TDS default liability unavailable where payee authority insisted on no deduction, leaving no surviving demand or interest.

Where the payee authority expressly insisted that no tax be deducted, the payer was treated as disabled from deducting tax at source on lease rent and allied payments made to the authority. The cited Delhi High Court position was applied to hold that, in such circumstances, the payer could not be fastened with assessee-in-default status for non-deduction, and the relief extended beyond the rental component to related amounts paid without deduction. On that footing, no consequential demand or interest could survive on the same alleged default, and the impugned demand was held unsustainable.

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Issues: Whether the assessee could be treated as an assessee in default for non-deduction of tax at source on lease rent and allied payments made to Noida Authority, and whether any demand could still survive by way of interest.

Analysis: The payments were made under the insistence of the authority that no tax was to be deducted, and the assessee was therefore disabled from deducting tax at source. The earlier Delhi High Court decision relied on by the first appellate authority had already held that, in such circumstances, the payer could not be treated as an assessee in default. The relief was not confined only to lease rent, but extended to amounts paid over and above the rental component to the authority without deduction of tax. In view of that legal position, no further demand could be sustained on the same footing, including the consequential demand founded on the alleged default.

Conclusion: The assessee could not be treated as an assessee in default, and no addition or demand was sustainable on account of the impugned payments; the issue is decided in favour of the assessee.

Ratio Decidendi: Where deduction of tax at source is rendered impossible by the payee authority's express insistence that no tax be deducted, the payer cannot be fastened with default liability for non-deduction on the same payments.

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