Case Law Details

Case Name : Bapushaeb Nanasaheb Dhumal Vs. ACIT (ITAT Mumbai)
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Courts : All ITAT (4619) ITAT Mumbai (1504)

Bapushaeb Nanasaheb Dhumal Vs. ACIT (ITAT Mumbai)

The assessee made payments to sub-contractors during the previous year and though s. 194C requires TDS at the stage of payment/credit, did not do so. The tax was, however, deducted on 31st March and paid over in Sept before the due date for filing the return. The AO took the view that while the payment made to the sub-contractor for March was allowable, the payments for the earlier months was dis allowable u/s 40(a)(ia). This was confirmed by the CIT (A). On appeal by the assessee, HELD allowing the appeal:

Failure to deduct or deposit tax as per s. 194C or Chapter-XVII makes the assessee liable to the consequences provided under the said Chapter-XVII. However, s. 40(a)(ia) is in addition to Chapter XVII. S. 40(a)(ia)(A) provides that if tax is deducted during the last month of the previous year and paid on or before the due date of filing of return as per s. 139(1), then such sum shall be allowed as deduction. In cases where tax is deducted other than the last month of previous year but is deposited before the last day of the previous year, then it will be allowed as deduction. Therefore, the conditions for allow ability of deduction are prescribed u/s 40(a)(ia) itself and Chapter-XVII and s. 194C are not relevant. If the condition of deduction and payment prescribed u/s 194C / Chapter XVII are held applicable for dis allowance of deduction u/s 40(a)(ia), then s. 40(a)(ia) will be rendered meaningless, absurd and otiose. Since the assessee had (belatedly) deducted tax in the last month of the previous year i.e. March 2005 and deposited the same before the due date of filing the return u/s 139(1), deduction had to be allowed u/s 40(a)(ia) (A).

Note: S. 40(a)(ia) has been amended by the Finance Act  2010 w.e.f. 1.4.2010 to provide that in all cases if TDS is paid before the due date of filing the ROI, no disallowance shall be made.

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Category : Income Tax (26332)
Type : Judiciary (10602)
Tags : ITAT Judgments (4800) section 40(a)(ia) (186) TDS (953)

0 responses to “Default u/s 194C does not result in s. 40(a)(ia) disallowance if TDS paid before due date of filing ROI”

  1. Anushree says:

    Is this applicable for A. Y. 2009-10?

  2. R. Ramamurthy says:

    Income tax Appellate Tribunal on 16-1-2009 in ITA No.879/2008 in case of B.UdayaKumar Shetty has held 40(a)(i)(a) is inapplicable once tax deducted @ source u/s.194C is paid within the staturoty period prescribed u/s.139(1) and has to be allowed as deduction and has also considered the Amendment made by Finance Act, 2008 with retrospective effect from 1-4-2005. Revenue has questioned the same in ITA.No.319/2009 in Hon’ble High Court of Karnataka and the matter is pending after admission of appeal.

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