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 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.
• DIT v Mitsubishi Corporation Supreme CourtCuts both ways
  My Indian payer did not deduct tax at source and paid me gross. The Assessing Officer says I should have paid advance tax and has charged s.234B interest. Which years can he do that for?
  Only from financial year 2012-13 onwards. The Supreme Court held that for every assessment up to and including financial year 2011-12, s.209(1)(d) entitled the assessee to reduce, in computing its advance tax, the income-tax that WOULD BE deductible at source, even though it had in fact received the full amount without deduction — so no s.234B interest could be charged. The proviso to s.209(1)(d) inserted by the Finance Act 2012 with effect from 1 April 2012 reverses that, and from financial year 2012-13 the assessee cannot reduce tax that the payer failed to deduct.
• 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 departmentNo later treatment found
  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.
• Director, Prasar Bharati v CIT Supreme CourtHelps department
  My advertising agency bills the advertiser, remits the money to me, and I pay it fifteen per cent back as its margin. The agreement calls it commission. Is that section 194H?
  Yes, on these facts. The Supreme Court held that the fifteen per cent paid to accredited advertising agencies under Doordarshan's agreements was commission within section 194H, so tax had to be deducted on it. What decided the case was the arrangement, not the label on the ledger: the agreement called the sum commission throughout, it was paid over after the appellant had collected the money from the agencies, and the relationship was one of principal and agent rather than principal to principal. Read it against Ahmedabad Stamp Vendors and Bharti Cellular, where the same section did not apply because the distributor bought on its own account.
• 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.
• 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 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.
• GVK Industries Ltd v ITO Supreme CourtHelps department
  We paid a Swiss adviser a success fee for tying up the loans for our power project. He has no office here and did all the work abroad. Do we still have to deduct before we remit?
  Yes, on these facts. The Supreme Court held that the success fee paid to a non-resident consultant for structuring and tying up the finance for an Indian power project was fees for technical services, in the consultancy limb, and that tax should have been deducted, so the no-objection certificate for remittance was rightly refused. Section 9(1)(vii)(b) charges the fee where the payer is a resident and lays down what is known as the source rule - the recipient's income is chargeable in the country where the source of payment is located - and requires the services to be utilised in India. The clause carves out an exception in its latter part, for services utilised in a business or profession carried on outside India or for making or earning income from a source outside India; the Court set that exception out but did not rule on it in terms, deciding the case instead on the definition of fees for technical services.
• 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 taxpayerSuperseded by amendment
  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 ways
  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 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 Ghanshyam (HUF) Supreme CourtHelps department
  The court enhanced my acquisition compensation with interest. Which year is it taxed, and is the interest capital?
  Interest awarded under s.28 of the Land Acquisition Act, 1894 is part of the amount of compensation; interest under s.34 is not, because it is only compensation for delay in paying a sum already determined. The additional amount under s.23(1A) and the solatium under s.23(2) are likewise part of enhanced compensation, and the whole of it — including s.28 interest — is taxed under s.45(5) in the year of receipt, even where the claimant has withdrawn it against security while the Revenue's or the State's appeal is pending.
• 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.
• Vijay Ship Breaking Corpn v CIT Supreme CourtHelps taxpayer
  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 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.
• 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.
• Adityapur Industrial Area Development Authority v Union of India Supreme CourtHelps department
  Section 10(20A) has been omitted and we are outside the new s.10(20) Explanation. Can we still say our income is the State's income and immune under Article 289?
  No. The Supreme Court held that where a development authority is constituted under a State Act with its own funds, its own assets and its own liabilities, the income is the authority's own income and not the income of the State, so Article 289(1) does not help. The withdrawal of s.10(20A) by the Finance Act 2002 and the narrowing of s.10(20) by the Explanation from 1 April 2003 were deliberate, and a benefit expressly taken away cannot be recovered through the Constitution.
• 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.
• Union of India v A. Sanyasi Rao Supreme CourtCuts both ways
  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 departmentNo later treatment found
  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.
• 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 taxpayerNo later treatment found
  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.
• 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.
• Manohar Ramabtar Jhunjhunwala v PCIT High CourtHelps taxpayerNo later treatment found
  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 taxpayerNo later treatment found
  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 taxpayerNo later treatment found
  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.
• Hosur Bata Employees Union v Principal Chief Commissioner of Income Tax High CourtCuts both waysNo later treatment found
  My clients settled a wage dispute and took VRS and compensation for loss of future salary in two instalments. The company deducted TDS on the whole amount without giving s.89 relief. Can we make the employer refund it?
  No — not from the employer. The Madras High Court held that the employer cannot be found at fault for deducting tax at source in the absence of an application in Form 10E under Rule 21A, because s.192(2A) is what obliges the employer to compute and give s.89 relief and it operates only on the particulars the employee furnishes. The Court's remedy was to direct the employees to file returns under s.139(1) within thirty days and the Income Tax Officer to process them under s.143(1) and refund within two months.
• CIT (International Taxation) v Nidra Hospitality Gujarat Pvt Ltd High CourtHelps taxpayerNo later treatment found
  The officer says I am in default under s.201 for not deducting under s.195 on payments abroad, although I have a Form 15CB from my chartered accountant for every remittance. Is that enough?
  On these facts, yes. The Gujarat High Court declined to admit the Revenue's appeal, holding that once the assessee had filed its TDS returns and submitted Form 15CB — the accountant's certificate on liability to deduct under Chapter XVII-B prescribed by Rule 37BB — for each remittance, and the Assessing Officer had not disputed those, the assessee could not be treated as an assessee in default under s.201. The Court also held that commission paid to travel agents and on hotel bookings made through websites and subsidiaries was not a sum covered by s.195.
• 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 v Union of India High CourtHelps departmentNo later treatment found
  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.
• Dr. Manoj Khanna v ITO High CourtHelps departmentNo later treatment found
  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.
• 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.
• CIT v Dr Balabhai Nanavati Hospital High CourtCuts both waysNo later treatment found
  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 taxpayerNo later treatment found
  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 taxpayerNo later treatment found
  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 taxpayerHigh Courts differ
  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 taxpayerNo later treatment found
  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.
• SKS MC Joint Venture v State of Jharkhand High CourtHelps taxpayerHigh Courts differ
  I deposited the TDS late but with interest, and years later the department filed a criminal complaint under s.276B. Can I get it quashed?
  On these facts, yes. Where the deductor had deposited the tax with the stipulated interest before any complaint was filed, and the department then launched the prosecution long afterwards instead of exercising its power to compound, the Jharkhand High Court held that continuing the criminal proceeding was an abuse of the process of law and quashed the cognizance order.
• CIT (TDS)-2 v Santur Builders Pvt Ltd High CourtHelps taxpayerNo later treatment found
  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.
• Chennithala Thripperumthura Service Co-op Bank Ltd v ITO (TDS) High CourtHelps departmentNo later treatment found
  We are exempt from deducting tax on these deposits. Does that also mean we need not give the information?
  No. The Court held that an exemption from deduction under s.194A(3)(viia) does not carry with it any exemption from furnishing information under s.133(6). It rejected the jurisdictional challenge because the notice had been issued after obtaining prior approval from the Commissioner, and dismissed the petition.
• CIT v Nokia Network OY High CourtHelps taxpayerNo later treatment found
  We supply telecom equipment with embedded software to Indian operators through our Indian subsidiary. Is the subsidiary our permanent establishment?
  No on the permanent establishment question; the software question was never decided. A wholly-owned Indian subsidiary is a separate legal entity, and Article 5(8) of the India-Finland treaty forbids treating it as a permanent establishment merely because it is a subsidiary: the enquiry is factual, governed by disposal and virtual projection, and on these facts the Revenue produced nothing to establish either a fixed place or a dependent agent permanent establishment. The Court did not hold that bundled software is part of a sale of goods rather than a licence. That question was conceded in the assessee's favour in the light of the Supreme Court's decision in Engineering Analysis Centre of Excellence, so this judgment is not authority on it; nor did the Court decide the taxability of offshore supplies as a separate question, treating that as settled by Ishikawajma-Harima.
• Income-Tax Department v Vishweshwara Rao Chava High CourtHelps departmentNo later treatment found
  The complaint under s.276B names me as a director and says nothing more than that I was in charge of the company. The trial court discharged me. Can the Department get that set aside?
  Yes, if the complaint carries the specific averment that the director was in charge of and responsible to the company for the conduct of its business, and the s.2(35) notices treating him as principal officer are on the record as exhibits. Whether he really was at the helm is a matter of evidence for the trial, not a ground for discharge, and non-production of the record behind the notices does not make the complaint bad at that stage.
• All India Central Bank Officers Federation v Union of India High CourtHelps departmentNo later treatment found
  My client is a bank officer taxed on a deemed concession in rent for the bank's quarters even though the market rent is lower than the percentage of salary applied. Is the deeming provision open to challenge?
  Not on the grounds run so far. A Division Bench of the Bombay High Court dismissed a batch of writ petitions by bank officers' associations challenging Explanations 1 to 4 below s.17(2) inserted by the Finance Act 2007 with limited retrospective effect. It held the legal fiction is not an impermissible legislative override of Arun Kumar v Union of India, that the retrospectivity is valid, and that classifying by city population and measuring the concession as a percentage of salary does not offend Article 14.

The 60 strongest entries are summarised here. The other 234 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.