Case Law Details
Brief Facts of the Case:
The assessee, a hospital, entered into an agreement with M/S Lakeshore Hospital and Research Centre Limited (herein after “M/s Lakeshore”) by which, the latter had undertaken to perform various professional services in the assessee’s hospital. During the year under consideration, the assessee paid a sum of Rs. 69,06,644/- to M/s Lakeshore. On the payments made, the assessee deducted tax at the rate of 2% under Section 194C of the Income Tax Act 1961 (herein after “Act”). However, assessment was completed on the basis that tax deductible was at 5% as prescribed under Section 194J the AO disallowed proportionate amount relatable to short deduction of tax at source, which was worked out to Rs. 41,43,986/- by invoking provisions of sec. 40(a)(ia) of the Act. The CIT(A) confirmed the assessment and the Tribunal also rejected the appeal filed by the assessee concerning the assessment year 2005-2006.
However, in 2006-2007, the Tribunal followed the Calcutta High Court judgment in Commissioner of Income Tax v. S.K.Tekriwal [2014] 361 ITR 432 (Cal) and held that where tax is deducted by the assessee, even if it is under a wrong provision of law, as in this case, the provisions of Section 40(a)(ia) of the Act cannot be invoked.
Question of Law:
Whether TDS on the consideration paid by Assessee should be withheld under Section 194C or 194J of the Act?
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