TDS on foregone salary and appeal maintainability under section 192 and 201(1) rejected for the appellant.

A challenge to a TDS order was not maintainable where the appellant was neither the deductor nor the person treated as assessee in default under section 201(1), so no appeal lay in that capacity. On the merits, section 192 requires tax deduction at source at the time of payment of salary; because the salary under the settlement was not actually paid and was instead foregone, no TDS liability arose on the accrued but unpaid amount. The appeal therefore failed on both maintainability and merits, leaving the view that no default was made out undisturbed.

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Issues: (i) whether the appellant had locus and maintainability to challenge the order passed in the TDS proceedings; (ii) whether tax was deductible at source on salary that had been foregone under the settlement but was not actually paid.

Issue (i): Whether the appellant had locus and maintainability to challenge the order passed in the TDS proceedings.

Analysis: The appealability provisions were read with the definition of assessee. The appellant was neither the deductor nor the person treated as assessee in default in the proceedings under section 201(1). The order impugned before the Tribunal was not one from which the appellant, in that capacity, could maintain an appeal.

Conclusion: The challenge was not maintainable and the issue was decided against the appellant.

Issue (ii): Whether tax was deductible at source on salary that had been foregone under the settlement but was not actually paid.

Analysis: Section 192 requires deduction of tax at the time of payment of salary. On the admitted facts, the amount in question was not paid as salary under the settlement and was instead forgone. The legal distinction between accrued income and the obligation to deduct tax at source at the time of payment was applied, and the employer could not be fastened with TDS liability merely on the basis of accrual.

Conclusion: No TDS liability arose on the foregone amount and this issue was also decided against the appellant.

Final Conclusion: The appeal failed both on maintainability and on merits, and the TDS authorities' view that no default was made out was left undisturbed.

Ratio Decidendi: TDS under section 192 is deductible at the time of payment, and a person who is neither the deductor nor an assessee in default has no maintainable appeal against the TDS order in such proceedings.

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