Landmark Cases on TDS and Withholding

Co-operative societies engaged in banking are exempt from deducting tax at source on interest paid to members on time and other deposits, per Section 194A(3)(v).

Disallowance under section 40(a)(i) for failure to deduct tax at source is not tenable if the CIT(Appeals) has rightly deleted it, particularly when relying on the assessee's own case decided by the Tribunal.

Where income is diverted by an overriding title, the assessee has no obligation to deduct tax at source under section 194C. Payment made to a trustee, even if deposited in the assessee's bank account before being paid out, is not the assessee's income, and therefore, TDS is not applicable.

An order under section 201(1) of the Income Tax Act for Assessment Year 2009-10 can be passed when the TDS statement is required to be filed.

Payments made for online advertising services through foreign search engine portals do not necessarily result in the accrual of income in India, and such payments are not to be classified as 'technical services' under section 194J or 'advertising contract' under section 194C. Disallowances made without granting a proper hearing violate natural justice.

The tax department cannot speculate to deny the benefit of tax deducted at source by the employer to the petitioner.

A late fee under section 234E cannot be imposed if TDS applications have been processed under section 200A. Orders levying such fees are liable to be set aside.

A co-operative society mentioned in Section 194A(3)(v) of the Income Tax Act should be interpreted as a co-operative society other than a co-operative bank.

Orders levying late fee under Section 234E are liable to be set aside if the authorities below have erred in sustaining the levy.

The court determined that the label 'reimbursement' in an agreement does not determine the true nature of payments under a secondment agreement. Such payments must possess the characteristics of actual reimbursement to be treated as such, and the term itself is not decisive.

The revenue bears the onus to demonstrate that taxes have not been recovered from the person primarily liable to pay them. Vicarious recovery is permissible only when the primary liability is not discharged.

Section 40(a)(ia) of the Income Tax Act should be interpreted in a fair, just, and equitable manner, considering the objective of ensuring scrupulous implementation of TDS provisions to augment revenue and prevent loss to the government.

Payment for transmission or wheeling of electricity does not constitute rent under Section 194-I of the Income Tax Act as it does not involve payment for the use of land, building, or machinery, and possession is a necessary element for rent.

Tax is not required to be deducted at source on reimbursement of salary to seconded employees and on deputation expenses to foreign AEs, provided tax has already been deducted at source under section 192.

Amounts exempt under Section 10A of the Income-tax Act do not constitute 'income' for the purposes of Section 195, meaning no tax is deductible at source on such amounts.

Where there is a case of 'less TDS' rather than 'no TDS', disallowance by the Assessing Officer is bad in law.

The levy of fees under section 234E for delayed filing of quarterly TDS returns is confirmed as per the binding precedent of Conceria International (P.) Ltd. The court also considered that Section 200A(1)(c) was not introduced during the Assessment Years 2012-13.

A co-operative society is primarily a co-operative society, and therefore, it is not required to deduct tax at source on interest payments made on time deposits to other co-operative societies, by virtue of Section 194A(3)(v).

TDS under Section 194H is applicable to standard and supplemental commission paid to travel agents operating under an admitted principal-agent relationship where specific contractual clauses indicate agents hold collected monies in trust for the airline.

If a payment made by a resident to a non-resident is not chargeable to tax in India, then no tax is deductible at source, even if no application has been made under section 195(2). Taxability is a prerequisite for tax deduction at source.

Payments made for the production of programmes for broadcasting or telecasting are covered under Section 194C, not Section 194J, meaning TDS should be deducted at 2% under Section 194C as it constitutes 'work' and not fees for technical services or royalty.

Tax is required to be withheld on payments that are chargeable to tax in India. Payments not chargeable to tax in India do not attract withholding tax obligations.

An order passed under Section 201(1) is barred by limitation if it is passed after the prescribed due date, even if the assessee has furnished statements under Section 200.

A disallowance under section 40(a)(ia) of the Income Tax Act, 1961, cannot be made if the assessee has fulfilled the requirements of the second proviso to section 194C(3), even if Form No. 15-J was not furnished before the due date.

Section 192(3) of the Income-tax Act, which allows for adjustments in TDS, is an integral part of Section 192(1) and is intended to permit the person deducting TDS to make necessary adjustments.

Interest awarded under Section 28 of the Land Acquisition Act, 1894, forms part of enhanced compensation for acquired agricultural land, entitling the assessee to a refund of TDS.

Tax is not required to be deducted at source under Section 194A if the recipient of the interest income is not ascertainable and not liable to pay tax.

An assessee is not liable for TDS default under section 201(1) on payments to NOIDA Authority for lease rents, but the interest liability under section 201(1A) may still apply if the deductee has offered such income. However, the conclusion regarding TDS default applies prospectively.

Tax deducted at source (TDS) is a method of collection, not a levy of tax. Credit for TDS can be granted even if the corresponding income is not yet assessable, as long as the assessee follows a consistent method of accounting.

An intimation generated under section 200A of the Income-tax Act, 1961, cannot be the basis for levying a fee under section 234E of the Act, particularly for periods prior to June 1, 2015.

An assessee is not liable for any consequences regarding TDS if the deductor deducted tax but failed to deposit it with the government.

No Tax Deducted at Source (TDS) is required on payments that are purely reimbursements of expenses, as these are not considered income in the hands of the recipient.

Credit for tax deducted at source (TDS) must be granted to the taxpayer even if the income on which TDS was deducted is not taxable in India or if the obligation to deduct tax under a specific section is not affected by a Double Taxation Avoidance Agreement (DTAA).

The Kerala High Court decision in Prudential Logistics & Transports v. ITO held that the second proviso to Section 40(a)(ia) of the Income-tax Act, 1961, was not retrospective in effect for earlier assessment years.

Reimbursement of expenses that do not constitute income chargeable to tax under the Income Tax Act is not subject to withholding tax (TDS). Payments made solely for reimbursement of actual expenses incurred by a third party are not taxable income.

Incentives paid to retail dealers under a sales promotion scheme do not constitute commission, thus Section 194H of the Income-tax Act is not applicable.

Payments made towards reimbursement of amounts to C&F agents do not attract liability to deduct tax at source as they do not have an income element embedded in them.

If the deductee has already paid the tax due, the deductor cannot be deemed to be in default under section 201(1) or liable for interest under section 201(1A). The Revenue must establish that the tax is not recoverable from the deductee before deeming the deductor as an assessee in default.

Interest under section 201(1A) cannot be levied if the recipient of income has already paid the due taxes. The onus is on the revenue to prove that taxes have not been recovered from the primary liable person.

Late fee levied under Section 234E of the Income Tax Act, 1961, is deleted if the authorities below erroneously sustained it without providing the assessee an opportunity to be heard regarding any delay.

The levy of late fees for delay in filing TDS statements for periods prior to June 1, 2015, is upheld.

Where TDS has been deposited along with interest, and there is no deliberate non-compliance, the levy of late fee and interest may result in genuine hardship and ought to be deleted.

Disallowance under section 40(a)(i) can be made only when there is a liability to deduct tax under section 195 and such tax has not been deducted. The phrase 'chargeable under the provisions of the Act' in section 195(1) is crucial and requires the payment to be income taxable in India.

An assessee cannot be held as an assessee-in-default under section 201(1) of the Income-tax Act if the agreements entered into were not works contracts within the meaning of section 194C.

Interest cannot be imposed on the payee assessee for the payer's failure to deduct tax at source. An amendment to section 209 regarding advance tax on income received without TDS is prospective.

Section 234E, which provides for late fees for delayed filing of TDS statements, is a substantive provision and its levy is not dependent on Section 200A(1)(c). Therefore, late fees can be levied even for periods prior to June 1, 2015, when Section 200A was amended to explicitly include fee computation.

Interest expenses arising from delayed remittance of taxes deducted at source are allowable if they are compensatory and incurred in fulfilling statutory obligations. Penalties under Section 271D may not be sustained if transactions are genuine, have no revenue loss, and were necessitated by business exigency.

A High Court decision on the applicability of TDS provisions and consequential interest is considered by the Tribunal in the context of divergent High Court views.

Payments made to a foreign company for technical services utilized in the business are subject to tax deduction under Section 195, and failure to do so can lead to disallowance of the expenditure under Section 40(a)(ia).

The initiation of proceedings under Section 201 of the Income Tax Act, 1961, requires a prior finding that the assessee is in default. The burden of proving tax payment by the deductee shifts to the deductor after the amendment of Section 201, effective from July 1, 2012.