obligation envisaged under S. 192 of the Act. We agree with the stand of the assessee at the first instance. We find that the provisions of section 192 of the Act has in mistakable terms provided that the liability to deduct tax arises under section 192 of the Act only when the salary is actually paid to its employees. In any event, this position of law is no longer .....

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