Udhna Citizen Co.operative Bank Limited Vs ITO (ITAT Surat)
40(a)(ia) Disallowance Does Not Bar Action U/s 201- ITAT Surat Upholds TDS Liability on Expense Provisions;
The Surat Bench of the ITAT partly allowed the appeal of a co-operative bank in proceedings under sections 201(1) and 201(1A) for AY 2013-14, arising from non-deduction of TDS on provisions made for rent and legal/consultation fees. The Assessing Officer (TDS) had treated the assessee as an “assessee in default” and raised a demand of ₹4.77 lakh for failure to deduct tax under sections 194I and 194J.
The Tribunal held that the liability to deduct TDS arises at the time of credit or payment, whichever is earlier, and therefore TDS was required to be deducted even when the amounts were merely provided in the books. It rejected the assessee’s contention that since the expenses were already disallowed under section 40(a)(ia), no action could be taken under section 201, holding that sections 40(a)(ia) and 201 operate in different fields and are not mutually exclusive.
The ITAT further observed that the assessee failed to satisfy the conditions of the proviso to section 201(1)—namely, producing evidence that the payees had filed returns, included the income, paid tax thereon, and furnished the prescribed accountant’s certificate. Accordingly, the assessee was rightly treated as an assessee in default in respect of rent provisions.
However, in respect of legal fees, the Tribunal noted the assessee’s claim that TDS had been deducted on part payment made before the due date. It therefore remanded this limited issue to the TDS AO for verification, directing that relief be granted to the extent TDS was duly deducted and paid. The appeal was thus partly allowed for statistical purposes
FULL TEXT OF THE ORDER OF ITAT SURAT
