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No s. 40(a)(ia) disallowance for default of short-deduction of TDS
The assessee made payments to various contractors. Though tax was deducted at source, it was at a rate lower than that prescribed under the Act. The AO & CIT(A) held that as there was a default by the assessee, the expenditure had to be disallowed u/s 40(a)(ia). On appeal by the assessee to the Tribunal, HELD allowing the appeal:
A combined reading of s. 201(1A) and s. 40(a)(ia) shows that while a case of short-deduction of TDS is covered by s. 201(1A), it is not covered by s. 40(a)(ia). There is an obvious omission to include short deduction / lesser deduction in s. 40(a)(ia). Therefore, in case of short /lesser deduction of tax, the entire expenditure whose genuineness was not doubted by the assessing officer, cannot be disallowed (S.K. Tekriwal (Cal HC) & Chandabhoy and Jassobhoy 49 SOT 448 (Mum) followed)
Note: It is also held that foreign currency loss on loan given to a subsidiary for capital purposes is not deductible
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On a reading of the order, particularly paragraph 13, the issue is seen to have been decided in assessee’s favour, in effect on the ground that there is an omission on the part of the legislature to ensure that the two referred provisions are mutually compatible and consistent.
If the legislative history were to be given a close look, this, perhaps, is not a solitary instance but just one in a series of its kind. What is deplorable is the fact that such issues have come to be raised time and again, and led to prolonged disputes and court litigation; thereby proving an irritant both to taxpayers and adjudicating authorities. To recall, one of the rudimentary principles of jurisprudence, well settled by case law, is that in a taxing enactment, nothing must be read in or implied. Even so, one will find that is the very rule often broken ; butchered and made a casualty by assessing officers dictated by own whims and fancies.
The instant case brings to one’s mind a closely related provision of a later origin; that is, section 200A, and the new insertions in section 201 (2). On a tentative study, one’s irresistible feeling is, that the said provisions do not cover, adequately or otherwise, all possible situations giving rise to excess or short TDS, and for whatever reason. So much so, seem to bristle with immense scope for problems, and potentials for disputes and a right royal legal battle..
For a clue : Section 200A talks of computerised processing of TDS statement (s) made by the deductor, But that concerns itself to such statement(s) on record for any one year. In a case where any incorrect particulars are furnished in that year’s statement , but not having been detected hence left to be reflected in that year’s statement, there appears to be no way for making any such ‘adjustments’ as envisaged in section 200A (1)- (a) and/ or (b) in a later year.
Not all said, over to the supposedly well equipped stalwarts and experts in practice, who could better identify and consider in-depth all such areas; also follow-up by representing to the government for appropriately effective correctives in a wholesome manner. As, otherwise, are bound to add to the woes already faced with by honest taxpayers because of the messed-up TDS regime; especially, after the set-up of the CPU .
For a quick idea, the recent Delhi High Court Writs in the PIL matter exclusively devoted to such hassles and hardships is worthwhile to go through.