TaxTMI 
TaxTMI 
TaxTMI 
2014 (4) TMI 1058
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....ct tax under section 194-I of the Act and the provisions of section 194C are not applicable in respect of transactions between the assessee and the contractee. However, with regard to short deduction of tax, i.e., deduction of tax at 2.06 per cent. instead of 10 per cent. under section 194-I, as to whether the provisions of section 40(a)(ia) was applicable or not has been remanded back to the file of the Tribunal by the High Court. Therefore, only for the limited purposes of applicability of section 40(a)(ia) of the Act in respect of short deduction of tax, i.e., deduction of tax at 2.06 per cent. instead of 10 per cent. under section 194-I of the Act, the High Court has restored the matter to the file of the Tribunal. 3. We heard Shri V. ....
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....r side and also perused the material available on record. We have also carefully gone through the provisions of section 40(a)(ia) of the Act, which reads as follows : '(ia) any interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid on or before the due date specified in sub-section (1) of section 139 : Provided that where in respect of any such sum, tax has been deducted in any....
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.... '(1A) Without prejudice to the provisions of sub-section (1), if any such person, principal officer or company as is referred to in that sub- section does not deduct the whole or any part of the tax or after deducting fails to pay the tax as required by or under this Act, he or it shall be liable to pay simple interest,- (i) at one per cent. for every month or part of a month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is deducted ; and (ii) at one and one-half per cent. for every month or part of a month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid, and s....
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....Pradesh High Court in the case of P. V. Rajagopal [1998] 233 ITR 678 (AP). While considering the provisions of section 201 which stood for the assessment years 1989-90 to 1993-94, the Andhra Pradesh High Court found that there is nothing in the section to treat the employer as the defaulter where there is a shortfall in the deduction of tax at source. For the purpose of convenience, we are reproducing below paragraphs 34 and 35 of the judgment of the Andhra Pradesh High Court (page 694) : 34. ..................... We may now read the provisions of section 201 :  ....
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....section has two limbs, one is where the employer does not deduct tax and the second where after deducting tax, the employer fails to remit it to the Government. There is nothing in this section to treat the employer as the defaulter where there is a shortfall in the deduction. The Department assumes that where the deduction is not as required by or under the Act, there is a default. But the fact is that this expression 'as required by or under this Act' grammatically refers only to the duty to pay the tax that is deducted and cannot refer to the duty to deduct the tax. Since this is a penal section, it has to be strictly construed and it cannot be assumed that there is a duty to deduct the tax strictly in accordance with the computa....