Landmark Cases on TDS and Withholding

The amendment to Section 200A, enabling the levy of late filing fees under Section 234E, applies prospectively from June 1, 2015. Therefore, no fee under Section 234E can be levied via an intimation issued under Section 200A for periods prior to this date.

The fee under Section 234E for late filing of TDS/TCS statements cannot be levied retrospectively by processing an intimation under Section 200A for defaults occurring before the amendment allowing such processing.

A fee under Section 234E cannot be levied or adjusted in an intimation under Section 200A for TDS statements pertaining to periods prior to June 1, 2015, as the enabling amendment to Section 200A(1)(c) came into effect only from that date.

Section 234E, levying late fees for delayed filing of TDS statements under section 200(3), is constitutionally valid and constitutes a compensatory fee, not a punitive penalty. Before treating any person as an assessee-in-default, an opportunity of being heard must be provided.

The fee under Section 234E of the Income-tax Act cannot be levied for defaults in filing TDS statements committed prior to June 1, 2015, as the provision for its levy became effective only from that date.

Tax must be deducted at source from payments made to a non-resident under Section 195 only if such payment is chargeable to tax in India. The Assessing Officer bears the onus to establish that the payments made are indeed chargeable to tax under the Income Tax Act.

The deductor cannot be treated as an assessee-in-default under Section 201(1) if the deductee has already paid the tax or offered the impugned receipts in their return of income. However, interest under Section 201(1A) for delayed deposit of tax can still be levied up to the date of filing of the return of income by the deductee.

Late fees under section 234E can only be levied prospectively from June 1, 2015. Levying late fees for periods prior to this date is not permissible.

The imposition of fees for late filing of TDS/TCS returns prior to the Finance Act, 2015 amendments was not illegal, and the Rajasthan High Court found no justification to interfere with such compensatory fees.

The second proviso to Section 40(a)(ia), introduced by the Finance Act, 2012, is curative and applies retrospectively from April 1, 2005. Consequently, if the recipient of a payment has filed their return and paid taxes on the amount from which tax was not deducted at source, the payer's expenditure cannot be disallowed under Section 40(a)(ia).

The Supreme Court lays down principles for deducting tax at source (TDS) under Section 195 on payments to non-residents, including aspects of income deemed taxable in India and the application of Double Taxation Avoidance Agreements (DTAAs) under Section 90.

Withholding tax provisions, being machinery provisions, are not independent of the charging provisions determining an assessee's tax liability, and the taxability of foreign salary payments depends on specific facts. Additionally, penalty provisions under sections 271C and 271D are not automatic, and an assessee can be exonerated by a reasonable cause under section 273B, particularly if acting under a bona fide belief or in unsettled legal situations.

No fee under Section 234E can be imposed for periods falling under assessment years prior to June 1, 2015.

Late fee levied under section 234E for filing TDS returns prior to June 1, 2015, is invalid. This is because the TDS return was filed before the effective date of the relevant provisions for levying such late fees.

Intimations issued under Section 200A cannot levy fee under Section 234E for belated filing of TDS statements that relate to periods prior to June 1, 2015, as the amendment to Section 200A allowing such levy is prospective from June 1, 2015.

Section 201 is attracted only when an employer fails to deduct or pay tax on employee salaries as required by the Act. An employer has a duty to make an honest and fair estimate of the employee's tax liability when deducting TDS on salary income.

A deductor who receives Form 15H or Form 15G under Section 197A is not deemed an 'assessee in default' under Section 201(1) for non-deduction of tax, as there is no obligation to verify the payee's actual taxable income.

Technical services under Section 9(1)(vii) read with Explanation 2 require human intervention at the time of service delivery. Consequently, payments for telecom services like roaming, mobile data, connectivity, or interconnect/port access do not constitute 'fees for technical services' and are not liable for TDS under Section 194J.

A deductor's bonafide belief or reliance on a Tax Residency Certificate (TRC) can influence whether they are deemed an 'assessee in default' under Section 195 for failing to deduct tax at source on payments to non-residents. The decision clarifies the due diligence required when interpreting tax treaties and TRCs for TDS compliance.

An employer is not an 'assessee in default' under Section 201(1) if short or non-deduction of TDS on employee salaries or exempt income was due to a bona fide belief. The Assessing Officer must compute TDS liability based on the employee's actual income, and no interest under Section 201(1A) is leviable when such a bona fide belief exists.

Discounts offered to distributors under a tightly controlled relationship constitute commission and are subject to tax deduction at source under Section 194H of the Income-tax Act.

Section 40(a)(ia) of the Income Tax Act does not apply to disallow expenses when there is a short deduction of tax at source. This includes situations where TDS is deducted at a lower rate than required or under an incorrect section.

An employer's obligation for Tax Deducted at Source (TDS) on salaries is to make a bona fide estimate of the employee's income. TDS is to be made at the time of payment of salary, not on accrual, and Section 192(3) of the Act permits the employer to adjust the TDS amount for any excess or deficiency.