Section 194 of the Income Tax Act
Income-tax Act, 2025: s.393
Section 194 of the Income-tax Act, 1961 corresponds to section 393 (Tax to be deducted at source) of the Income-tax Act, 2025.
Read section 393 of the 2025 Act
Correspondence checked against the ICAI tabular mapping of the two Acts and the BharatTax.co section commentary.
The decision most relied on for Section 194 is Hindustan Aluminium Corporation Ltd. v. CIT (144 ITR 474), cited in 119 of the 87 judgments on BharatTax that turn on this section.
Leading authorities on Section 194
The Calcutta High Court held that a lump sum revenue expenditure, which is of a significant amount and provides benefits spread over several years, can be allowed as a deduction proportionately over the period of benefit. This approach prevents distortion of the profits of a single assessment year.
An Income Tax Officer assessing income must determine the assessee's system of accountancy and, for the mercantile system, ascertain when the right to receive the income legally accrued.
Expenditure incurred in respect of abandoned cell towers is an allowable business expenditure under Section 37(1) of the Income-tax Act, 1961, especially when no new business was being set up by the assessee.
Expenditure incurred for the expansion of an existing business is revenue in nature and allowable as a deduction if it does not create a new asset. Accounting entries in books of accounts do not solely determine the allowability of an expenditure for income tax purposes.
Expenditure incurred on projects or assets that are written off in accounts is an incidental business loss if the asset never came into existence or the expenditure was incurred wholly and exclusively for business purposes.
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.
A claim for a deduction or allowance must be made in the relevant assessment year. If an assessee fails to claim an amount in the correct year, it cannot be claimed in a subsequent year.
A difference between the commercial price and published price of airline tickets is not a special commission or brokerage under section 194H, if the airline has discretion to reduce the published price.
An assessee cannot claim a deduction for an expenditure in a subsequent assessment year if it was a known expenditure in an earlier year and the assessee failed to provide for it or claim it in that earlier year.
The Land Acquisition Collector is the legal person responsible for paying income by way of interest, not the court, as the Collector holds the funds and is accountable for the payment.
