Routine aspects relating to deduction of Income Tax at Source are well known. These are some aspects relating to deduction of Income Tax at Source which are not too well known but useful for day to day administration of scheme of TDS.
TAX DEDUCTION AND COLLECTION ACCOUNTNUMBER: (S.203A):
Every person, deducting or collecting tax is required to apply for Tax Deduction and Collection Account Number within one month from the end of the month in which the tax was deducted or collected. Relevant Rule is 114A and relevant Form is Form No.49B. Here the problem arises, as tax in many cases is required to be deposited by 7 th of the succeeding month. Banks do not accept the challans without quoting the TAN number and TDS deposit get late.
TAN or TDCN is required to be quoted on all Challans, certificates, statements and returns relating to TDS. (Section 203A(2))
Failure to apply for TDCAN (From 49B) or failure to quote Tan or Quoting of false Tan invites penalty U/S 272BB, which is Rs.10000/-. Of course, opportunity of being heard will be given before levy of any such penalty.
OTHER IMPORTANT POINTS:
• If tax is not deducted , though it was required to be deducted, income tax shall be payable by the assessee direct. (Section 191)
• Where tax is deductible and has been deducted , the payee cannot be called upon to pay the tax so deducted. The AO can force recovery from the payer and not be payee (Section 205)
• NO DOUBLE DEMAND OF TAX
Where the assessee has paid tax himself under section 191, the liability under section 201(1) shall be eliminated. (Clarification by Board(F.NO.276/201/96-IT (B) DATED 29.1.1997) however, this will not alter the liability to charge interest u/s 201(1A) or penalty u/s 271C.
• Date of Cheque be deemed as date of payment in case of payment of TDS by Cheque: it is well settled proposition of law that if payment by any cheque is accepted and the cheque on presentation is encashed, the payment relates back to the dated when the cheque had been received.
• DEPOSIT OF TAX BY HEAD OFFICE EVEN THOUGH DEDUCTED AT SOURCE IN BRANCH:
(Circular No.719 dt.22.8.1995 and 744 dated 6.5.1996): Where all matters relating to TDS were handled (like deposit of tax, filing of returns, etc.) at Head Office or some other office, then though tax is deducted at branch office, it can be deposited at Regional/Head office. Circular no.719 and 744 are there. Though these circulars are only in respect of payment of salary. But these circulars have been followed by Orissa High Court in Larsen & Toubro Ltd. VITO (2005) 278 ITR 369 in matters relating to TDS U/S 192 and U/S 194C.
• DUPLICATE CERTIFICATE: in case the original TDS certificate is lost, the payee can get a duplicate TDS certificate, which can be issued on a plain paper. The duplicate certificate should be filed along with an indemnity bond (U/R 31(5)).
• CONSEQUENCES OF BELATED ISSUE OR NON ISSUE OF TDS CERTIFICATE: Failure to issue TDS certificate within the tome allowed U/R 31(3) attracts penalty of Rs. 100/- per day of default. (Sec 272A(2)(g).) However, penalty will not exceed the amount of tax deductible or collectible, as the case may be. Of course, penalty can be imposed by Joint Commissioner after giving an opportunity of being heard.
• CREDIT OF TAX DEDUCTED (SECTION 199,203 & 205):
• Credit of tax deducted and paid is given to the payee U/s 199 on the basis of TDS certificate issued u/s 203.
• Credit for TDS is given to person in whose hands the payment is clubbed . Thus where interest is paid to a minor, and the same is taxed in the hands of father, then the credit for such TDS will be given to the father (proviso (I) to Section 199).
• Relevant year of Payment: Credit for TDS will be given in the assessment year in which the income is assessable (S.199).
CASES WHERE THE PAYMENT SUBJECT TO TDS RELATES TO MULTIPLE YEARS
CBDT Cir. No.5/2201 dated 2.3.2001: “ Where advance rent is spread over more than one financial year and tax is deducted thereon, credit shall be allowed in the same proportion in which such income is offered for taxation for different asstt, years based o the single certificate furnished for tax so deducted on the entire advance rent.
Where subsequent to the deduction of tax at source on advance rent pertaining to one or more financial year, the agreement gets terminated/cancelled resulting into refund of the balance amount of advance rent to the tenant, credit for the entire balance amount of TDS, which has not been given credit so far, shall be allowed in the asstt, year relevant to financial year during which the balance amount of advance rent is refunded back.”
It may be noted that word used is assessable and not assessed . Meaning thereby that in case some income is wrongly included in the computation chart in a wrong assessment year and the same is assessed accordingly, credit for TDS may be denied in that year, as the income is assessable in some other year. (Stallion Securities Ltd. V.ITO (2004) 91 ITD 338 (Hyd).
• Credit only if income is included in total income: Credit for TDS is allowed only when income from which tax was deducted at source is included in total income. Thus where income from which tax was deducted at source was not included in total income, credit for TDS is not admissible.
• Where one TDS certificate is issued for payments due to multiple owners: In case of joint owners or co-owners, credit shall be given to each such joint owner in the same proportion in which rent, interest, etc is assessable as his/her income. There is one problem in this that is only one TDS certificate is issued in favor of first co-owner. And in order to take credit, only one of the co-owners can attach the original TDS certificate with his return of income, others are required to file a copy of the same. In my views, provision should be made in the Rules so that person-deducing tax may be able to issue more than one certificate u/s 203.
9. REFUND OF TAX WRONGLY DEPOSITED:
Refund of excess TDS paid by the payer can be claimed by applying to ITO (TDS) as per Circular No.285 dated 21.10.1980.
It is possible in a case where tax has been wrongly deposited U?S 195, then an appeal can be preferred to CIT (A) U/s 248 for declaration that the person is not liable to make such deduction and refund can be granted by CIT (A). (Tata Engineering & Locomotive Ltd. Case (2005) 921ITD 111 (Mum)
10. CONSEQUENCES OF DEFAULT IN TDS:
Disallowance of Expenditure (U/S 40a (I) and (ia)
Assessee in default (U/S 201(1)
Charging of Interest U/S 201(1A) @ 12% p.a.
Penalty U/S 271C (Equal to the amount of tax not deducted or not paid)
Prosecution U/S 276B(Imprisonment not <>