TDS Defaults

TDS Defaults — the law in short

Every authority in this library on tds defaults, with what each one decided.

• DIT (International Taxation) v Star Cruises (India) P Ltd Supreme CourtHelps taxpayer
  My client is the Indian agent of a foreign cruise ship that sails round trips out of Mumbai. The Assessing Officer says a cruise is entertainment and hospitality, not carriage of passengers, so s.44B does not apply and he wants the s.195 withholding worked out on 25% of the fare instead of 7.5%. Can he do that?
  It depends on the findings of fact, and on these facts he could not. The Supreme Court refused to confine 'carriage' in s.44B to movement from one port to a different port, and held that ancillary services provided on a voyage do not take the activity outside the section. The concurrent findings of the CIT(A), the Tribunal and the Bombay High Court that the non-resident ship owner was carrying passengers were left undisturbed, so the deduction under s.195 stood on the statutory presumptive rate of 7.5% of gross cruise fare receipts and not on the 25% the Assessing Officer had estimated. The Revenue's appeals were dismissed.
• Bharti Cellular Ltd v ACIT Supreme CourtHelps taxpayer
  We sell prepaid SIMs and vouchers to distributors below list price. Is that margin commission under 194H?
  No. The Supreme Court held that the distributor buys the starter kits and recharge vouchers at a discount on a principal-to-principal basis, so the margin is a trade discount and not commission or brokerage; the operator has no obligation to deduct under s.194H.
• AO v Nestle SA Supreme CourtHelps department
  My protocol has an MFN clause and I applied the lower rate India later agreed with an OECD member. Was I entitled to?
  No, on both counts. A notification under s.90(1) is a mandatory condition before any court, authority or tribunal can give effect to a treaty or to a protocol that alters the existing provisions of law, so an MFN clause does not import a later treaty's rate or scope by itself. And where the clause is triggered by India's treaty with a third state 'which is a member of the OECD', that state must have been an OECD member when it entered the treaty with India, not merely by the time the benefit is claimed.
• US Technologies International Pvt Ltd v CIT Supreme CourtHelps taxpayer
  You deducted the TDS but paid it late. Is penalty under s.271C leviable?
  No. Section 271C(1)(a) is attracted by a failure to deduct, not by late payment of tax already deducted. But interest under s.201(1A) still runs, and prosecution under s.276B remains available — this is not an amnesty.
• 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 CIT Supreme CourtHelps department
  We reimbursed LTC where staff also flew abroad. Are we in default for not deducting TDS?
  Yes. The Court proceeded on the footing that s.10(5) with Rule 2B covers travel within India by the shortest route, so where employees added foreign legs and took circuitous routes the bank should have deducted under s.192(1) and was an assessee-in-default under s.201 with interest.
• Engineering Analysis Centre of Excellence P Ltd v CIT Supreme CourtHelps taxpayer
  You pay a foreign supplier for software. Is that royalty, and must you deduct TDS?
  Not royalty. An end-user licence gives a limited right to use a copyrighted article, not an interest in the copyright, so the payment is not chargeable in India and no tax need be deducted under s.195.
• Shree Choudhary Transport Co. v Income Tax Officer Supreme CourtHelps department
  I am a transport contractor who hires trucks from individual owners and pays them freight. Does section 194C apply, and can section 40(a)(ia) disallow amounts I have already paid rather than merely owe?
  Yes to both. The Supreme Court held that section 194C applied to the payments the firm made to truck owners it engaged to carry the cement it had contracted to transport, so it was bound to deduct tax at source; that disallowance under section 40(a)(ia) is not confined to amounts outstanding at the year end but applies equally to expenses already incurred and paid; that the provision as introduced by the Finance (No. 2) Act, 2004 with effect from 1 April 2005 governed assessment year 2005-06; and that the amendment of 2014 reducing the disallowance to thirty per cent gave the firm no benefit. Splitting a single freight payment into two vouchers below Rs 20,000 did not escape section 194C.
• PILCOM v CIT Supreme CourtHelps department
  I paid a foreign body from my overseas bank account for an event partly held in India — must I deduct tax at source when the payee is protected by a treaty?
  Yes. The Supreme Court held on 29 April 2020 that PILCOM, the joint committee of the Indian, Pakistani and Sri Lankan cricket boards, had to deduct tax under section 194E from guarantee money paid out of its London accounts to non-resident cricket boards and to the ICC for the 1996 World Cup. The payments represented income which accrued, arose, or was deemed to accrue or arise in India, because matches were played here. The obligation under section 194E is not affected by a double taxation avoidance agreement: if the payee says the receipt is not taxable, it claims a refund with interest, but the deductor is not absolved.
• CIT v Calcutta Export Co Supreme CourtHelps taxpayer
  I deducted TDS during the year but paid it after 31 March, though before I filed my return — can the expense still be disallowed under section 40(a)(ia)?
  No. The Supreme Court held on 24 April 2018 that the amendment to section 40(a)(ia) by the Finance Act 2010 is curative and operates retrospectively from 1 April 2005, when the clause was first inserted. So for any year from assessment year 2005-06 onwards, tax deducted at any time in the previous year and paid on or before the due date for filing the return under section 139(1) attracts no disallowance. The memorandum to the Finance Bill 2010 had said the amendment would apply from assessment year 2010-11; the Court held that a proviso supplying an obvious omission must be read back into the section.
• Palam Gas Service v CIT Supreme CourtHelps department
  I already paid my sub-contractors during the year and nothing was outstanding at 31 March — can section 40(a)(ia) still disallow the expense for not deducting TDS?
  Yes. The Supreme Court held on 3 May 2017 that the word "payable" in section 40(a)(ia) covers amounts actually paid as well as amounts still outstanding. Sections 194C and 200 require deduction at the time of credit or of payment, whichever is earlier, and payment over to the Government within the prescribed time; a person who ignores that obligation must bear the consequences the Act lays down, of which disallowance under section 40(a)(ia) is one. The view of the Punjab and Haryana, Madras and Calcutta High Courts was approved, and the Allahabad High Court's decision in CIT v. Vector Shipping Services (P) Ltd. was overruled.
• CIT v Kotak Securities Ltd Supreme CourtHelps taxpayer
  We paid stock exchange transaction charges without TDS. Are those fees for technical services under 194J?
  No. The exchange's trading platform is a standard facility available to every member on identical terms, with no customisation for the payer, so the transaction charges are not fees for technical services under s.194J — and the s.40(a)(ia) disallowance built on that premise falls away.
• 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.
• Japan Airlines Co Ltd v CIT Supreme CourtHelps taxpayer
  We pay landing and parking charges to the airport. Is that rent under 194-I at the higher rate?
  No. The charges pay for a bundle of services connected with operating aircraft at the airport — air traffic services, ground safety, aeronautical communication and compliance with safety standards — with use of the tarmac only incidental, so they are not rent under s.194-I and s.194C is the right provision.
• UOI v Tata Chemicals Ltd Supreme CourtHelps taxpayer
  I deducted tax under s.195 because the officer told me to, and the CIT(A) has now held it was not deductible. Do I get interest on the refund, or only the tax back?
  Yes, interest as well. The resident deductor is entitled not only to the refund of the tax deposited under s.195(2) but to have it refunded with interest from the date of payment of the tax. The Revenue was the appellant and its appeals were dismissed. The CBDT has since accepted the position by circular.
• CIT v Ahmedabad Stamp Vendors Association Supreme CourtHelps taxpayer
  I buy stamp papers from the government at a discount and resell them. Is that discount commission under 194H?
  No. The sale of stamp papers by the State to a licensed vendor is a sale on a principal-to-principal basis, and the 0.50% to 4% margin is a cash discount for bulk purchase, not commission or brokerage attracting deduction under s.194H.
• Vodafone International Holdings BV v Union of India Supreme CourtHelps taxpayerValidity unconfirmed
  I am buying the shares of a foreign holding company from another non-resident, and that company's subsidiaries hold shares in an Indian company — must I withhold tax under section 195?
  No, on the law as it stood. The Supreme Court held on 20 January 2012 that what was sold was a single share in a Cayman Islands company, which is property situated outside India, in an outright sale between two non-residents on a principal to principal basis. Shares are a bundle of rights and a transfer lock, stock and barrel cannot be broken into components — control premium, non-compete, brand licence, call options — and taxed piecemeal, particularly where the parties fixed one lump sum of US$11.08 billion with no split. The Revenue established no connection with section 9(1)(i), so section 195 did not apply.
• GE India Technology Centre P Ltd v CIT Supreme CourtHelps taxpayer
  Must you deduct tax on every payment to a non-resident, just to be safe?
  No. The obligation under s.195 arises only where the sum paid is chargeable to tax under the Act. Mere remittance to a non-resident does not attract it, and you need not apply under s.195(2) where nothing is chargeable.
• CIT v Bharti Cellular Ltd Supreme CourtCuts both waysValidity unconfirmed
  We pay interconnect and port charges to another telecom operator — is that fees for technical services on which we must deduct tax under section 194J?
  Unresolved, and the Supreme Court sent it back for evidence. On 12 August 2010 it held that the question turns on whether human intervention is involved in the technical operations by which one operator gives another interconnection, and that this cannot be decided without technical assistance on the record. Since 1979 the courts have read technical services narrowly, applying noscitur a sociis, because the words sit between managerial and consultancy services in Explanation 2 to section 9(1)(vii). The department had led no expert evidence. The matters were remitted to the Assessing Officer (TDS) to examine an expert, and no interest or penalty was to be levied for the past.
• Kanchanganga Sea Foods Ltd v CIT Supreme CourtHelps departmentValidity unconfirmed
  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 taxpayerValidity unconfirmed
  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.
• Vijay Ship Breaking Corpn v CIT Supreme CourtHelps taxpayerValidity unconfirmed
  Does breaking up ships count as production for the section 80HH and 80-I deduction, and must I deduct tax at source on usance interest paid abroad on the vessel I bought?
  Yes to the deduction, and no tax was deductible. The Supreme Court held that ship breaking gives rise to the production of a distinct and different article, so the deduction under sections 80HH and 80-I was rightly allowed. Production is wider than manufacture, the two words are used disjunctively, and nothing in the ordinary meaning of produce requires the article to be new. On the second question, Explanation 2 to section 10(15)(iv)(c), inserted on 18 September 2003 with effect from 1 April 1983, exempts usance interest payable outside India by a ship breaking undertaking on the purchase of a ship. Since the sum was not assessable in India, no obligation to deduct under section 195(1) arose.
• CIT v Infosys Technologies Ltd Supreme CourtHelps taxpayerValidity unconfirmed
  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.
• Madhumilan Syntex Ltd v Union of India Supreme CourtHelps department
  I deposited the TDS late but with interest. Can the company and its directors still be prosecuted?
  Yes. The offence under s.276B is complete once deducted tax is not credited to the Government within the prescribed time; depositing it later with interest is a civil consequence and does not wipe out the default. Directors identified as principal officers under s.2(35) were properly arrayed with the company under s.278B.
• Transmission Corporation of A.P. Ltd v CIT Supreme CourtHelps department
  I am paying a foreign supplier for equipment and its erection. Most of the payment is cost, not profit. Must I deduct tax at source under section 195 at all?
  Yes. The Supreme Court held that any other sum chargeable under the provisions of this Act in section 195(1) is not confined to pure income profits. A sum is within the section if it is chargeable to tax, and that includes a sum in which income is hidden or embedded, such as a trading receipt of which only a fraction is taxable. The deduction is tentative, subject to regular assessment, and the payer's and recipient's protection lies in applying under section 195(2) or (3) or section 197 for a determination of the chargeable proportion or a lower or nil deduction.
• Transmission Corporation of AP Ltd v CIT Supreme CourtHelps departmentValidity unconfirmed
  I am paying a foreign supplier for equipment and for erecting it, and only part of that is really his income - must I deduct tax under section 195 on the whole payment?
  Yes, unless you first get the chargeable proportion fixed. The Supreme Court held that any other sum chargeable under the provisions of this Act in section 195(1) is not limited to payments that are wholly pure income profits; it covers a gross trading receipt in which income is embedded. The payer's obligation is confined to the appropriate proportion of income chargeable, but that proportion is determined on an application under section 195(2), or by the recipient under section 195(3) or section 197. If no application is made, tax must be deducted on the sum paid. The assessee's appeals were dismissed with costs.
• Union of India v A. Sanyasi Rao Supreme CourtCuts both waysValidity unconfirmed
  Tax has been collected from me at source on my purchase price as though a fixed percentage of it were my profit. Am I stuck with that figure, or can I still be assessed on my real income?
  You can still be assessed on your real income. The Supreme Court upheld the validity of section 206C and held section 44AC a valid piece of legislation, but read it down: it is an adjunct to and explanatory of section 206C and does not dispense with a regular assessment. To the extent its non obstante clause shut out sections 28 to 43C for the specified trades, the provision was unreasonable, no basis having been shown for denying those traders the reliefs every other assessee gets. So tax is collected at the section 206C rates and a regular assessment follows, with profits computed under sections 28 to 43C.
• Associated Cement Company Ltd v CIT Supreme CourtHelps department
  My contract is only for loading bags, not a works contract, and much of what I pay is reimbursement of the contractor's wage bill. Must I still deduct under section 194C on the whole sum?
  Yes. The Supreme Court held that any work in section 194C(1) means any work, not a works contract, which is a term with a special connotation in tax law. The sub-clause itself includes supply of labour, which shows the wider intention. The deduction is of a percentage of the sum credited or paid, not of the contractor's income component; the words on income comprised therein show only that what is deducted is tax at source. And nothing in the sub-section allows the payer to exclude amounts paid to the contractor by way of reimbursement of wages he has paid his workers.
• Associated Cement Co Ltd v CIT Supreme CourtHelps departmentValidity unconfirmed
  I pay a labour contractor a rate per tonne plus reimbursement of his workers' wages. Do I deduct tax on the whole payment or only on his profit element?
  On the whole payment. The Supreme Court held that section 194C(1) requires two per cent to be deducted out of the sum credited to or paid to the contractor, not out of the contractor's profit inside that sum. The words 'on income comprised therein' describe a deduction at source, not a licence to isolate the contractor's income. The Court also held that 'any work' means any work and is not confined to a works contract. Amounts reimbursed to the contractor under the contract for wages paid to his workers cannot be carved out of the sum.
• Emil Webber v CIT Supreme CourtHelps department
  My Indian contract says my pay is free of Indian tax and the Indian company pays the tax for me. Is that tax itself taxable in my hands?
  Yes. The Supreme Court held that tax paid by an Indian company on an expatriate's salary, under an obligation to pay him free of Indian tax, is itself income of the expatriate. The definition in section 2(24) is inclusive and does not rob income of its natural meaning; anything properly described as income is taxable unless exempted. The payment was made for and on behalf of the assessee, was not gratuitous, and had an integral connection with the salary he received. Since he was not an employee of the company that paid, it fell under section 56 as income from other sources. The appeals were dismissed.
• Barendra Prasad Ray v ITO Supreme CourtHelps department
  A foreign professional worked on our matter in India but we neither briefed him nor paid him. Can we be treated as his agent and made liable for his tax?
  Yes, on these facts. The Supreme Court held that 'business connection' in section 9(1) is not confined to trade or manufacture and takes in a professional connection. Business means an activity carried on continuously and systematically by applying labour or skill to earn income, and professions are generally regarded as businesses. The connection between the Calcutta solicitors and the English barrister was real and intimate, not casual: he argued their case with their consent, alongside their Indian counsel, and could not have earned the fees without associating himself with them. The order treating them as his agent under section 163(1) stood.
• Vodafone Idea Ltd v ACIT (Delhi HC, 2026) High CourtHelps taxpayerValidity unconfirmed
  The Tribunal allowed my appeal, the Assessing Officer has passed the appeal effect order and worked out the refund, but the CPC will not pay because the portal shows an outstanding demand on my PAN and on my group TANs. Is that lawful?
  No. Once an appellate authority (or the Assessing Officer giving effect to its order) finds an amount refundable, that becomes a vested and crystallised right, and the Assessing Officer or the CPC cannot withhold a rupee of it except by an order actually passed under section 245. Where the Revenue could not produce any such order, the Delhi High Court held that refusing the refund because of demands standing against the assessee's PAN and sister TANs was untenable in law, arbitrary, and violative of Articles 14, 19(1)(g) and 300A, and directed payment of Rs 53,09,56,470 with interest under sections 244A and 244A(1A) by a fixed date, with a further 1 per cent per month if the date was missed.
• Manohar Ramabtar Jhunjhunwala v PCIT High CourtHelps taxpayerValidity unconfirmed
  My employer deducted tax but never deposited it, so the credit was denied on processing, a demand now sits on the portal and my later years' refunds are being eaten by it. Do I get the credit and the refund, or only a promise that nobody will recover from me?
  You get the credit and the refund, not merely a bar on recovery. A Division Bench of the Bombay High Court, hearing a batch of such petitions with the assistance of an amicus, held that where an assessee establishes that tax was in fact deducted at source, the Department must grant appropriate TDS credit and cannot recover the corresponding amount from the deductee directly or indirectly, that the consequential relief including refund must follow, and that pending disposal of a credit application the demand must be marked in the system as stayed or not recoverable so that no coercive recovery or refund adjustment takes place.
• Raitha Seva Sahakara Sangha Niyamita v Union of India High CourtHelps taxpayerValidity unconfirmed
  My society's bank has marked a lien on its current account for s.194N tax on cash withdrawals which the bank itself never deducted. Can a bank do that, and is the society liable?
  No, on both counts. The Karnataka High Court held that the bank had no statutory authority to create a lien over the amount lying in its customer's current account. The obligation under s.194N is cast on the paying bank and is to be discharged at the time of payment; the consequence the Court identified is a penalty on the bank under s.271C, imposed by a Joint Commissioner, and the section does not contemplate either a deduction liability or a penalty on the customer.
• Vijaya Agro Traders v ITO High CourtHelps taxpayerValidity unconfirmed
  The faceless unit has disallowed my purchases for not deducting under s.194Q and has said nothing at all about the Board's circular I quoted in my reply. Is that enough to get the order set aside?
  Yes. The Karnataka High Court set aside an order under s.143(3) read with s.144B, made in a s.194Q scrutiny, on the single ground that CBDT Circular No. 13/2021 had not been considered or appreciated by the assessing unit, and remitted the matter for fresh consideration in the light of that circular. Guidelines issued under s.194Q(3) are issued with the approval of the Central Government and the officer is not free to pass over them in silence.
• Kohinoor Educational Services v Union of India High CourtHelps departmentValidity unconfirmed
  My payee refuses to sign the accountant's certificate for Form 26A. Can I get a writ compelling him to issue it?
  No, not where the records the certificate must rest on no longer exist. The deductor wanted a mandamus against the Airports Authority of India to issue the accountant's certificate in Annexure A to Form 26A under rule 31ACB, so as to bring itself within the first proviso to section 201(1) and escape disallowance under section 40(a)(ia). The Authority's answer was that its records for the period before April 2013 had been lost in floods in 2015 and could not be retrieved from the legacy system after migration. The Delhi High Court held that a mandamus enforces a clear legal right and a corresponding public duty, and does not lie to command an authority to issue a factual certification when the records on which such a certification must rest are not there. Replies under the Right to Information showing that returns had been filed did not fill the gap, because proof that a return was filed is not proof that a particular receipt from a particular payer was accounted for in it. The review petition was dismissed.
• 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.
• Dr. Manoj Khanna v ITO High CourtHelps departmentValidity unconfirmed
  You have now paid the TDS. Does that end the prosecution under s.276B?
  Not by itself. Belated deposit does not extinguish criminal liability unless the statute says so. The s.278E presumption of a culpable mental state attaches to a person in managerial charge and can only be rebutted at trial.
• CIT v Dr Balabhai Nanavati Hospital High CourtCuts both waysValidity unconfirmed
  After a survey the TDS officer says my consultant doctors are employees and wants 192 instead of 194J. Is he right?
  Not on these facts, and only part of the case was decided. On the doctors the High Court found no substantial question of law: they are appointed on probation for qualification and specialisation, receive no fixed monthly remuneration, are free to practise at other hospitals, get no PF or ESIC and no perquisites, attend according to patients' needs, and the hospital exercises no real supervisory control; the doctors had also returned the receipts as business or professional income. The separate maintenance-contract question was not answered — the Tribunal's order on it was set aside and the matter sent back for a contract-by-contract finding, and the assessee-in-default question on that limb goes with it.
• Pune Municipal Corporation v ACIT (TDS), Pune High CourtHelps taxpayerValidity unconfirmed
  I have been held an assessee in default under s.201 for not deducting s.194C and s.194LA tax when I issued TDR certificates instead of paying money. Is there an answer where the payment is wholly in kind?
  The Bombay High Court found a strong prima facie case and stayed the s.201 order, the demand and the s.271C penalty notice. Its prima facie view is that the words 'or by any other mode' in s.194C and in s.194LA must be read ejusdem generis with payment in cash or by cheque or draft, so those sections do not operate where the payment is made in kind by issuing transferable development rights. The court drew support for that reading from s.194B and s.194R, which do contain express machinery for a benefit paid wholly in kind and which is conspicuously absent from s.194C and s.194LA.
• CIT v Samsung Heavy Industries Co Ltd High CourtHelps taxpayerValidity unconfirmed
  I deducted 2% under 194C and the AO says it was 194J at 10%. Can he disallow the expense?
  No. Tax had in fact been deducted, so this is short deduction and not non-deduction, and s.40(a)(ia) does not reach short deduction. The Uttarakhand High Court dismissed the revenue's appeal against deletion of the disallowance.
• Manjeet Singh Chawla v Dy CIT (TDS) High CourtHelps taxpayerValidity unconfirmed
  If the payment for the fall in option value is not salary, is it capital gains?
  On this decision, neither. The Karnataka High Court held that compensation for the diminution in value of stock options that were never exercised is a capital receipt not chargeable under any head, and quashed the order rejecting the employee's application for a nil withholding certificate.
• ITO v MKY Constructions P Ltd High CourtHelps taxpayerValidity unconfirmed
  We paid the whole TDS default with interest before the complaint was filed. Can we still be prosecuted under s.276B?
  Not where a reasonable cause for the failure is made out. The Delhi High Court refused the department leave to appeal against an acquittal in three prosecutions under section 276B read with section 278B. Section 278AA carves out an express exception to penal liability under section 276B where the accused establishes a reasonable cause for the failure to deposit. The trial court had found that the company's default was driven by a liquidity crisis caused by legally recoverable payments withheld by contracting parties, that the entire defaulted tax had been deposited with interest under section 201(1A) and late fee under section 234E, and that the default was not deliberate. The High Court held that finding neither perverse nor legally infirm, and declined to disturb it.
• ITO v MKY Constructions Private Limited High CourtHelps taxpayer
  I deducted tax at source but could not deposit it on time because my own contract payments were stuck. I have since paid it with interest. Can I still be prosecuted?
  Not where reasonable cause is proved. The Delhi High Court refused leave to appeal against acquittals under section 276B read with section 278B. Section 278AA opens with a non obstante clause and means that the existence of a reasonable cause operates as a statutory defence to prosecution. The company was a sub-sub-contractor whose large receivables from the main contractor, and refunds from the Department, were stuck, and it deposited the whole of the tax with interest and late fee before the complaints were filed, a fact the Income Tax Officer admitted in cross-examination. That showed the absence of the culpable mental state and the trial court's finding was neither perverse nor legally infirm.
• CIT (TDS)-2 v Santur Builders Pvt Ltd High CourtHelps taxpayerValidity unconfirmed
  The AO says our EDC paid to HUDA was 'rent' and has raised a s.201 demand for not deducting under s.194-I. Is that right?
  No. External Development Charges paid to the Haryana authority are not rent, so s.194-I is not attracted and a s.201(1)/201(1A) order built on s.194-I cannot stand. The Delhi High Court dismissed the Revenue's appeal, holding the point squarely covered by its own earlier decision in DLF Homes Panchkula. It also refused to let the Revenue rescue the order by switching to s.194C at the appeal stage, because s.194C was never the case the AO made.
• CIT v Nokia Network OY High CourtHelps taxpayerValidity unconfirmed
  We supply telecom equipment with embedded software to Indian operators through our Indian subsidiary. Is the subsidiary our permanent establishment, and is the software royalty?
  No on both counts, on these facts. A wholly-owned Indian subsidiary is a separate legal entity that contracts in its own name, and without proof that a place was at the disposal of the foreign company it is not a fixed place permanent establishment; a liaison office doing advertising and similar work falls within the preparatory and auxiliary exclusion. Software supplied as an integral part of the equipment is part of the sale of goods and not a licence, so the consideration is not royalty, and offshore supply completed outside India produces no Indian income.
• CIT (TDS) v Turner General Entertainment Networks India High CourtHelps taxpayerSuperseded by amendment
  The show-cause notice came a year after the AO referred the matter to the JCIT. Which date starts the s.275(1)(c) clock?
  The reference, not the show-cause notice. The expression 'action for the imposition of penalty is initiated' in s.275(1)(c) refers to the date on which the first introductory step for such action is taken. The Assessing Officer's reference to the Joint Commissioner was that step, so the penalty order passed on the footing of the later show-cause notice was out of time.
• Nishithkumar Mukeshkumar Mehta v Dy CIT High CourtHelps departmentUnder appeal
  Is compensation for the fall in value of stock options taxable as salary if I keep the options?
  Yes, on this decision. The Madras High Court held that where the employee paid nothing for the options and kept all of them after receiving the compensation, the whole receipt was a perquisite taxable under the head Salaries, and refused the nil-deduction certificate sought under s.197.
• Sanjay Baweja v Dy CIT High CourtHelps taxpayerHigh Courts differ
  My employer paid me for the fall in value of options I never exercised. Is that a perquisite?
  No, on this decision. The Delhi High Court held that a one-time voluntary payment made to holders of unexercised stock options after a group disinvestment was not a perquisite under s.17(2)(vi), because the value of specified securities depends on the exercise of the option and no option had been exercised. The refusal of a nil-deduction certificate under s.197 was set aside.
• Puri Constructions Pvt Ltd v Addl CIT High CourtHelps departmentValidity unconfirmed
  I paid External Development Charges to HUDA/HSVP because the Town and Country Planning Department told me to. I have no contract with HUDA. Does s.194C still oblige me to deduct tax at source?
  Yes. The Delhi High Court rejected the developers' challenge and held that EDC payments fall within s.194C. The privity argument does not work: s.194C looks for a contract under which the contractor carries out work, not for a contract between the payer and the payee. Nor does s.196 rescue the developer, because HSVP is a legal entity distinct from the Government of Haryana. This is a different question from the one decided in DLF Homes Panchkula, which held EDC is not 'rent' under s.194-I. The two decisions sit side by side and do not conflict.
• Godaddy.Com LLC v ACIT High CourtHelps taxpayer
  We pay a foreign registrar to register our domain names. Is that royalty, and must we withhold?
  No, it is not royalty. A registrar has no proprietorship rights in the domain name it registers for a customer, so it cannot confer or transfer a right to use that name — and without a right to use there is nothing to characterise as royalty under s.9(1)(vi) or Article 12(3)(a) of the India-US treaty. The Delhi High Court allowed the assessee's appeal, reversing the Tribunal, which had held the receipts were royalty because a domain name is an intangible similar to a trademark.
• CIT v Lalitpur Power Generation Co Ltd High CourtHelps taxpayerValidity unconfirmed
  My plant erection contract includes testing and commissioning. Can the AO carve that out and demand 194J?
  No. Where testing and commissioning form part of an indivisible contract for setting up a thermal power plant, the payments fall under s.194C as work; the consideration cannot be fragmented to create a fees-for-technical-services component under s.194J.
• Incredible Unique Buildcon P Ltd v ITO High CourtHelps taxpayerHigh Courts differ
  My customer deducted TDS on my bills and deposited almost none of it, and I have no Form 16A. Can I still get the credit and stop the demand?
  Yes. The Court held that the bar in s.205 operates as soon as it is established that tax was deducted at source, whether or not the deductor deposited it and whether or not a TDS certificate was issued. Form 16A is not the only evidence of deduction; other reliable material — the return disclosures supported by ledger accounts — will do.
• PCIT v Maahi Milk Producer Co Ltd High CourtHelps taxpayerValidity unconfirmed
  I pay a dairy to process my milk. Do I deduct 2% under 194C or 10% under 194J?
  2% under s.194C. Processing of milk by a dairy is job work, not technical services — the Gujarat High Court approved the Tribunal's reliance on CBDT Circular No. 13/2006 dated 13 December 2006 to that effect, and the s.40(a)(ia) disallowance fell with the characterisation.
• A.M. Enterprises v State of Jharkhand High CourtHelps taxpayerSuperseded by amendment
  I paid the TDS with interest before sanction and no penalty was ever levied. Can they prosecute?
  On this combination of facts, no. The High Court quashed the s.276B/278B prosecution because the tax with interest had been deposited before sanction under s.279(1), no penalty proceedings had ever been initiated, and the delay was explained. If a cancelled penalty destroys the basis of a prosecution, the position is stronger where no penalty was ever adjudicated at all.
• DLF Homes Panchkula Pvt Ltd v JCIT High CourtHelps taxpayer
  Are External Development Charges paid to HUDA 'rent' under s.194-I? And if the AO picked the wrong section, can the department switch sections on appeal?
  EDC paid to the Haryana authority under the statutory licensing scheme is not rent, so s.194-I is not attracted. The Revenue did not even try to defend the Assessing Officer's reasoning; it asked instead for a remand so the officer could apply s.194C. The Court refused. An order under s.201 stands or falls on the reasoning the officer actually gave, and the reasoning here was fundamentally flawed. The s.201(1) and 201(1A) demands were set aside.
• Sanjay Sudan v ACIT High CourtHelps taxpayerHigh Courts differ
  My employer deducted TDS but never deposited it. The department has raised a demand on me and set my later refund off against it. Can it do that?
  No. s.205 bars a direct demand on the person from whose income the tax was deducted, and the Court held that adjusting a later year's refund against that demand is an indirect recovery of the same tax. The demand notice and the adjustment were quashed and the refund directed to be released.
• Molasi Primary Agricultural Cooperative Credit Society Ltd v ITO High CourtHelps department
  We are a primary agricultural credit society drawing cash to lend to farmers. Must the bank still deduct under s.194N?
  Yes. The Madras High Court held that a primary agricultural credit co-operative society is not within the exceptions to s.194N, so the deduction on cash withdrawals above the threshold stands, and the requirement is non-negotiable except in line with the specific exceptions in the proviso. Relief, if any, has to come from the competent government authority; s.194N is not one of the sections for which a nil or lower deduction certificate can be sought under s.197.

The 60 strongest entries are summarised here. The other 96 entries are listed in full below, and each has its own page.

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.