Mere failure to deduct TDS is no longer offence u/s 276B.

If a person fail to deduct TDS, he is no longer liable to punish with rigorous imprisonment under section 276B of Income Tax Act, 1961.

Earlier the provision of Section 276-B of Income Tax Act, 1961 existed as under:-

“276B. Failure to deduct or pay tax.- If a person fails to deduct or after deducting, fails to pay the tax as required by or under the provisions of sub- section (9) of section 80E or Chapter XVIIB, he shall be punishable,- (i) in a case where the amount of tax which he has failed to deduct or pay exceeds one hundred thousand rupees, with rigorous imprisonment for a term which shall not be less than six months but which may extend to seven years and with fine; (ii) in any other case, with rigorous imprisonment for a term which shall not be less than three months but which may extend to three years and with fine.” Continue reading

Without serving notice, CIT (A) cannot enhance tax liability

Without serving notice offering reasonable opportunity to the assessee, CIT (A) cannot enhance tax liability or reduce tax refund and the order passed by CIT(A) takes serious illegality and it is contrary to Section 251(2).

In the case, Sri Y. Brahmiah (Died) Karimnagar Versus The Income Tax Officer -ANDHRA PRADESH HIGH COURT

The appellant is a trader in timber and apart from that, he has got other sources of income. He submitted returns for the three Assessment Years.The Assessing Officer accepted all the facts and figures furnished by the appellant. However, AO disallowed the claim for deduction of loss on the Saw Mill business. Instead, AO treated the income from the Saw Mill business as nil. Aggrieved by that and on other ancillary aspects, the appellant approached the Commissioner (Appeals). The Commissioner not only rejected the contention of the appellant but also in a way, reopened the assessment and directed the Assessing Officer to undertake an exercise. He has also indicated that the profit from sale of timber and cutting charges in the Saw Mill must be taken at 10% on the turnover. Continue reading

Income from franchising hotels / Restaurants is a business income

The rental income from leasing / franchising hotels & restaurants, under the franchisee conditions, is a business income and the same is not chargeable under the head “income from house property”. Hence lessor/ franchiser can not claim 30% adhoc deduction under section 24(a) of Income Tax Act, 1961 with respect to rental income from leasing / franchising the hotels & restaurants.

M/s. Tamil Nadu Tourism Development Corporation Ltd. Versus The Deputy Commissioner of Income Tax – MADRAS HIGH COURT

The assessee is a wholly owned Government of Tamil Nadu undertaking engaged in the business of development of tourism in the State. the assessee relying upon its Memorandum of Association had stated that its main activity was to start, operate and promote establishments, undertakings, enterprises and activities which facilitate or accelerate the development of tourism, handicrafts and cottage industries in Tamil Nadu; Continue reading

Interest on not deducting TDS count till the date tax actually paid by deductee.

If deductor fail to deduct  TDS  and deductee paid the advance tax and self assessment tax on such income then interest on not deducting TDS under section 201(1A) shall be applicable from the period commencing from “the date of such tax was deductible” to “the date on which tax was actually paid by the deductee”, not to “the date on which TDS is deducted by deductor”.

In the case, Commissioner of Income Tax Delhi XVII Versus M/s. Babcock Power (Overseas Projects) Ltd.- Delhi High Court

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TDS credit given even if deductor has not paid TDS amount

It is immaterial as to whether the TDS has been paid by deductor to the Central Government or not – Section 205 of the Income Tax Act prevents the department from demanding the tax from the deductee to the extent of TDS and TDS credit will be given.

Section 205 of the Income Tax Act reads as follows:

“Where tax is deductible at the source under sections 192 to 194, section 194A, section 194B, section 194BB, section 194C, section 194D, section 194E, section 194EE, section 194F, section 194G, section 194H, section 194-I, section 194J, section 194K, section 194L, section 195, section 196A, section 196B, section 196C and section 196D, the assessee shall not be called upon to pay the tax himself to the extent to which tax has been deducted from that income”.

The plain reading of the section makes it clear that whenever tax is deductible under the provisions of this Act and where the tax has already been deducted, no demand can be raised on the deductee. This implies that to the extent of TDS, demand cannot be raised on the deductee and tds credit shall be available.

In the case of Executors of the Estate of S. Shanmuga Mudaliar Versus The ACIT, MADRAS HIGH COURT

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