|DATE:||(Date of pronouncement)|
|DATE:||December 10, 2012 (Date of publication)|
|Click here to download the judgement (tekriwal_40_a_ia_shortfall_disallowance.pdf)|
No s. 40(a)(ia) disallowance for short-deduction TDS default
The assessee paid machinery hire charges on which it deducted TDS at 1% u/s 194C. The AO claimed that the amount was in the nature of “rent” and TDS at 10% ought to have deducted u/s 194-I. A proportionate disallowance u/s 40(a)(ia) was made on the ground that there was a “failure” to deduct TDS on the payment. The Tribunal (48 SOT 515) upheld the assessee’s plea that s. 40(a)(ia) disallowance could not be made when there was a shortfall in TDS deduction. On appeal by the department to the High Court, HELD dismissing the appeal:
S. 40(a)(ia) can be invoked only when the two conditions, namely, that tax is deductible at source and such tax has not been deducted is satisfied. Where tax is deducted by the assessee under a wrong provisions of TDS and there is a shortfall, s. 40(a)(ia) disallowance cannot be made.