Section 201(1)

Section 201(1) — the law in short

What the courts have decided on section 201(1), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Singapore Airlines Ltd v CIT Supreme CourtCuts both ways
  My agents keep the difference between the price they charge customers and the net price they pay me — do I have to deduct TDS on money that never passed through my hands?
  Yes. The Supreme Court held on 14 November 2022 that the supplementary commission retained by IATA travel agents — the excess of the actual fare charged to the passenger over the net fare payable to the airline — is "commission" under section 194H, and the airlines were bound to deduct tax at source on it. Section 194H is read with section 182 of the Contract Act: where the contract shows a principal-agent relationship, the definition is attracted. But because the agents had paid tax on those amounts, no recovery of the shortfall could be made from the airlines; only interest under section 201(1A) survives, and the section 271C penalties were quashed.
• State Bank of India v Assistant Commissioner of Income Tax Supreme CourtHelps department
  My client is an employer facing a s.201 order for not deducting on LTC where the employees' itineraries included a foreign leg but the reimbursement was limited to the domestic shortest-route fare. Is the bona fide estimate defence available?
  No. The Supreme Court held that the moment an employee undertakes travel with a foreign leg it is not travel within India and the payment is outside s.10(5), so the employer was bound to deduct under s.192(1) and was rightly held an assessee in default. It rejected the argument that the reimbursement having been confined to the shortest domestic route saved the exemption, and it rejected the bona fide mistake defence because the employer had the complete travel details before it when settling the bills.
• ITC Ltd v CIT (TDS) Supreme CourtHelps taxpayer
  Our restaurant and banquet bills carry a tip that the customer adds on the card. The money lands in our bank account and we hand it to the staff with their wages. The department says that is salary we should have deducted on. Is it?
  No. The Supreme Court held that a tip is not salary at all, and that the route it travels — cash into the waiter's hand or a card entry through the employer's bank account — makes no difference. Section 15(b) taxes what is paid or allowed by or on behalf of an employer, and the word employer presupposes a contract of employment; the employee has no vested right to claim a tip from his employer, and the amount has no reference to his contract of employment. The employer receives the money in a fiduciary capacity as trustee and is only a conduit between customer and staff. The tip is the employee's income from other sources under section 56(1). Section 192 is therefore not attracted, the employer is not an assessee in default, and no interest under section 201(1A) arises.
• CIT v Bank of Nova Scotia Supreme CourtHelps taxpayer
  I have paid the short-deducted tax and the interest to close the matter — can the department still levy penalty under section 271C?
  No, not on findings like these. The Supreme Court dismissed the Revenue's appeal on 7 January 2016, holding there was no substantial question of law and that the Commissioner (Appeals) and the Tribunal had assessed the facts and the law properly and correctly. The Tribunal had cancelled the section 271C penalty on the footing that the case was not about recovery under section 201(1) or compensatory interest under section 201(1A) — both already paid to end the dispute — and that penalty requires contumacious conduct on the part of the assessee to be established, following the Delhi High Court in Itochu Corporation and Mitsui & Company.
• Kanchanganga Sea Foods Ltd v CIT Supreme CourtHelps departmentNo later treatment found
  I pay a non-resident in kind, not in cash. Do I still have to deduct tax at source under section 195?
  Yes. The Supreme Court held that charter fee discharged by handing a non-resident owner 85 per cent of the fish caught was a payment attracting section 195, and that the non-resident received it in India. Until the catch was apportioned it belonged wholly to the Indian charterer; the non-resident got control only when its share was handed over at Chennai after certification, valuation and customs clearance. That was the first receipt in the eye of law and it was in India, so the income was chargeable under section 5(2). The company was rightly treated as an assessee in default under section 201 for not deducting.
• CIT v Eli Lilly & Co (India) P Ltd Supreme CourtCuts both waysSuperseded by amendment
  The TDS officer says I under-deducted under s.192. If my estimate was made honestly, does that answer the demand, the interest and the penalty?
  It answers the penalty, not the tax and not the interest. The Supreme Court treated s.192(1) as requiring the employer to estimate the salary — an exercise akin to computation — and held that where there was a shortfall the officer proceeds under s.201(1) to recover it and interest under s.201(1A) runs from the date the tax was deductible to the date the tax was actually paid. On penalty it held that s.271C should not be invoked where the issue was a nascent one and the employers had acted bona fide.
• CIT v Larsen & Toubro Ltd Supreme CourtHelps taxpayer
  As an employer, must I collect bills and tickets from employees before treating leave travel concession or conveyance allowance as exempt while deducting tax under section 192?
  No. The Supreme Court dismissed the department's appeals on 21 January 2009, holding that an employer is under no statutory obligation, under the Act or the Rules, to collect evidence that its employees actually spent the amounts paid as leave travel concession or conveyance allowance. Two reasons are given. The beneficiary of the exemption under section 10(5) is the individual employee, not the employer. And there is no circular of the Central Board of Direct Taxes requiring an employer, when deducting under section 192, to collect and examine material supporting the declaration the employee submits. The appeals were dismissed with no order as to costs.
• CIT v Infosys Technologies Ltd Supreme CourtHelps taxpayer
  My employees exercised stock options but the shares are locked in and non-transferable. Was I supposed to deduct tax on the market value less what they paid?
  No, on the law as it stood before 1 April 2000. The Supreme Court dismissed the Revenue's appeals and held that the company was not an assessee in default. The shares were locked in for five years, held by the trust, stamped non-transferable and notified as such to the stock exchange, and had to be returned if the employee left. They had no realisable value on the date the option was exercised and there was no cash inflow, so any benefit was notional and its value unascertainable. Section 17(2)(iiia), which supplied the missing valuation mechanism from 1 April 2000, was held not to be clarificatory or retrospective.
• Hindustan Coca Cola Beverage P Ltd v CIT Supreme CourtHelps taxpayer
  I did not deduct TDS, but the person I paid has already paid tax on it. Can the department still recover it from me?
  Reported as holding that the tax cannot be recovered twice — once the payee has paid, the deductor is not liable for the tax again. Interest may still run for the period of delay.
• Citizen Credit Co-operative Bank Ltd v ITO (TDS Ward), Mumbai High CourtHelps taxpayerNo later treatment found
  We are a co-operative bank. The TDS officer says we should have deducted tax under s.194A on fixed deposit interest paid to co-operative housing societies that are not our members, and has treated us as an assessee in default. Is he right?
  No, on the Bombay High Court's reading. Clause (v) of s.194A(3) has two limbs, and the words 'other than a co-operative bank' appear only in the first limb, which deals with interest paid by a society to its members; the second limb — interest 'credited or paid by a co-operative society to any other co-operative society' — carries no such exclusion, so a co-operative bank, which remains a co-operative society, is not obliged to deduct tax on interest paid to non-member co-operative societies. Paragraph 42.7 of CBDT Circular No. 19 of 2015 says the same thing in terms.
• Kohinoor Educational Services Pvt Ltd v Union of India High CourtHelps department
  The payee will not give me the accountant's certificate in Form 26A, so I am stuck as an assessee in default. Can the High Court order it to sign?
  Not where the payee does not have the records to certify from. The Delhi High Court held that the Form 26A certificate is not a routine administrative letter but a certification of specific statutory facts made after examining the payee's return, accounts and documents. Mandamus lies to enforce a clear legal right and a corresponding public duty; it does not lie to command an authority to certify facts it cannot verify. Proof that the payee filed its return, and bank statements showing receipts, are not proof that the particular sum was taken into account in computing its income. The review petition was dismissed, no error apparent being shown.
• Kohinoor Educational Services Pvt Ltd v Union of India High CourtHelps departmentNo later treatment found
  I did not deduct tax on payments to a government body that has certainly paid tax on them. It will not give me the accountant's certificate in Form 26A. Can the court make it sign, and does the first proviso to s.201(1) cover my old years?
  No on both counts here. The Delhi High Court declined to issue a mandamus compelling the payee to furnish the Annexure A accountant certificate to Form 26A, and upheld the single judge's view that the first proviso to s.201(1) came into effect only on 1 July 2012 and does not reach financial years 2009-10 to 2012-13. Delay and laches - a decade after the licence ended - were an independent ground.
• State Bank of India v ACIT (TDS) High CourtHelps departmentNo later treatment found
  Staff booked a consolidated package tour with a foreign leg. Can we exempt the Indian part as LTC?
  No. Where the tour operator charges a consolidated amount for the whole journey including the domestic portion, there is no severable Indian leg on which s.10(5) can operate, and the employer was rightly treated as an assessee in default under s.201(1) and s.201(1A).
• Pr. CIT (TDS) v National Health and Education Society — hospital consultants' fees fall under s.194J, not s.192 High CourtHelps taxpayer
  The TDS officer says our consultant doctors are really employees, that their fees are salary, and that we should have deducted under s.192 instead of s.194J. Is he right?
  Not on these facts. The hospital engaged Hospital Based Consultants and deducted under s.194J. The Assessing Officer held they were employees, that s.192 applied, and passed orders under s.201 treating the hospital as in default; the Commissioner (Appeals) and the Tribunal went against him on that point and the Revenue appealed under s.260A. The Bombay High Court held the question squarely covered by its own earlier Division Bench decision in Commissioner of Income-tax (TDS), Pune v Grant Medical Foundation (Ruby Hall Clinic), where the same Court had held that no relationship of employer and employee existed between a hospital and its consultant doctors and had answered the question in favour of the assessee. No substantial question of law arose, and all six appeals were dismissed with no order as to costs. Questions on s.194C versus s.194J for outsourced services and on drug handling charges were held to turn on findings of fact, and a question on the time limit for orders under s.201(1) was left open as academic.
• Vodafone Essar Mobile Services Ltd v Union of India High CourtHelps taxpayerSuperseded by amendment
  How far back can the department go to treat you as an assessee in default for a TDS lapse?
  Not indefinitely. The Court quashed notices reaching more than four years back, holding the department had exceeded its authority — and that a CBDT circular cannot enlarge what the statute allows.
• Coimbatore District Central Co-operative Bank Ltd v ITO (TDS) High CourtHelps taxpayer
  The department has raised s.201 demands on our co-operative bank for not deducting tax on time deposit interest paid to members in years before June 2015. Does the Finance Act 2015 amendment to s.194A(3)(v) apply to those years?
  No. The Madras High Court held that the words 'other than a co-operative bank' were inserted in s.194A(3)(v) by the Finance Act 2015 with prospective effect from 1 June 2015, and that an amendment is prospective unless made retrospective by express language or necessary implication. For interest paid or credited to members before that date the exemption in s.194A(3)(v) was available, and the Court also held that no State or central enactment draws a distinction between a co-operative bank and a co-operative society carrying on banking business.
• CIT v Ansal Land Mark Township (P) Ltd High CourtHelps taxpayerUnder appeal
  You did not deduct TDS, but the payee declared the income and paid the tax. Is the expenditure still disallowed?
  No. The second proviso to s.40(a)(ia) is declaratory and curative and applies retrospectively from 1 April 2005, so no disallowance survives where the payee has returned the amount and paid tax on it.
• Thomas George Muthoot v CIT High CourtHelps departmentHigh Courts differ
  My payee has already paid the tax on the interest I paid him without deducting TDS. Can I use the second proviso to s.40(a)(ia) for an earlier year?
  Not in Kerala. The Kerala High Court held that the second proviso to s.40(a)(ia), inserted by the Finance Act 2012 with effect from 1 April 2013, is prospective only, because it confers an additional benefit rather than removing an unintended hardship, and so cannot rescue a disallowance for an earlier assessment year. The Court also held that the fact that the recipient has since paid the tax does not undo the disallowance, Hindustan Coca Cola being confined to s.201(1).
• CIT v De Beers India Minerals P Ltd High CourtHelps taxpayerNo later treatment found
  We paid for technical services but learnt nothing from them. Is it still fees for technical services?
  No, where the treaty carries a make available condition. The service must be aimed at and result in transmitting the technical knowledge, skill or process, so that it stays with the recipient after the contract ends and can be used independently. Delivering the fruit of the expertise, here survey data and maps, is not enough.
• CIT v Glenmark Pharmaceuticals Ltd High CourtHelps taxpayer
  I get a third party to manufacture my products to my formulation and under my brand, but he buys the raw material himself. Should I be deducting tax under section 194C?
  No, on those facts. The Bombay High Court held the contract was one of sale, not of work, so section 194C was not attracted and the company could not be treated as an assessee in default under section 201(1). What decides it is not the specifications or the trade mark but the material and the passing of property: the manufacturer sourced the raw material himself, worked at his own establishment on a principal to principal basis, and property passed only on delivery. The Court held clause (e) of the Explanation inserted by the Finance Act 2009 to be clarificatory of a position that had held the field for over three decades.
• BDA Ltd v ITO (TDS) High CourtHelps taxpayer
  My printer supplies labels made to my design but out of his own paper and ink at his own premises. Must I deduct tax under section 194C?
  No, on these facts. The Bombay High Court held that the supply of printed labels was a contract of sale and not a works contract, so section 194C did not apply, and it quashed the orders of the Tribunal, the Commissioner (Appeals) and the Income Tax Officer (TDS). The printer was an independent establishment supplying similar labels to other customers, it worked in its own premises with its own machinery, labour and raw material, and the assessee supplied nothing. That the labels were made to the assessee's specifications and could not be sold elsewhere did not convert the transaction, since the quantity was limited to the purchase order.
• Gwalior Rayon Silk v CIT High CourtHelps taxpayer
  The TDS officer says I under-deducted on perquisites and wants the short tax under section 201(1) plus interest under section 201(1A). My estimate was honest. Does that answer the demand or only the penalty?
  It answers the demand itself. The Madhya Pradesh High Court held that section 192 obliges the employer to deduct on the estimated income of the employee, so the employer has to form an opinion on his employee's liability and must do so honestly and fairly. If the estimate later turns out to be wrong, that fact alone does not support an inference that he failed to act honestly and fairly, and an employer who has deducted and paid tax on an honest estimate cannot be treated as an assessee in default under section 201(1). Interest under section 201(1A) went with it, the revenue accepting that sub-section (1A) is not attracted where there is no default under sub-section (1).
• Shailesh Veljibhai Paladiya v. ITO, TDS Ward-2, Surat (ITAT Surat) — section 206AA cannot be invoked where section 194-IA itself is not attracted, and deducting one per cent by mistake is not an admission of liability ITATHelps taxpayerNo later treatment found
  I deducted one per cent on a land purchase where the sellers had no PAN, and the officer says I should have deducted twenty per cent under section 206AA. The land was agricultural. Can he charge me the difference because I deducted something?
  No. The Tribunal held that section 206AA merely prescribes a higher rate where tax is otherwise deductible and does not create an independent liability to deduct, so unless the transaction falls within section 194-IA the enhanced rate cannot be invoked at all. The land being agricultural, section 194-IA was not attracted, and the section 201(1) demand of Rs 44,95,590 and the section 201(1A) interest of Rs 42,25,854 were both deleted.
• Sanchit Gupta v DCIT (CPC), TDS ITATHelps taxpayer
  I bought a flat and deducted 1 per cent under s.194-IA. CPC has raised a 20 per cent short-deduction demand because the seller's PAN was inoperative for want of Aadhaar linking. The seller has since linked it. Is there any way out?
  Yes, but not the one most people reach for. The Delhi Bench held that the assessee fell outside the CBDT relief circulars on his dates, and that subsequent linking does not retrospectively cure the position. It nonetheless directed that no s.206AA liability be cast on him if the seller is shown to have declared the sale in her return and paid the tax, applying the Ansal Landmark principle by analogy, and remitted the matter for verification — observing that the department was equally responsible for not red-flagging inoperative PANs in its own system.
• ITO (TDS-3), Ahmedabad v. Tarun Santramdas Varma (ITAT Ahmedabad) — rural agricultural land is outside section 194-IA, and the Revenue's appeal against deletion of a Rs 1.69 crore section 201 demand was dismissed ITATHelps taxpayerNo later treatment found
  The TDS officer says I should have deducted under section 194-IA on land I bought, and has applied twenty per cent under section 206AA because the farmer-sellers had no PAN. The land is agricultural. Does that answer the demand?
  Yes, if you can prove the land is rural agricultural land. The Tribunal dismissed the Revenue's appeal and upheld the deletion of a Rs 1,69,34,640 demand, holding that the lands qualified as rural agricultural land and fell outside the scope of section 194-IA, so the assessee could not be treated as an assessee in default under section 201(1) and the section 201(1A) interest was not sustainable either.
• ITO (TDS) v Sashwat Energy P Ltd ITATHelps taxpayerNo later treatment found
  My deductee has returned the income and paid the tax, and I have filed Form 26A. I know the s.201(1) demand goes — but for how long does s.201(1A) interest run against me?
  To the date the resident payee furnished his return of income, not to the date you eventually pay. The Mumbai Bench stated the rule expressly: where the payer is not deemed to be an assessee in default under s.201(1) because the resident payee paid the tax, interest under s.201(1A)(i) is payable from the date on which the tax was deductible to the date of furnishing of the return of income by that resident payee. The s.201(1) demand itself was set aside subject to verification.
• Sugee Seven Developers LLP v ITO (TDS) ITATCuts both ways
  My joint development agreement is with a perpetual lessee, not the owner of the land. Do I deduct one per cent under section 194-IA or ten per cent under section 194-IC?
  Ten per cent. The Mumbai Tribunal held that section 194-IC applies. Reading section 45(5A) with the Memorandum explaining its introduction, the definition of specified agreement cannot be confined to the holder of freehold title, because that would take a transfer by a leaseholder under a joint development agreement out of the net altogether, contrary to the purpose of a provision meant to ease the burden on the transferor. The land here had been on perpetual lease since 1938, the payee held the right to give it for development and to receive consideration in money and in kind. On the alternative plea, the Tribunal remitted the matter and directed that relief not be refused merely for want of Form 26A.
• Madhu Transport Co P Ltd v ITO ITATHelps taxpayerNo later treatment found
  I never filed Form 26A, but my payee did include the amount in its return and pay tax. Is the s.40(a)(ia) disallowance still good?
  No, on these facts. The Tribunal deleted the disallowance where the recipient had offered the interest in its return and paid tax on it, applying Hindustan Coca-Cola, and held that the absence of Form 26A could not defeat the claim for a year before rule 31ACB and Form 26A existed at all.
• N C Shaw and Co Beverages P Ltd v ITO (TDS) ITATHelps taxpayer
  I manufacture liquor and settle volume-linked scheme discounts with my distributors by credit note. The TDS officer says those credit notes are commission under s.194H and has made me an assessee in default. Is he right?
  No, on these facts. The Kolkata Bench held that a post-sale discount in cash or in kind, given to a buyer with whom the seller deals on a principal-to-principal basis, is a normal sales discount that reduces the sale price and is not commission or brokerage within Explanation (i) to s.194H, so there was no obligation to deduct and no default under s.201(1) or interest under s.201(1A); the consequential s.271C penalty went with it. Note what this order is not: although the assessee argued s.194R and s.194Q at length, the Tribunal decided the case entirely on s.194H and its operative paragraphs say nothing about either provision.
• SME Pool Series V August 2016 v ITO (TDS) — no section 194LBC deduction on excess interest spread where the originator holds no pass-through certificates ITATHelps taxpayer
  Our securitisation trust pays excess interest spread to the originator, who met its retention requirement by cash collateral rather than by buying PTCs. Were we obliged to deduct under section 194LBC?
  No, on the Mumbai Tribunal's reasoning. Section 194LBC applies only where income is payable to an 'investor' in respect of an investment in the securitisation trust, and 'investor' is defined in clause (a) of the Explanation after section 115TCA as a holder of a securitised debt instrument, securities or a security receipt ISSUED BY the trust — a deed of assignment, by which the trust acquires the receivables, is not such an instrument. The originator here had subscribed to no pass-through certificates and had met its Minimum Retention Requirement by cash collateral and by collateralising excess receivables, so neither condition in the section was satisfied, and the demands of Rs. 4,21,30,230 under section 201(1) and Rs. 47,22,191 under section 201(1A) were deleted.
• Sachin Kumar Kabra v. ITO (TDS), Bhilwara (ITAT Jodhpur) — two brothers each paying under fifty lakh for a Rs 65.11 lakh plot owed no section 194-IA deduction ITATHelps taxpayerSuperseded by amendment
  My brother and I bought a plot from the development authority for Rs 65.11 lakh and paid half each. The Commissioner (Appeals) says the threshold is per property, so we should have deducted. Who is right?
  For a purchase before 1 October 2024 the assessee was right and the Commissioner (Appeals) was wrong. The Tribunal, following its own Coordinate Bench in Dalpat Singh Nanecha, held that the case was fully covered and directed the Assessing Officer to delete the entire demand raised under section 201(1) and section 201(1A) for non-deduction under section 194-IA.
• Manoj Kumar Jain, Prop. M/s Balaji Re-Rolling Mills v ITO (TDS), Kota ITATHelps taxpayerNo later treatment found
  I collected the Form 27C declarations late and filed them late with the TDS officer. Can the department still raise a TCS demand on me?
  On this order, no. The Jaipur Tribunal held that where there is no dispute that the declarations were made in the prescribed format and no dispute about their genuineness, a mere delay in filing the declaration does not defeat the claim, the breach being technical and liable to be condoned. It expressly noted that the Commissioner (Appeals) had relied on a Chennai Bench decision where Form 27C was not obtained within a reasonable time and Form 27BA was collected after a lapse of seven years, and held that those were not the facts before it.
• Government Polytechnic Education Society v ITO (TDS) ITATHelps taxpayerNo later treatment found
  We pay guest lecturers monthly. Should we deduct under 194J, and are we in default if we didn't?
  No. The Tribunal found the guest faculty did the same work as the regular staff, under the institution's control and supervision, so the engagement was a contract of service and not a contract for services and they rendered no professional or technical service - s.194J was not attracted. It added that each person's ad hoc remuneration was below the taxable limit anyway, so nothing fell to be deducted and no default under s.201(1) or s.201(1A) could be visited on the institute. The demand was directed to be deleted.
• ACIT (TDS) v Sula Vineyards Pvt Ltd — for unlisted shares the Rule 3(8) merchant banker value governs the ESOP perquisite, and a genuine sale at a much higher price to an unrelated party does not displace it ITATHelps taxpayerNo later treatment found
  The TDS officer says my employer under-deducted on my ESOP perquisite because the company's shares actually changed hands at Rs 850 while the merchant banker valued them at Rs 194. Which figure fixes the perquisite?
  The merchant banker's figure — and this is stage one, the perquisite on exercise under s.17(2)(vi). The Tribunal held that on a plain reading of Rule 3(8) the fair market value of an unlisted company's shares is the value determined by a merchant banker, so an actual arm's length sale of the same company's shares at Rs 850 during the same year gave the Revenue no basis for recomputing the perquisite. The Revenue's appeal against deletion of a short-deduction demand of Rs 2,62,34,000 was dismissed.
• Shamim Irshad v. ITO, Ward-77(2), New Delhi (ITAT Delhi) — before 1 October 2024 the section 194-IA obligation was qua each transferee, not qua the aggregate consideration ITATHelps taxpayerSuperseded by amendment
  I bought a flat jointly with my husband for Rs 55 lakh in 2015 and I paid Rs 40 lakh of it. The TDS officer has made me an assessee in default under section 194-IA because the property crossed fifty lakh. Was I obliged to deduct?
  For a purchase before 1 October 2024, no. The Tribunal held that the obligation cast by section 194-IA is qua each transferee and not qua the aggregate consideration, so where the transferee in question neither credited nor paid more than fifty lakh rupees the section has no application and no default under section 201(1) or 201(1A) arises.
• Vinod Soni v ITO (TDS) ITATHelps taxpayerSuperseded by amendment
  Four of us bought jointly, each share under Rs 50 lakh — is 194-IA TDS due after the 2024 change?
  Yes, for anything on or after 1 October 2024. This order held the Rs 50 lakh limit in s.194-IA(2) is tested against each transferee's own share, so four buyers at Rs 37,50,000 each owed nothing on a Rs 1.5 crore deed — but a proviso inserted by the Finance (No.2) Act, 2024 with effect from 1 October 2024 aggregates the amounts paid by all transferees to all transferors, so the order now governs only earlier transactions.
• ACIT v SDV International Logistics Ltd ITATHelps taxpayerNo later treatment found
  My employees claim HRA and home loan interest together. Must I treat that as a double benefit?
  No, not on these facts. The point was ground 2 of a composite order under s.201 and s.271C. The first appellate authority had held the exemption and the interest deduction to be two independent provisions, each with its own conditions, and the Tribunal upheld that because the department could not controvert it, so the short deduction and the consequential penalty both fell away. The employees concerned had let out the houses they owned and were living in rented premises, with the whole of the interest set against rental income and the exemption claimed on the rent they actually paid.
• Bharat Financial Inclusion Ltd v DCIT (TDS) — s.17(2)(vi) fixes only the VALUE of the ESOP perquisite; the s.192 withholding obligation arises when the shares are actually allotted ITATHelps taxpayerNo later treatment found
  My employee exercised his options in one year but the shares were only allotted in the next, after he satisfied conditions in his separation agreement. In which year was I obliged to deduct tax under s.192?
  This is stage one — the perquisite on exercise — and the Tribunal drew a line between valuing it and withholding on it. It held that the amended s.17(2)(vi) is only to determine the VALUE of the ESOP transaction, and that the obligation to withhold under s.192 accrues only when the shares are ALLOTTED after the person who exercised the option has completed his commitments; a mere exercise is only acceptance of a general proposal. The assessee's appeal against a short-deduction order was allowed.
• Ramdas Trading Company v ITO (TDS), Alwar ITATCuts both waysNo later treatment found
  I only trade in scrap — I do not manufacture anything, and I sell in retail. Can s.206C still be fastened on me, and is there any time limit on the TCS order?
  Yes, it can. The Tribunal held that the contentions that the assessee is a trader and not a manufacturer, that the scrap was not generated by his own manufacturing or mechanical working of materials, and that a purchaser in retail sale is not a 'buyer', are all squarely covered against the assessee by the Special Bench decision in Bharti Auto Products. But it also held that although s.206C prescribes no limitation, proceedings under it can reasonably be guided by the limitation in s.201(3), and it sent the matter back to the Commissioner (Appeals) to decide that question.
• Inno Real Private Limited and Inno Estates Private Limited v Deputy Commissioner of Income Tax ITATCuts both waysNo later treatment found
  My client was held to be an assessee in default for not deducting tax at thirty per cent on a remittance to a Cyprus company. Cyprus has since been removed from the notified list — does that help for a past year?
  The Chennai Tribunal set aside the orders and remitted both cases for de novo consideration in the light of CBDT Circular No. 15 of 2017 dated 21 April 2017, which clarifies that Notification No. 86/2013 notifying Cyprus was rescinded with effect from the date of its issue, thereby removing Cyprus as a notified jurisdictional area with retrospective effect from 1 November 2013. The Commissioner (Appeals) had held that the rescinding notifications of 14 and 16 December 2016 carried no retrospective effect and had sustained the section 201(1) demands; the circular, which post-dated his order, answered that.
• Statutory position — s.194A: tax on interest other than interest on securities, with the threshold at ₹50,000 for a bank, co-operative bank or post office, ₹1,00,000 for a senior citizen and ₹10,000 in any other case — the 1961 Act position from 1 April 2025 to 31 March 2026 CBDT Circulars & InstructionsCuts both ways
  My bank has deducted tax on my fixed deposit interest and I was told the limit had gone up. My father is a senior citizen and his bank deducted too. There is also a loan I took from a friend on which I pay interest, and a co-operative society that pays me interest on a deposit. Who exactly has to deduct under section 194A, on what amount, and what are the limits as they stand now?
  Section 194A requires any person who is not an individual or a Hindu undivided family, and who pays a resident interest other than interest on securities, to deduct tax at the rates in force at the time of credit or payment, whichever is earlier. An individual or HUF is drawn in only by the proviso to sub-section (1), and only if total sales, gross receipts or turnover exceeded one crore rupees in business or fifty lakh rupees in profession in the preceding financial year. Section 194A(3)(i) sets the thresholds. From 1 April 2025 they are fifty thousand rupees where the payer is a banking company, a co-operative society carrying on banking business or a post office deposit scheme, one lakh rupees where the payee is a senior citizen, and ten thousand rupees in any other case — each figure substituted by Act No. 7 of 2025, the Finance Act, 2025. Section 194A(3) also carries the exclusions: interest paid to a banking company, a financial corporation, the Life Insurance Corporation, the Unit Trust of India or an insurer under clause (iii); interest paid by a firm to its partner under clause (iv); the co-operative society exemptions in clauses (v) and (viia), which since 1 April 2020 are switched off only where both conditions in the proviso are met — the society's turnover exceeded fifty crore rupees in the preceding financial year and the interest to that payee crossed one lakh rupees for a senior citizen or fifty thousand rupees for anyone else; and the two Motor Accidents Claims Tribunal limbs in clauses (ix) and (ixa), where interest credited is never liable and interest paid is liable only above fifty thousand rupees in the financial year — a figure the Finance Act, 2025 did not move. Section 197A(1A) and (1C) let a payee stop the deduction by declaration — Form No. 15G, or Form No. 15H for a resident individual aged sixty or more, both prescribed by rule 29C. From 1 April 2026 the Income-tax Act, 1961 was repealed by section 536 of the Income-tax Act, 2025; the successor is section 393(1) of the 2025 Act, whose Table carries the same three figures.
• Statutory position — s.194J: two per cent on technical fees and film royalty, ten per cent on everything else, and a fifty thousand rupee threshold that never reaches a director CBDT Circulars & InstructionsCuts both ways
  I pay a consultant, I pay an engineering firm for technical work, and I pay my company's non-executive director a sitting fee. Do I deduct two per cent or ten per cent on each, and does the fifty thousand rupee limit apply to all three?
  Section 194J does not have one rate. Since 1 April 2020 it has two, and which one you use depends on which limb of sub-section (1) the payment falls into: two per cent for fees for technical services that are not professional services and for royalty that is consideration for the sale, distribution or exhibition of cinematographic films; ten per cent for everything else the section catches — professional fees, director's remuneration, other royalty and a non-compete sum under s.28(va) — and two per cent again, under a separate proviso, where the payee is engaged only in the business of operation of a call centre. The threshold in the first proviso is fifty thousand rupees, raised from thirty thousand by the Finance Act, 2025 with effect from 1 April 2025, and it is set out limb by limb for clauses (a), (b), (c) and (d) only — clause (ba), the director limb, is not in that list, so a single rupee of director's fee carries tax. An individual or Hindu undivided family is outside the section altogether unless the second proviso pulls them back in, and then only for fees for professional or technical services. All of this governs a sum credited or paid up to 31 March 2026: the Income-tax Act, 1961 stands repealed on 1 April 2026, and for a payment on or after that date the governing provision is section 393(1), Table, Serial No. 6(iii) of the Income-tax Act, 2025, which carries the same two rates and the same fifty thousand rupee threshold.
• Statutory position — s.201: who is deemed an assessee in default, the Form 26A escape that covers non-deduction only, one per cent and one and one-half per cent for two different periods, and the six-year limit from 1 April 2025 CBDT Circulars & InstructionsCuts both waysSuperseded by amendment
  The TDS officer has passed an order under section 201 treating me as an assessee in default and has added interest under section 201(1A). Who exactly is in default, what gets me out of it, which interest rate runs for which period, and how far back can he go?
  Section 201(1) deems a person who does not deduct, does not pay, or after deducting fails to pay the whole or any part of the tax to be an assessee in default in respect of that tax. Its first proviso takes him out of that deeming, but only for a failure to deduct, and only if the payee has furnished his return under section 139, has taken the sum into account in computing income in that return and has paid the tax due on the income declared — and the deductor furnishes a certificate to that effect from an accountant, which rule 31ACB requires in Form 26A. Interest under section 201(1A) runs at two rates for two different periods: one per cent for every month or part of a month from the date the tax was deductible to the date it was deducted, and one and one-half per cent for every month or part of a month from the date it was deducted to the date it was actually paid. Where the first proviso to section 201(1) rescues the deductor from the tax, the proviso to section 201(1A) still charges the one per cent, from the date the tax was deductible to the date the payee furnished his return. Since 1 April 2025 an order under section 201(1) for a failure to deduct cannot be made after six years from the end of the financial year in which payment is made or credit is given, or two years from the end of the financial year in which a correction statement is delivered under the first proviso to section 200(3), whichever is later; until 31 March 2025 the figure was seven years and the limit protected only a failure to deduct from a person resident in India. Section 201 governs a default on a sum paid or credited up to 31 March 2026; where the earlier of credit or payment falls on or after 1 April 2026, the consequences provision is section 398 of the Income-tax Act, 2025.
• Statutory position — s.197: the Assessing Officer may certify a lower rate, or nil, for a listed section, but only on the payee's application and only for a period of the previous year — the 1961 Act position, for deductions up to 31 March 2026 CBDT Circulars & InstructionsCuts both ways
  My money is stuck. Every invoice I raise has tax deducted at the full rate, my actual tax for the year is far less than the deductions, and I only get it back a year later when the refund comes. Somebody told me to apply for a lower-deduction certificate under section 197. What does section 197 actually say — which payments does it cover, what does the Assessing Officer have to be satisfied about, what form do I file, and can the certificate be backdated to cover the deductions already made?
  Section 197(1) lets the payee apply to the Assessing Officer for a certificate that the payer may deduct at a lower rate, or not at all. It is not open-ended: it works only for the sections named in it, and the Assessing Officer must be satisfied that “the total income of the recipient justifies” the lower rate. The list is sections 192, 193, 194, 194A, 194C, 194D, 194G, 194H, 194-I, 194J, 194K, 194LA, 194LBA, 194LBB, 194LBC, 194M, 194-O, 194Q and 195 — 194LBA was added by Act No. 8 of 2023 with effect from 1 April 2023 and 194Q by Act No. 15 of 2024 with effect from 1 October 2024. Section 197(2) then binds the payer: once a certificate is given, he deducts at the certified rate, or nothing, until the Assessing Officer cancels it. Section 197(2A) is the rule-making power, and the rules made under it are rule 28 (application in Form No. 13, filed electronically), rule 28AA (how the rate is worked out and how long the certificate lasts) and rule 28AB (a no-deduction certificate for trusts and other section 139(4C) filers). Nothing in the section or the rules confers a power to backdate a certificate, and in substance it operates forward: rule 28AA(4) sends it to the named deductor, who cannot un-deduct months already past. From 1 April 2026 this machinery is gone — the Income-tax Act, 1961 was repealed by section 536 of the Income-tax Act, 2025 and the successor is section 395 of the 2025 Act, applied for in Form No. 128 under rule 213 of the Income-tax Rules, 2026, and from the same date section 395(6) lets that application go to a prescribed income-tax authority instead of the Assessing Officer.
• Statutory position — s.195: tax is deducted only on a sum “chargeable under the provisions of this Act”, and Explanation 2 fixes who owes the duty, not what is taxable CBDT Circulars & InstructionsCuts both waysSuperseded by amendment
  In March 2026 I remitted a fee to a company outside India without deducting anything, because I did not think any part of it was taxable here. The Assessing Officer now says section 195 obliged me to deduct on the whole remittance, or at least to apply to him before paying. Does section 195 say that — and since the new Act has come in, which Act governs my payment at all?
  Which Act governs is settled by one date: on the CBDT's transition FAQ, where the earlier of credit or payment falls on or before 31 March 2026 the Income-tax Act, 1961 applies, and where it falls on or after 1 April 2026 the Income-tax Act, 2025 applies instead — there, the deduction duty sits in section 393(2), Table, Serial No. 17. So a March 2026 remittance is a section 195 question. Section 195(1) does not tax a remittance; it attaches a deduction duty to “any interest … or any other sum chargeable under the provisions of this Act” paid to a non-resident or a foreign company, at the time of credit or of payment, whichever is earlier. Those five words are the gateway, and in GE India Technology Centre the Supreme Court held on 9 September 2010 that they cannot be read out of the sub-section: a payer who is fairly certain that no part of the sum is chargeable in India may make that determination himself and is not obliged to apply under section 195(2) first. Section 195(2) is the payer's application where a composite payment is partly chargeable; section 197 is a different route, taken by the recipient. Sub-section (6) requires information about every sum, whether or not chargeable, in the form prescribed by rule 37BB — which is why the bank asks for a 15CA even where nothing is deductible.
• Statutory position — s.194A(3)(v) and (viia): when a co-operative society or a co-operative bank must deduct tax on interest CBDT Circulars & InstructionsCuts both ways
  Our co-operative society pays interest to members, to other co-operative societies and to outsiders. Which of these payments carry a TDS obligation under s.194A?
  Clause (v) of s.194A(3) exempts two things and must be read as two limbs: income credited or paid by a co-operative society, other than a co-operative bank, to a member thereof; and income credited or paid by a co-operative society to any other co-operative society. The words 'other than a co-operative bank' were inserted in the first limb by the Finance Act 2015 with effect from 1 June 2015, so from that date a co-operative bank must deduct tax on interest on time deposits of its members; the second limb was not amended and carries no exclusion of a co-operative bank, so interest paid by any co-operative society, including a co-operative bank, to another co-operative society remains outside sub-section (1).
• CIT v Idea Cellular Ltd High CourtHelps departmentOverruled
  I sell prepaid SIM cards and recharge coupons to my distributors at a discount. Is that discount commission on which I must deduct tax under section 194H?
  Yes, on the Delhi High Court's view. It set aside the Tribunal and held that the relationship between the cellular operator and its prepaid market associates was principal and agent, not principal to principal. The distributor never became the owner of the SIM card, which remained the operator's property and gave the ultimate subscriber access to the operator's network; what was being delivered was a service, and a service cannot be bought and sold. The distributor was a link in the chain by which the operator provided that service. The discount was therefore commission within section 194H, and the operator was rightly treated as in default under section 201(1) with interest under section 201(1A).

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.