Brief of the case:
The Hon’ble Kerala HC in in the case of CIT vs. M/s P V S Memorial Hospital Ltd. held that deduction of TDS under a wrong section amounts to non-compliance with the provisions of Chapter XVII-B which results in applicability of section 40(a)(ia) where the payments get disallowed and action u/s 201(1).
Facts of the case:
- The assessee is hospital entered into agreement with M/S Lakeshore Hospital and Research Centre Limited to hire various professional services in assessee’s hospital. The assessee deducted tax on such payments @2% u/s 194C considering the same as payment made under contract.
- However, the AO assessed the same as deductible under Sec 194J as Professional Services and disallowed the expenditure claimed by assessee under sec 40(a)(ia).
- The disallowance made by AO was upheld by CIT(A) , however , the tribunal relying on the decision of Hon ‘ble Calcutta HC in the case of CIT v. S.K.Tekriwal (2014) 361 ITR 432 (Cal), held that since the assessee has deducted TDS though under wrong section but disallowance cannot be made u/s 40(a)(ia) and Thus the assessee can be treated as assessee in default and appropriate action can be taken u/s 201(1).
- Both assessee and revenue are in appeal before High Court against the decision of Tribunal.
Contention of Assessee:
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