TMI Blog2022 (4) TMI 842X X X X Extracts X X X X X X X X Extracts X X X X ..... RESIDENT: This appeal by the assessee is arising out of the order of the Commissioner of Income Tax (Appeals)-13, Chennai, in ITA No.40/CIT(A)- 13/2013-14 dated 17.01.2018. The assessment was framed by the ITO, Non-Corporate Ward-12(4), Chennai, for the AY 2013-14, u/s.143(3) of the Income Tax Act, 1961 (hereinafter the Act ) vide his order dated 31.03.2016. 2. The only issue in this appeal of the assessee is as regards to disallowance of job work charges paid without deduction of TDS by invoking provisions of Sec.40(a)(ia) of the Act, amounting to ₹ 2,61,24,420/-. For this, assessee has raised various grounds, but the issue is only one, hence, grounds need not be re-produced. 3. The brief facts of the case are that the AO during the scrutiny assessment proceedings noticed that the assessee has claimed expenses on account of job work charges paid to the master weavers to the extent of ₹ 2,61,24,420/-. The assessee has not deducted TDS on the job work charges to claim the same as expenses. Therefore, the AO noted that the assessee failed to deduct TDS as required under Chapter-XVIIB of the Act and therefore, invoked the provisions of Sec.40(a)(ia) of the Act, m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment made, but also deposit that amount to the credit of the Central Government within the stipulated time. The time within which the payment is to be deposited with the Central Government is mentioned in Rule 30(2) of the Rules. 11. The Punjab Haryana High Court in P.M.S. Diesels Ors. v. Commissioner of Income Tax 2, Jalandhar Ors., (2015) 374 ITR 562, has held these provisions to be mandatory in nature with the following observations: The liability to deduct tax at source under the provisions of Chapter XVII is mandatory. A person responsible for paying any sum is also liable to deposit the amount in the Government account. All the sections in Chapter XVII-B require a person to deduct the tax at source at the rates specified therein. The requirement in each of the sections is preceded by the word shall . The provisions are, therefore, mandatory. There is nothing in any of the sections that would warrant our reading the word shall as may . The point of time at which the deduction is to be made also establishes that the provisions are mandatory. For instance, under Section 194C, a person responsible for paying the sum is required to deduct the tax at the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Sections 194C conjointly with Section 200 and Rule 30(2) is unblemished and without any iota of doubt. We, thus, give our imprimatur to the view taken. As would be noticed and discussed in little detail hereinafter, the Allahabad High Court, while interpreting Section 40(a)(ia), did not deal with this aspect at all, even when it has a clear bearing while considering the amplitude of the said provision. 14. In the aforesaid backdrop, let us now deal with the issue, namely, the word 'payable' in Section 40(a)(ia) would mean only when the amount is payable and not when it is actually paid. Grammatically, it may be accepted that the two words, i.e. 'payable' and 'paid', denote different meanings. The Punjab Haryana High Court, in P.M.S. Diesels Ors., referred to above, rightly remarked that the word 'payable' is, in fact, an antonym of the word 'paid'. At the same time, it took the view that it was not significant to the interpretation of Section 40(a)(ia). Discussing this aspect further, the Punjab Haryana High Court first dealt with the contention of the assessee that Section 40(a)(ia) relates only to those assessees who follow t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compliance of Chapter XVII and bringing within the Department's fold tax payers is served by confining the provisions of Section 40(a)(ia) to assessees who follow the mercantile system. Nor do we find anything that indicates that for some reason the legislature intended achieving these objectives only by confining the operation of Section 40(a)(ia) to assessees who follow the mercantile system. The same view was taken by a Division Bench of the Calcutta High Court in Commissioner of Income Tax v. Crescent Export Syndicate, (supra). It was held:- It is noticeable that Section 40(a) is applicable irrespective of the method of accounting followed by an assessee. Therefore, by using the term payable legislature included the entire accrued liability. If assessee was following mercantile system of accounting, then the moment amount was credited to the account of payee on accrual of liability, TDS was required to be made but if assessee was following cash system of accounting, then on making payment TDS was to be made as the liability was discharged by making payment. The TDS provisions are applicable both in the situation of actual payment as well of the credit of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cifically Sections 194C and 200 in the instant case), he would still go scot free, without suffering the consequences of such monetary default in spite of specific provisions laying down these consequences. The Punjab Haryana High Court has exhaustively interpreted Section 40(a(ia) keeping in mind different aspects. We would again quote the following paragraphs from the said judgment, with our complete approval thereto: Further, the mere incurring of a liability does not require an assessee to deduct the tax at source even if such payments, if made, would require an assessee to deduct the tax at source. The liability to deduct tax at source under Chapter XVII-B arises only upon payments being made or where so specified under the sections in Chapter XVII, the amount is credited to the account of the payee. In other words, the liability to deduct tax at source arises not on account of the assessee being liable to the payee but only upon the liability being discharged in the case of an assessee following the cash system and upon credit being given by an assessee following the mercantile system. This is clear from every section in Chapter XVII. Take for instance, the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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