INCOME TAX ACT, 1961

Section 40(a)(ia)

Business disallowance under section 40(a)(ia) - Applicability of provisions - Assessee continued to deduct tax at concessional rate beyond the amount as per certificate issued under section 197 -

Assessee was supposed to make payments to party which required deduction of tax at source. The concerned payees furnished certificates issued under section 197 permitting deduction of tax at lower rate. On strength of such certificates, assessee deducted tax at lower rates. AO alleged that assessee continued to deduct tax at concessional rate beyond the amount as per certificate issued under section 197 instead of deducting the TDS at the rate 2%. Assessee was aggrieved by disallowance under section 40(a)(ia), on account of short-deduction of tax at source as assessee while making payments deducted lower tax in respect of part of the amount paid to the deductee. Case of assessee was that mere short deduction of tax would not result into disallowance of expenditure under section 40(a)(ia). Held: Statutory provisions providing for deduction of tax at source at lower rate is person specific and cannot be extended to the amounts specified by the recipients of the payment while making application for grant of certificate in Form No. 13, in terms of section 197. If assessee continues to deduct tax at the rate specified in the certificate, even, in respect of payment made over and above the sum specified in the certificate, it cannot be treated as assessee-in-default for short deduction of tax.

Followed:Tata Communications Ltd. v. Dy.CIT' [ITA No. 7084 & 7085/Mum/2017 : 2019 TaxPub(DT) 8190 (Mum-Trib)].

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2013-14

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