TaxTMI 
TaxTMI 
2022 (4) TMI 842
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.... that the AO during the scrutiny assessment proceedings noticed that the assessee has claimed expenses on account of job work charges paid to the master weavers to the extent of Rs. 2,61,24,420/-. The assessee has not deducted TDS on the job work charges to claim the same as expenses. Therefore, the AO noted that the assessee failed to deduct TDS as required under Chapter-XVIIB of the Act and therefore, invoked the provisions of Sec.40(a)(ia) of the Act, made disallowance of this amount of Rs. 2,61,24,420/-. 4. Aggrieved, the assessee preferred an appeal before the Ld.CIT(A), who also confirmed the disallowance made by the AO by stating that since the amounts paid towards job work charges to master weavers comes within the preview of provisions of Sec.40(a)(ia) of the Act. The AO has rightly disallowed the same u/s.40(a)(ia) of the Act. Aggrieved, the assessee came in the second appeal before the Tribunal. 5. This appeal was fixed for hearing at least 20 times since 03.09.2018. None was present from the assessee side except on few occasions for seeking adjournment. Hence, we decide the appeal exparte qua assessee. On the other hand, the Sr.DR relied on the orders of the lower....
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....urce at the rates specified therein. The requirement in each of the sections is preceded by the word "shall". The provisions are, therefore, mandatory. There is nothing in any of the sections that would warrant our reading the word "shall" as "may". The point of time at which the deduction is to be made also establishes that the provisions are mandatory. For instance, under Section 194C, a person responsible for paying the sum is required to deduct the tax "at the time of credit of such sum to the account of the contractor or at the time of the payment thereof. ......" While holding the aforesaid view, the Punjab & Haryana High Court discussed the judgments of the Calcutta and Madras High Courts, which had taken the same view, and concurred with the same, which is clear from the following discussion contained in the judgment of the Punjab & Haryana High Court: "A Division Bench of the Calcutta High Court in Commissioner of Income Tax v. Crescent Export Syndicate, (2013) 216 Taxman 258 (Calcutta) held:- "13................ "The term 'shall' used in all these sections make it clear that these are mandatory provisions and applicable to the entire su....
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....#39;, denote different meanings. The Punjab & Haryana High Court, in P.M.S. Diesels &Ors., referred to above, rightly remarked that the word 'payable' is, in fact, an antonym of the word 'paid'. At the same time, it took the view that it was not significant to the interpretation of Section 40(a)(ia). Discussing this aspect further, the Punjab & Haryana High Court first dealt with the contention of the assessee that Section 40(a)(ia) relates only to those assessees who follow the mercantile system and does not cover the cases where the assessees follow the cash system. Those contention was rejected in the following manner: "There is nothing that persuades us to accept this submission. The purpose of the section is to ensure the recovery of tax. We see no indication in the section that this object was confined to the recovery of tax from a particular type of assessee or assessees following a particular accounting practice. As far as this provision is concerned, it appears to make no difference to the Government as to the accounting system followed by the assessees. The Government is interested in the recovery of taxes. If for some reason, the Government was i....
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....ee. Therefore, by using the term 'payable' legislature included the entire accrued liability. If assessee was following mercantile system of accounting, then the moment amount was credited to the account of payee on accrual of liability, TDS was required to be made but if assessee was following cash system of accounting, then on making payment TDS was to be made as the liability was discharged by making payment. The TDS provisions are applicable both in the situation of actual payment as well of the credit of the amount. It becomes very clear from the fact that the phrase, 'on which tax is deductible at source under Chapter XVII-B', was not there in the Bill but incorporated in the Act. This was not without any purpose. 15. " We approve the aforesaid view as well. As a fortiorari, it follows that Section 40(a)(ia) covers not only those cases where the amount is payable but also when it is paid. In this behalf, one has to keep in mind the purpose with which Section 40 was enacted and that has already been noted above. We have also to keep in mind the provisions of Sections 194C and200. Once it is found that the aforesaid Sections mandate a person to deduct tax at source not....
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....I-B arises only upon payments being made or where so specified under the sections in Chapter XVII, the amount is credited to the account of the payee. In other words, the liability to deduct tax at source arises not on account of the assessee being liable to the payee but only upon the liability being discharged in the case of an assessee following the cash system and upon credit being given by an assessee following the mercantile system. This is clear from every section in Chapter XVII. Take for instance, the case of an assessee, who follows the cash system of accounting and where the assessee who though liable to pay the contractor, fails to do so for any reason. The assessee is not then liable to deduct tax at source. Take also the case of an assessee, who follows the mercantile system. Such an assessee may have incurred the liability to pay amounts to a party. Such an assessee is also not bound to deduct tax at source unless he credits such sums to the account of the party/payee, such as, a contractor. This is clear from Section 194C set out earlier. The liability to deduct tax at source, in the case of an assessee following the cash system, arises only when the paymen....