TDS & Section 40(a)(ia) provisions
Income Tax Act, 1961
CA. Manish Shah
Shah & Bhandari
Chartered Accountants
Index
Nature of Payment
Section 192 to 196D
Other Provisions relating to TDS/TCS
Other Amendments
Intimation - Section 200A
 Failure to Deduct / Pay- Section 201
CA. Manish Shah
Index
Interest - Section 201(1A)
Penalty – Section 221
Late Fees - Section 234E
Penalty - Section 271H
Provisions of Section 40(a)(ia)
Section 40(a)(ia)-Issues & Amendments
CA. Manish Shah
Nature of Payment
Section
Nature of Payment
192
Salaries
193
Interest on Securities
194
Dividend
194A
Interest other than Interest on Securities
194B
Lottery / Crossword Puzzle
194BB
Winning From Horse Race
194C(1)
Payments to Contractors etc.
194D
Insurance Commission
194E
Payments to Non Resident Sportsmen etc.
194EE
Payment from NSS etc.
CA. Manish Shah
Contd…
Section
Nature of Payment
194F
Payment from Units
194G
Commission on Lottery
194H
Commission or Brokerage
194I
Rent
194J
Fees for Professional or Technical Service
194LA
Payment of Compensation
194LB
Interest on Infrastructure Debt Fund
194LC
Payment of Interest on Infrastructure Bond
195
Payments to NRI
CA. Manish Shah
Contd…
Section
Nature of Payment
196B
Income from Units
196C
Income from Foreign Currency Bond/Share
196D
Income of FII from Securities
CA. Manish Shah
Salary [Sec.192]
Nature of Payment :Salary to Any Person
Exemption Limit :
• ` 5,00,000/- Senior Citizen (80+)
• ` 2,50,000/- Senior Citizen (60-80 Years)
• ` 2,00,000/ - Any Other Employee
Deduction U/s 16, 80C, 80CCC, 80CCD,
80CCE, 80D, 80DD, 80E, 80G,80GG &
Loss under head “House Property”.
CA. Manish Shah
Contd…
 Employer is having option not to deduct
tax on non-monetary perquisites provided
to employee and instead pay tax himself.
 Rate of Deduction :
As applicable to Individual - Sch-1, Part
III of Finance Act,2012 and E. Cess @
2%, SHE Cess@ 1%.
CA. Manish Shah
Contd…
 Tips recd. by employer and paid to
employees is salary income liable for TDS
• ITC Ltd. 338 ITR 598
 Unequal deduction of Tax. No interest U/s
201(1A).
• Enron Expat Services 327 ITR 626
CA. Manish Shah
Interest on Securities [Sec.193 ]
Rate of Deduction :
a. Companies
: 10%
b. Firms, Co-op. Society
: 10%
c. Individual/HUF/AOP/BOI : 10%
 No threshold limit for non deduction
except specified cases
CA. Manish Shah
Contd…
No Tax to be Deducted :
 Up to ` 2,500/- on Debentures of widely
held Co. to Individual. (` 5,000/- Wef
01/07/2012 also for HUF, provided
payment by A/c Payee Cheque)
 Up to ` 10,000/- on 8% RBI Taxable
Bonds
CA. Manish Shah
Contd…
 Any Security of State/ Central Govt.
 Interest Payable to LIC, GIC & other
Insurer.
 Listed Securities by Cos.
CA. Manish Shah
Dividends [Sec.194]
 Rate of Deduction : 10%
 Exemption Limit : ` 2500/-
 No TDS on 115-O Dividend
CA. Manish Shah
Interest other than Interest on
Securities [Sec.194A ]
Rate of Deduction :
 Companies, Firms
 Individual/HUF/AOP/BOI
CA. Manish Shah
: 10%
: 10%
Contd…
No Tax to be Deducted:
 Up to ` 10,000/- when payer is a Banking Co.,
Co-Op. Soc. (Banking Business), Post Office
under notified scheme, Senior Citizen
Scheme.
 Up to ` 5,000/- in any other case.
 Listed Securities.
 Limit qua Branch in Case of Bank & Housing
Finance Cos.
CA. Manish Shah
Contd…
 Paid by a firm to its Partners.
 Paid by Co-op. Society to its Members, Other
Co-op. Society.
 Paid by Central Govt. under provisions of
Direct Taxes.
 Paid to Banking Cos., Financial Corp, LIC etc.
 Interest on compensation awarded under Motor
Vehicles Act up to ` 50,000/-.
 Zero Coupon Bonds by Infra. Co./Fund.
 Certain Individual & HUF.
CA. Manish Shah
Contd…
 EMI Loan from Finance Co.
• SRL Ranbaxy Ltd. 143 TTJ 265
 In case of Motor Vehicle Compensation – Limit Qua
Claimant
• National Insurance 238 CTR 201
 In case of Motor Vehicle Compensation – Limit per
year to be considered
• United India Insurance 56 TDR 407
CA. Manish Shah
Contd…
 Interest given as damages – S. 194A not
applicable
• HP Housing Board 340 ITR 388
CA. Manish Shah
Winnings of Lottery/Crossword
Puzzles [ Sec.194B]
 Includes winnings from – lotteries/
crossword/ puzzles/ card games/ or any other
game.
 Exemption Limit – ` 10,000/ In case of Cash prize & prize in kind – Tax to
be deducted with reference to aggregate prize.
 No TDS– in case of bonus or commission
paid to agents or sellers of lottery tickets
CA. Manish Shah
Contd...
Rate of Deduction :
 Domestic Cos./Firms/Co-op. Soc. : 30%
 Non Domestic Cos.
: 40%
 Individual/HUF/AOP/BOI
: 30%
 Lower Deduction U/s 197 - Not Permissible
CA. Manish Shah
Winnings from Horse Races
[ Sec. 194BB ]
 Exemption Limit : ` 5,000/-
 Obligation to deduct TDS applies only
where such winnings are paid to a
bookmaker or person to whom license
has been granted by Govt. under any law
for time being in force.
CA. Manish Shah
Contd..
Rate of Deduction :
 Domestic Cos./Firms/Co-op. Soc. : 30%
 Non Domestic Cos.
: 40%
 Individual/HUF/AOP/BOI
: 30%
 Lower Deduction U/s 197 - Not Permissible
CA. Manish Shah
Payment to Contractors
[Sec.194C ]
Contractor includes sub-contractor carrying out
any Work (including supply of Labour with or
without Materials) & Work includes:
Advertising, Broadcasting & Telecasting incl.
production of programmes.
Carriage of goods & passengers by mode of
transport other than by railway
Catering
Manufacturing or Supply of Product by using
material purchased from customer
CA. Manish Shah
Contd...
Contractee includes
• Town Development Authority
• Specified Individual & HUF
 Now no bifurcation between payment to
Contractor/ Sub Contractor
 Not applicable to Manufacturing Contract:
•
No TDS on value of material if stated in
invoice
CA. Manish Shah
Contd…
Exemption/Limit :
` 30,000/- per credit/payment & ` 75,000/- in
aggregate.
Payment to Contractor by Individual & HUF
for personal purpose.
Payment to Transporter in case of PAN.
Reimbursement of Actual Expenses- Liable
to TDS : (Ref. Circular No.715 dtd.08.08.95).
CA. Manish Shah
Contd..
Rate of Deduction :
 Contractor:
a. Individual, HUF
b. Others
:1%
:2%
 Transport Contractor:
a. If PAN is Quoted
b. If no PAN is Quoted
: Nil
: 20%
CA. Manish Shah
References:
Circular No.
Circular Date
86
93
29/05/1972
26/09/1972
558
681
714
715
723
13
28/05/1990
08/03/1994
03/08/1995
08/08/1995
19/09/1995
31/03/2006
CA. Manish Shah
Contd..
ACC Ltd.
201 ITR 435 SC
Hindustan Coca Cola Beverage
293 ITR 226 SC & Circular No. 275/201/95IT(b) dated 29/01/1997]
Birla Cement Works Ltd.
248 ITR 216 SC
CA. Manish Shah
Contd..
Contract of work vis-à-vis Contract for
Sale:
• If dominant object is to transfer goods, it
would be contract of sale.
• If dominant object is to carry out work, it
would be contract of work
• E.g.:
• 1.Office Renovation - Contract of work
• 2.Uniform of Employees- Contract of
Sale
CA. Manish Shah
Contd..
 Transport Contract:
The exemption is very wide and it covers that
any payment made to contract during course of
business of plying, hiring , leasing of good
carriage [goods carriage as per Explanation to S.
44AE(7)]
CA. Manish Shah
Contd..
 Payment to Couriers -194C
 Payment to Restaurant, FD Agent – Not 194C
 Payment to Recruitment Agency – 194 J not
194C
(Ref. Circular No.715 dated 8/8/95)
 Supply of Printed Material
(Ref. Circular No.715 dated 8/8/95- But refer decisions)
CA. Manish Shah
Contd..
 Hiring of vehicle for Transportation of
employees - S. 194C applicable.
• Accenture Services P. Ltd. 44 SOT 290
 Act of commission agent or broker would be
outside the purview of S. 194C
• SRF Finance Ltd. 211 ITR 861
 Franchise agreement- Sharing of profit.
• Career Launcher 139 TTJ 48
CA. Manish Shah
Contd..
 Various Services provided by hotel does not
involve ‘carrying out any work’- outside the
purview of S. 194C
• East India Hotels 320 ITR 526
 In case of cable operator, it is not broadcasting
but it is telecasting.- S. 194C is applicable.
• Kurukshetra Darpans Pvt. Ltd. 169 Taxman 344
CA. Manish Shah
Contd..
 If property passes to customer on delivery &
material is not purchased from customer. Sec.
194C not applicable
• Glenmark Pharmaceuticals Ltd. 324 ITR 199
 Labour payment through representative. Payment
not exceeding ` 20,000/-. No TDS
• Lakshmi Protein 3 ITR (Trib.) 768
CA. Manish Shah
Contd..
 Supply of corrugated boxes with labels
• Dabur India Ltd. 283 ITR 197
 Sale of Packing material.
• Seagram Mfg. Pvt. Ltd. 221 CTR 509
• Mother Dairy 40 SOT 9
 Manufacturing agreements
• Reebok India 306 ITR 124
CA. Manish Shah
Contd…
 Purchase of printed material
• Markfed 304 ITR 17
 Transportation of material, hiring of dumper- S.
194C applicable. Not S. 194I
• Shree Mahalakshmi Transport Co. 339 ITR 484
• Swayam Shipping Services P. Ltd. 339 ITR 647
 Car hiring falls u/s 194C. Not S. 194I
• AUDA 13 ITR 73 (Trib).
CA. Manish Shah
Contd..
 Combined transportation contract using truck of
firm & partners. Payment by firm to partners.-S.
194C not applicable.
• Grewal Bros. 240 CTR 325
 With sale of material, transport charges
separately collected. – S. 194C Not applicable.
• Chand Hing Tannery 42 BCAJ March P. 32
CA. Manish Shah
Contd…
 Transporter- Accounts not auditable U/s 44AB –
Payment made to him not liable U/s 194C
• Dhirubhai Dajibhai Patel 133 TTJ 1
 Making of diaries and catalogues from own
materials. S. 194C not applicable.
• Eastern Medikit 135 ITD 461
CA. Manish Shah
Insurance Commission
[ Sec.194D ]
 Tax to be deducted on payment whether
by way of commission or otherwise for
procuring Insurance Business including
business relating :
a. continuance
b. renewal or revival of policies.
 Exemption Limit - ` 20,000/- p.a.
CA. Manish Shah
Contd…
Rate of deduction:
For Companies
: 10%
For Firms, Co-op Soc.
: 10%
For Individuals/HUF/AOP/BOI : 10%
CA. Manish Shah
Non- Resident Sportsmen or
Association [ Se.194E ]
 Tax to be deducted on payment to a nonresident foreign citizen sportsman
(including athlete) & entertainer (Wef
01/07/2012) or non-resident sports
association
 No threshold limit.
 Rate of Deduction : 10% (Wef 01/07/2012 20%)
 Lower Deduction U/s 197 - Not Permissible
CA. Manish Shah
Contd…
 Payment to Referee, Umpires is not a
payment to sportsman
• Indicom 335 ITR 485
CA. Manish Shah
National Savings Scheme
[Sec.194EE ]
 Tax to be deducted on payment referred to
in Sec.80CCA(2)(a)
 Exemption Limit: ` 2500/ No tax to be deducted if payment made to
the heirs of the deceased assessee i.e..
original depositor
 Rate of Deduction : 20%
 Lower Deduction U/s 197 - Not
Permissible
CA. Manish Shah
Repurchase of Units [Sec. 194F]
Tax to be deducted on payment referred to
in Sec.80CCB(2)
No threshold limit.
Rate of Deduction :
Resident – 20%
Non Resident – 20%
 Lower Deduction U/s 197 - Not Permissible
CA. Manish Shah
Commission on Sale of Lottery
Ticket [Sec.194G]
 Payment for commission, remuneration
or prize on lottery ticket.
 Exemption Limit: ` 1,000/-
 Rate of Deduction : 10%
CA. Manish Shah
Contd…
 Purchase of lottery ticket at a discount.
Sec. 194G not applicable
• M. S. Hameed 249 ITR 186
CA. Manish Shah
Commission or Brokerage
[ Sec. 194H ]
 Commission or Brokerage includes income
earned for services rendered in course of
buying/selling of goods or assets, valuable
article or thing, not being securities.
 Commission or Brokerage does not include
any income earned while rendering
professional services, insurance service.
 Exemption Limit - ` 5,000/- p.a.
CA. Manish Shah
Contd…
No deduction for commission or brokerage
payable by BSNL & MTNL to their PCO
franchises .(Instruction No. 3/2009)
Rate of deduction:
a.Co, Firms, Co-op Soc.
b.Individual/HUF/AOP/BOI
CA. Manish Shah
: 10%
: 10%
Contd…
 Airline agent- Difference between ticket price is
not Brokerage/ Commission.
• Qatar Airways 332 ITR 253
• ITL Tours & Travels 44 SOT 277
 Sim card- prepaid/ recharge coupon -
Commission - S. 194H applicable.
• Bharti Cellular 244 CTR 185
• Vodafone Essar 141 TTJ 461
CA. Manish Shah
Contd…
 Roaming charges paid by mobile Co. to
another mobile Co. - Not commission. S.
194H not applicable.
• Vodafone Essar 9 ITR 182 (Trib).
 Incentive and discount to distributor – S.
194H not applicable.
• Jai Drinks 242 CTR 505
CA. Manish Shah
Contd…
 Commission to Stamp Vendors – Discount on
sales. Sec. 194H not applicable.
• Ahmedabad Stamp Vendor Asso. 257 ITR 202
 Agreement between DD and Advt. agent –
Sec. 194H applicable.
• Prasad Bharati Doordarshan 189 Taxman 315
CA. Manish Shah
Contd…
 Medical Collection Centre-Not Commission - S.
194H not applicable.
• SRL Ranbaxy Ltd. 143 TTJ 265.
In this case, it was observed that hospital was not
making payment to collection center but collection
centers were making payment after deducting their
margin.
 Bank guarantee commission – S. 194H not
applicable.
• Kotak Securities Ltd. 50 SOT 158
CA. Manish Shah
Rent [ Sec. 194I ]
Rent includes:
 Payment made under lease/sub-lease/ tenancy
or any other agreement/ arrangement for use
separately or together of :
• Land, Building (incl. Factory building) land
appurtenant thereto with Furniture &
Fittings,
• Plant & Machinery, Equipment
 All or Any assets may not be owned by Payee.
CA. Manish Shah
Contd…
 Exemption/limit
• If payment does not exceed ` 1,80,000/- p.a.
• No TDS on Municipal Taxes, Ground Rent
 Rate of deduction:
Plant, Machinery, Equipment
Land, Building, Furniture
CA. Manish Shah
: 2%
: 10%
Contd…
 Limit is per owner in case of joint owners with
definite shares.
 Applicable, if Hotel accommodation is taken on
regular basis. (Ref. Circular No. 715)
 On Interest bearing Deposits – Sec.194 A is
applicable. (Ref. Circular No. 715)
 Film exhibition – Not Rent (Ref. Circular No. 736)
 Cold Storage Charges- S. 194C is applicable. Not
Sec. 194I (Ref. Circular No. 1/2008)
 Rent doesn't include Service Tax -‘Rent Income’
(Ref. Circular No. 4/2008)
CA. Manish Shah
Contd…
 Payment to Electricity Board-Transmission of
electricity & not for use of wires etc. S. 194I not
applicable
• Chhatisgarh State Electricity Board 143 TTJ 151
CA. Manish Shah
Fees for Professional or
Technical Services [ Sec. 194J ]
 Fees for Professional Services:
Legal/ Medical/ Engineering/ Architectural/Accountancy/
Technical/ Interior Decoration/Advertising (i.e.. Models,
Artists, Photographers etc.) & any notified profession
 Fees for Technical Services - Sec.9(1)(vii)–Expl-2
 Remuneration, Fees, Commission to Directors
(other than S.192 Wef 01/07/2012)
 Royalty - Sec.9(1)(vi)–Expl-2
 Non Compete Fees
CA. Manish Shah
Contd…
 Exemption Limit : ` 30,000/(except payment to Director)
 Rate of Deduction – 10%
 No T.D.S on payment of professional fees for
personal purposes by Individual & H.U.F.
 TDS to be deducted under one section only
i.e.. 194C /194J.
CA. Manish Shah
Contd…
Payments made to :
•
•
•
•
•
Hospital for medical service,
Share Registrar,
Commission of Advertisement Agency
Event Manager, Anchors
Sportspersons, Umpires, Coaches, Trainers,
Commentators, Columnists,
Physiotherapists, etc.
CA. Manish Shah
Contd…
 Reimbursement of Actual Expenses & Service
Tax to be included- as 'Any Sum Paid’:
(Ref. Circular No.715 & Letter No.
F275/73/2007)
 No TDS on acquisition of software, where
software is acquired in subsequent transfer
without modification & tax has been deducted
U/194 J or U/s 195 for any previous transfer &
certificate is obtained from transferor with PAN
(Ref. Notification 21/02012 dated 13/06/2012)
CA. Manish Shah
Contd…
 Transaction Charges of Stock Exchange-
Fees for technical services. S. 194J
applicable.
• Kotak Securities Ltd. 340 ITR 333
In this case, the court observed that since no
claim was made by department in earlier
year, no liability arises.
CA. Manish Shah
Contd…
 Lease line charges- not fees for technical
services. S. 194J not applicable.
• Omniscint Securities 15 ITR (Trib.) 82
• Angel Broking 3 ITR (Trib.) 294
 Payment by TPA to hospitals. S.194J applicable.
• Dedicated Healthcare Services 324 ITR 345
(Circular No. 8/2009)
• Vipul Medcorp 202 Taxman 463
CA. Manish Shah
Compensation for Compulsory
Acquisition Property [Sec.194LA]
 Payment made as Compensation, enhanced
compensation, consideration, enhanced
consideration on account of compulsory
acquisition of any immovable property.
 Immovable property does not include
Agricultural Land [as per Section 2 (14)].
CA. Manish Shah
Contd…
 Exemption Limit : ` 1,00,000/(Wef 01/07/2012 - ` 2,00,000/-)
 Rate of Deduction : 10%
 No need to prove that land is used for
agriculture• Special Land Acquisition Officer 46 SOT 458
CA. Manish Shah
Interest by Infra. Debt Fund
[Sec.194LB]
 Interest to Non Resident & Foreign Co. by
Infrastructure Debt Fund as per Section
10(47)
 Rate of Deduction : 5%
 No threshold Limit
CA. Manish Shah
Interest from Indian Cos.
[Sec.194LC]
 Interest payable to Non Resident & Foreign
Co. by Indian Co. for money borrowed
01/07/2012 - 01/07/2015 in foreign currency
under loan agreement or Long Term Infra.
Bonds
 Rate of Deduction : 5%
 No threshold Limit
CA. Manish Shah
Payment to Non-Residents
[Sec.195]
 Applicable to Interest and any other
payment other than Salary to Non Resident
& Foreign Co.
 Rate of Deduction :
As per D.T.A.A or
As per Sch.1, Part II of Finance Act, 2007
Whichever is beneficial to the assessee
However in case of No PAN @ 20%
CA. Manish Shah
Contd…
For Lower or Nil TDS - Payee to apply in
F.13/15C/15D to A.O. for Certificate in
F.15E
Payer may also apply to A.O. to determine
income in payment for lower TDS
CA. Manish Shah
Income from Units [196B]
 Applicable to Long Term Capital Gain of
Offshore Fund.
 Units referred to Section 115AB
 Rate of Deduction – 10%
CA. Manish Shah
Income from FC Bonds [196C]
 Applicable to Foreign Currency Bonds &
GDR of Indian Companies.
 Bonds & GDR referred to Section 115AC
 Rate of Deduction – 10%
CA. Manish Shah
Income of FII [196 D]
 Applicable to Income of FII from
Securities not being Dividend, LT & ST
Gain.
 Securities referred in Section 115AD
 Rate of Deduction– 20%
CA. Manish Shah
General Points:
 TDS @ 20 % if the deductee does not provide PAN to deductor.
 No Surcharge No Cess to be deducted /collected in case of all
assessee other than NR & Non Domestic Cos. on all income
other than salary.
 Non Domestic Company surcharge @ 2.5% if income or the
aggregate of such income paid or likely to be paid exceeds ` 1
Crore.
 Education Cess @ 2% + SHE Cess @ 1% is deductible at source
in case of Non-Residents and Foreign Cos.
 TDS Provisions u/s. 194A, 194C, 194H, 194I & 194J are
applicable to Individuals & HUF’s only if they were liable to tax
audit in the immediately preceding A.Y
CA. Manish Shah
TDS & TCS Returns
 Payment to Resident:
Form 24 Q
15th July, 15th Oct.,
15th Jan., 15th May
Other
Form 26 Q
Payments
15th July, 15th Oct.,
15th Jan., 15th May
Salary
TCS
Form 27EQ 15th July, 15th Oct.,
15th Jan., 15th May
CA. Manish Shah
Contd…
 Payment to Non Resident:
All Sections Form 27 Q 15th July, 15th Oct.,
15th Jan., 15th May
CA. Manish Shah
TDS, TCS Certificates
 Time limit for TDS / TCS Certificates:
Form 16
31st May
Form 16A
30th July, 30th Oct.,
30th Jan., 31st May
Form 27D
30th July, 30th Oct.,
30th Jan., 31st May
CA. Manish Shah
Time Limit for Payment

•
•

•
•
Deduction of TDS :
Salaries : At the time of Payment
Other Payment : Paid or credited, whichever is earlier
Payment Of TDS :
Salaries : Within 1 week from the last day of the month.
Other Payments (except 194B/194BB/194EE/194F):
a. If amount is credited to a/c of
the payee in March
– By 30th April
b. In any other case
– within 7 days of end
of month in which
deduction is made.
CA. Manish Shah
Procedure for Nil/Lower TDS
Interest & Withdrawal from NSS :
Individuals other than a Co. or Firm to file
F.15H (Senior Citizens) / F.15G-Others
Application U/s. 197/206 C in F.13 to TDS
ITO & obtain Certificate. Now these
certificates are issued online through ITD
System.
CA. Manish Shah
Other Amendments
 From 01/09/2011, Bank can correct PAN,
Year, Section, Type of Payment if requested
within 7 days of payment.
 New rule for refund of excess TDS.
 Wef 01/04/2012 now amount of expenditure
on which no TDS has been deducted is to be
given.
CA. Manish Shah
Contd…
Wef 01/04/2012, all deductors to issue
Form 16A through TIN System with
manual or digital sign.
In Form 15G, 15H and all lower TDS
application, quoting PAN is must.
Form 15H - Age limit for filing it has been
reduced to 60 years.
CA. Manish Shah
Contd…
TCS @ 1% on : Wef 01/07/2012
• Minerals being Coal, Lignite & Iron ore
• Cash Sale of :
 Bullions
(other than coin or article less than 10 gms) >` 2 Lacs
 Jewellery
> ` 5 Lacs
CA. Manish Shah
Intimation [200A]
 Intimation of demand /refund shall be send to
Assessee
 TDS return shall be processed & after making
adjustments of arithmetical error & incorrect
apparent claim,
 Interest, if any, shall be computed & demand if
any or refund due shall be determined after
adjusting TDS due & interest payable U/s 201.
 Intimation shall be sent within 1 year from end
of F.Y in which TDS return has been filed.
CA. Manish Shah
Contd…
 Deductor needs to verify the defects
 Pay demand or file revised return if
needed.
 Intimate AO of filing revised return or File
an appeal
 This intimation is now subject to
rectification / appeal also Wef 01/07/2012
& it will be deemed to be notice U/s 156.
CA. Manish Shah
Reasons for Defects
 Short Deduction:
1. Wrong rate of TDS
2. Rounding off to lower rupee
3. PAN not matching
4. Not mentioning lower rate & wrong payment
5. Wrong deductee code
6. Wrong Section
7. Wrong gender of employee
8. Wrong exemption information
CA. Manish Shah
Contd…
 TDS not paid:
1. Actually not paid
2. Wrong challan information
3. Splitting & merging of challan
4. Wrong minor code of challan
CA. Manish Shah
Contd…
 Interest on late payment:
1. No interest paid on delay
2. Less interest paid
3. Wrong CIN for interest
4. Cheque realized after due date
5. Challan due date is holiday
CA. Manish Shah
Failure to Deduct or Pay
[Sec. 201]
 If any person does not deduct or doesn’t pay
or after so deducting fails to pay whole or
part of the tax as required by or under this
Act, he or it shall, without prejudice to any
other consequences which he or it may incur,
be deemed to be an assessee in default in
respect of such tax (subject to amendment
made Wef 01/07/2012).
 Such person shall also be liable to pay interest
U/s 201(1A) & Penalty U/s 221.
CA. Manish Shah
Contd…
 Interest U/s 201(1A) shall be paid before
filing TDS returns.
 No penalty shall be charged U/s 221 unless
the Assessing Officer is satisfied that such
person has without good and sufficient
reasons failed to deduct and pay the tax.
 Where tax has not been paid after deduction,
the tax + interest shall be charged on all the
assets of the assessee.
CA. Manish Shah
Interest [Sec. 201(1A)]
Where the assessee after
deducting TDS fails to pay
the tax as required by or
under this Act
Liable to simple interest @
18% p.a [i.e. 1.5% p.m.] from
the date on which the tax was
deducted till the date on which
the payment is actually made.
Where the assessee fails to
deduct TDS and make the
payment as required by or
under this Act
Liable to simple interest @ 12%
p.a [i.e. 1% p.m.] from the date
on which the tax was deductible
till the date on which the TDS
deducted.
CA. Manish Shah
Contd…
 No Order U/s 201 can be made for failure to
deduct:
• After 2 Years from end of the F.Y in which TDS
return is filed.
• After 4 Years from end of the F.Y in which
payment is made or credit is given. This time limit
is increased to 6 Years Wef 01/07/2012
 Wef 01/07/2012, no interest U/s 220(2) shall be
charged if interest is charged U/s 201(1A) on tax
payable in the intimation U/s 200A(1) of the Act on
the same amount for same period- Section 220(2B)
CA. Manish Shah
Amendment to Section 201
 Wef 01/07/2012, failure to deduct tax
whole or part, the assessee shall not be
deemed to be in default provided:
1. Payee has furnished his ROI U/s 139(1)
[includes Sec. 139(4) also]
2. Payee has considered such amount in the
computing the income in ROI
CA. Manish Shah
Contd…
3. Has paid tax due on returned income
4. Furnishes certificate to that effect by a
CA in the prescribed form.
 However, in all such cases, interest @
1% would be payable from the date on
which TDS was deductible till the date on
which ROI is furnished by the payee.
CA. Manish Shah
Contd…
 Issues:
• Year of income
• Non filing of return due loss or below
taxable income.
• No tax payable on return income
• Still penalty chargeable U/s 221
• Insertion of word “further” why?
CA. Manish Shah
Contd…
 When can assessee be treated as “assessee in
default”?
• There must be a reasoned/speaking order passed U/s
201(1)
• Letter/intimation is not an order.
• Sec. 246(1)(ha) indicates that the statute contemplates a
written order so that person can file appeal.
• Refer :
AM Agencies 239 ITR 136
Mettur Chemicals 150 ITR 341
CA. Manish Shah
Penalty U/s 221
 When an assessee is in default or deemed
to be in default in making payment.
 Liable to Maximum penalty @100% of
Tax + Arrear of tax + Interest U/s 220 (2)
payable
 No Penalty if A.O. is satisfied
 No amendment in this Section in spite of
amendment in Sec. 201 and Sec. 220.
CA. Manish Shah
Levy of Fess [234E ]
 Section 234 E
 Applicable to Returns due after 01/07/2012
 Non filing & Late filing of TDS, TCS
Returns
 ` 200/- per day – maximum to the extent
of TDS/TCS
 To be paid with returns.
 Penalty U/s 272A of ` 100/- per day
removed.
CA. Manish Shah
Penalty [271H]
 Non Filing or Late of TDS & TCS Returns
 Incorrect Information in Returns
 Applicable to Returns due after 01/07/2012
 No penalty if Tax, Interest, Late Fees paid &
returns filed before 1 year from due date.
 Penalty :
Minimum- `10,000/Maximum- `1,00,000/CA. Manish Shah
PENALTIES - PROSECUTION
 Sec.271C/271CA :
Tax Failed to be deducted/collected/pay = Amount
failed to be deducted/collected/paid.
 Sec.272B, BB:
Failure to quote/apply for PAN/ – ` 10,000/ Sec.272A(2) : Failure to Furnish
F.15H/15G/16/16A/27D/24Q/26Q/27Q/27EQ –
` 100/- per day or Amount of TDS/TCS whichever is
lower (except cases of Sec. 234E Wef 01/07/2012)
 Sec. 276B - TDS / 276BB – TCS
Prosecution from 3 Months to 7 Years and Fine
CA. Manish Shah
Penalty Decisions
 If no malafide intention- not leviable.
• Cadbury India 55 DTR 318
In this case Hon’ble Supreme Court decision in case
on Anwar Ali 76 ITR 696 as well as decision of
Delhi High Court in case of Woodvard Govemor
253 ITR 745 were followed.
CA. Manish Shah
Section 40(a)(ia)
 Introduced wef 01/04/2005
 Applicable to computation of “Profits and
Gains of business or profession”.
 Expenditure covered:
• Interest
• Commission or Brokerage,
• Rent
• Royalty
• Fees for Professional & Technical Services
• Contract incl. Sub Contract payment for Any
Work
CA. Manish Shah
Contd…
 Such expenditure will not be allowable if the
tax is deductible under Chapter XVII-B and
such tax has not been deducted or after
deduction not paid before due date as per Sec.
139(1) of the Act.
 If tax is deduced in subsequent year or deducted
in earlier year but after Sec. 139(1) limit,
expenditure will allowed in that year.
CA. Manish Shah
Contd…
The provision of not disallowing the
expenditure if TDS is paid before due date U/s
139(1) has been introduced wef 01/04/2010
by Finance Act 2010.
CA. Manish Shah
Issues:
 Whether the amendment made in Sec. 40(a)(ia) by
Finance Act, 2010 is retrospective or not?
• Virgin Creations
(Calcutta High Court- ITA No. 302/2011 dated 23-11-2011)
This decision is followed by ITAT Ahmedabad in case of
Alpha Projects Society Pvt. Ltd. ITA No. 2869/Ahd/2011
• Hon’ble Supreme Courts decisions in case Allied Motors (224
ITR 677), Alom Extrusion (319 ITR 306) RB Jodha Mal (82
ITR570) Followed.
• Decision of the Mumbai Special Bench in Bharti Shipyard Ltd.
132 ITD 53 (SB) Overruled by Virgin Creations
CA. Manish Shah
Contd…
•
•
•
•
•
•
Kanubhai Ramjibhai Makwana 44 SOT 264
Piyush C Mehta 20 Taxmann.com 473
Bansal Parivahan 43 SOT 611
Sanjaykumar Pradhan 14 ITR 150 (Trib)
Kulwantsingh 10 Taxmann.com 25
Raja Mahendri Shipping 51 SOT 242
CA. Manish Shah
Contd…

If the payee has paid tax -
•
•
•
DICGC Ltd. 14 ITR (Trib.) 194 (Against)
Skycell Communications 251 ITR 53
Kotak Securities Ltd. 340 ITR 333 – Non Taxing
Provision.
Reliance Hindustan Coca cola Beverage 293 ITR 226
SC
Circular No. 275/201/95-IT(b) dated 29/01/1997
•

Short Deduction of TDS -
•
•
•
S.K. Tekriwal 48 SOT 515
Chandabhoy Jassobhoy 49 SOT 448
Beekaylon Synthetics ITA No. 6506/Mum./2008
CA. Manish Shah
Contd…

•
•
•
TDS default –
Bapusaheb Nanasaheb Dhumal 132 TTJ 694
M. G. Vishwanath Reddy 51 SOT 420
H S Mahindra Traders 132 TTJ 701
 Joint Ventures – No Sub Contract – Only
money routed through –
• Rishikesh Buildcon 206Taxman 567
CA. Manish Shah
Contd…

•
•

•
Section 40(a)(ia) has been introduced wef
01/04/2005 that Finance Act was brought in force
in October, any payment before the same would
not be disallowed.
Golden Stables Lifestyle Center ITA No.5145/Mum/2009
Shri Jivrajbhai Devjibhai Patel ITA No. 2479/Ahd/2008
Assessee has paid excess tax – hence did not
deduct TDS U/s 194C – Not Permissible.
SCC Pati Joint Venture 46 SOT 263
CA. Manish Shah
Contd…

If interest paid is as part of purchase price,
then no TDS U/s 194A – Section 40(a)(ia)
doesn’t apply
•
Parag Mansukhlal Shah 46 SOT 302 Ahd.

Retrospective Amendment – impossibility
for assessee to deduct tax –
•
Sterling Abrasive Ltd. 40 TTJ 68 Ahd.
CA. Manish Shah
Contd…

Late submission of Form 15G – submitted
during course of assessment –
•
Shyamsundar Kailashchand 141 ITD 126

Cost Sharing with group concerns
•
Emerson Process Management 47 SOT 157

Interest paid as part of Debt – No TDS
•
Akber Abdul Ali- 43B BCAJ 25 (March-12)
CA. Manish Shah
Contd…

Commission to Non Resident agents for services
outside India -
•
•
Devi’s Laboratory Ltd. 140 TTJ 746
Eon Technology Pvt. Ltd. 246 CTR 40

Cash payment of labour expense – Sec. 194 C &
Sec. 40(a)(ia) - Applicable
•
Nalawade C. Maruti 48 SOT 566

Section 40a(ia) – Not ultra vires
•
Rakesh Kumar & Co. 325 ITR 35
CA. Manish Shah
Contd…

Controversy between - Sec. 194C & 194J
•
•
Nalawade C. Maruti 48 SOT 566
Sanjaykumar 143 TTJ 415

Reimbursement of expenses of C & F Agents
like sea freight, CCI charges, steam freight
charges, container charges, etc.-
•
•
Minpro Industries 143 TTJ 331
Karnavati Co-op Bank Ltd 134 ITD 486
Charged separately
Choice Sanitary Ware 9 Taxmann.com 120 (Raj)
•
CA. Manish Shah
Contd…

Brokerage paid on derivatives – Sec. 194H not
applicable –
•
Noble Enclave & Towers Pvt. Ltd. 50 SOT 5

Commission to Directors –
•
Jhangir Biri 126 TTJ 567

Freight Charges-Truck hired for own use - Sec.
194C not applicable -
•
Kranti Road Transport Pvt. Ltd. 50 SOT 15
CA. Manish Shah
Contd…

S. 40(a)(ia) would apply only to expenditure
that remain payable at the end of relevant
F.Y and cannot be invoked to disallow
amounts which have already been paid
without TDS
•
Merilyne Shipping & Transports 136 ITD 23
(Vishakhapatnam Sp. Bench)
K. Srinivas Naidu 131 TTJ 17
Teja Construction 129 TTJ 57
Ashika Stock Broking 139 TTJ 192
•
•
•
CA. Manish Shah
Contd…
 Failure to deduct tax on reimbursement of
expensesSec. 40(a)(ia) is invoked only when some expense is
claimed as deduction & reimbursement of expense is
profit neutral, it is not rooted through P & L A/c, it is
not an expense and does not attract S. 40(a)(ia) -
• Sharma Kajaria & Co. 145 TTJ 1
 Failure to Disallow U/s 40a(ia) – Section 263
• Raja & Co. 335 ITR 381
CA. Manish Shah
Contd…
 In case of Joint Venture formed mainly to get a
contract - work is being done by each party
separately - no relation of contract & subContract. Hence, no TDS
• ITO v. UAN Raju Constructions 48 SOT 178
 Charitable Trust – Income computed U/s 11
• Mahatma Gandhi Seva Mandir 21 Taxmann.com 321
CA. Manish Shah
Contd…

Contract for supply of goods and along with the
supply of goods, there are services like supply of
gas by GAIL. Payment is made for gas as well as
transportation. Not liable for TDS –
•
Krishak Bharati Co-op Ltd. 10 ITR 527 (Trib.)

Brokerage Paid on sale of Property – No
Business – No TDS
•
Mrs. Sushila Mallick 142 TTJ 372
CA. Manish Shah
Contd…

Payments made on account of capital
Expenditure. Sec. 40(a)(ia) applicable. No
distinction between capital and revenue
expenditure -
•
Spaco Carburettors (I) Ltd. 3 SOT 798

In case of assessment U/s 145 (3)
•
Teja Construction 129 TTJ 57

Expenses other than Section 30 to 38
•
Teja Construction 129 TTJ 57
CA. Manish Shah
Amendment to Section 40a(ia)
 2nd Provision inserted Wef 01/04/2013
 It provides that if the assessee is “not deemed
to be assessee” in default as per 1st Proviso to
Section 201(1) for non deduction of TDS, it
shall be deemed that the assessee has
deducted & paid tax on the date of filing
return & no disallowance shall be made.
 Retrospective Effect?
CA. Manish Shah
Questions?
Shah & Bhandari
Chartered Accountants
shahbhandari@gmail.com
ca.mgshah@gmail.com
CA. Manish Shah
Thank You
CA. Manish Shah