“short deduction of tax”
The decision most relied on for short deduction of tax is CIT v. Punjab State Cooperative Agricultural Development Bank Ltd. (389 ITR 68), cited in 192 judgments on BharatTax.
Leading authorities on short deduction of tax
Income earned by a cooperative society from investing its surplus funds in short-term deposits and securities is not attributable to its core activities and therefore not eligible for deduction under Section 80P(2)(a)(i) of the Income-tax Act.
Disallowance under section 40(a)(ia) cannot be made when the assessee has deducted tax at a lesser rate, as opposed to no deduction. The second proviso to section 40(a)(ia) is applicable retrospectively, mitigating disallowance where tax is deposited by the recipient.
The deduction of tax at source under section 192 is not to be considered short if the employer makes a bona fide estimate of the taxable salary income of the employee.
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.
Interest under Section 234B is generally not leviable on non-residents whose income is subject to tax deduction at source under Section 195, provided the non-resident assessee did not induce short or non-deduction of TDS by the payer.
Expenditure on software useful for a short period or requiring regular updates, for which subscription fees are paid, constitutes revenue expenditure, distinguishable from capitalized software purchased on a perpetual license model, based on the test of enduring benefit.
Disallowance under Section 40(a)(ia) of the Income Tax Act, 1961, applies even in cases of short deduction of tax at source, including when tax is deducted under an incorrect provision.
An assessee is required to deduct tax at source on reimbursements, even if the assessee acted under a bona fide belief that such reimbursements were exempt.
