TaxTMI 
TaxTMI 
2026 (9) TMI 227
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....income from SVIL Mines Limited, in a sum of Rs. 81,000/-. 4. On the facts and in the circumstances of the case and in law, the first appellate authority erred in confirming charge of interest under the Act. 5. Since the issue has already been adjudicated by the ITAT Mumbai in favour of one of our assessee's in Delhi, the same is a covered matter i.e., ITA No. 152/Mum/2024, the same is a covered matter. Copy enclosed. 2. At the time of hearing, ld. AR of the assessee brought relevant facts of the case and his submissions are as under. He submitted that the assessee is a housewife deriving income assessable under the head "Income from House Property" from letting out her property to M/s Paramount Coaching Centre Pvt. Ltd. (the tenant/deductor") at a monthly rent of Rs. 90,000/-.During the previous year relevant to Assessment Year 2019-20, the tenant, in its capacity as deductor, deducted tax at source under section 194-I of the Income-tax Act, 1961 (for short 'the Act) at the rate of 10%, i.e. Rs. 9,000/- per month, and remitted the balance sum of Rs. 81,000/- per month to the assessee. He further submitted that in support thereof, the assessee has placed on reco....
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..... The short issue for our consideration is that, tenant has deducted TDS @10% and after deducting the TDS had made the payment to the assessee. Since the amount of TDS deducted was not reflected in Form 26AS presumably he had not declared any complete details in the TDS returns or has not paid TDS deducted from the assessee, the claim of TDS credit has been denied. This issue stands covered by series of decisions as relied upon by the assessee before us and also before the ld. CIT(A). The Hon'ble Gujarat High Court in the case of Kartik Vijaysinh Sonavane vs. DCIT 440 ITR 11(Guj) held that whether TDS has been deducted by the employer of the assessee, it will always be opened for the department to recover from the said employer at the credit of same could not have been denied by the assessee. The Hon'ble Gujarat High Court has relied upon its own judgment rendered in the case of Devarsh Pravinbhai Patel vs. Asstt. CIT in Appeal No.12965 of 2018 dated 24/09/2018 where employee in the case of the petitioner who is an employer of the Kingfisher Airlines worked as a pilot, no TDS on salary was deducted but not deposited. The Hon'ble Gujarat High Court after referring to the Hon'ble Gau....
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....at the amount has been deducted from the income. In case that amount has been deducted but not paid to the Central Government that eventuality is taken care of by section 201. Thus, accordingly, it was held that once the TDS has been deducted, assessee cannot be asked to pay the tax and department could have been initiated the proceedings u/s.201 in the hands of the deductor. 9. Similar view has been taken by the Hon'ble Karnataka High Court in the case of Smt. Anusuya Alva vs. DCIT-8(1) wherein in the context of 194I only the Hon'ble High Court held that Section 205 is barred against direct diamond on assessee where the tenant-lessee of assessee statutorily deducted tax u/s.194I for monthly rent payable to assessee but failed to remit the same to Central Government, Revenue could not enforce recovery of that amount from assessee for such failure on the part of tenant, in view of embargo/ prohibition provided u/s.205. The relevant observation of the Hon'ble High Court reads as under:- "8. Section 205 of the Act reads as under: "205. Bar against direct demand on assessee : Where tax is deductible at the source under Sections 192 to 194, Section 194A, Secti....
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.... in respect of the amount deducted. That means, once deduction is made, the Revenue is expected to look upto the person who had deducted the tax for realizing the amount, if such person fails in remitting the amount to the Central Government. 9. I am of the view that this understanding and such interpretation of Section 205 of the Act is also in consonance with the general principles of law, particularly the principles of the Law of Principal and Agent. If we look at the scheme for the provision of deduction of tax at source, it becomes obvious that such person is acting on behalf of the Revenue, i.e., as an agent of the Revenue. In fact, the person is enabled statutorily to make deduction and remit the amount to the Central Government, though in the instant case, the person who has deducted the amount may be the tenant or lessee of the petitioner and there is such inter se relationship as between the two, insofar as the deduction of tax at source representing 20 per cent of the monthly rent payable as envisaged under Section 194-I of the Act is concerned, the deduction is under the statutory obligation and on behalf of the Revenue and because of the compulsion herein. It ....
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....tax which has been deducted with respect to transaction entered and not deposited in the Central Government. The Hon'ble High Court after analyzing the provision of Section 199 under Rule 37BA have made a very detailed observation which for the sake of ready reference are reproduced hereunder:- 4. This view was also taken by this court via decisions dated 31.10.2023 rendered in W.P.(C) No. 9308/2022, titled Vishesh Khanna v. DCIT 2023:DHC:8267-DB and W.P.(C) No. 9043/2021, titled BDR Finvest Pvt. Ltd. v. DCIT 2023:DHC:8284-DB. 5. We may also add to the reasoning that is already embedded in the aforementioned judgments, in view of the renewed emphasis, albeit with greater vigour, laid by the appellant/revenue. 6. The submission of Mr Bhatia [based on Section 199 of the Act] simply boils down to this: the expression "and paid" found in subsection (1) of the said provision mandates that credit for tax deducted at source can only be extended when the deductor deposits the amount with the Central Government. 7. In this context, it is important to note that sub-section (3) of Section 199 of the Act alludes to the power invested in the Central Board of ....
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....nce commission, payments made in respect of life insurance policy, and payments made to the non-resident sportsmen or sports associations are liable for deduction to tax at source under Sections 194C, 194D, 194DA, and 194E, respectively. 8.3 As far as payments made to non-residents [not being a company], or to a foreign company are concerned, any interest (not being interest referred to in section 194LB or section 194LC or section 194LD) or any other sum chargeable under the provisions of this Act (not being income chargeable under the head "Salaries" ) payable to such non- resident is made amenable to deduction of tax at source under Section 195 of the Act. 8.4 Specifically, the grossing up principle finds statutory recognition in Section 198 of the Act. This is a principle, whereby, income which is payable, say, under any agreement/arrangement [in a case not referred to in Section 192(IA), and the tax chargeable on that income is required to be deducted by the payor, then the income is increased by the payor/deductor and offered to tax inclusive of the tax deducted at source. 8.5 Chapter XVII also contains provisions where, if tax is not deducted at sou....
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.... fact, a police complaint was lodged, which was brought to the notice of the appellant/revenue. Despite this aspect being brought to the notice of the appellant/revenue, no steps were taken either under the provisions of the Act or under the common law for recovery or even under the extant statute(s) for bringing deductors to book in accordance with the law. 13. In our opinion, the argument advanced by Mr Bhatia that the amount deducted towards tax at source will not be given credit because the deductor has chosen not to deposit the amount with the Central Government is erroneous for another reason, which is that the nature of the amount retained by the deductor continues to remain as 'tax'. 13.1 This aspect clearly emerges upon perusal of the contents of the information provided in the Tax Payers Information Series-28 booklet titled 'Tax Deduction at Source (TDS) Other Than Salaries' published by the Income Tax Department. The booklet notes that tax deducted at source will be treated as payment of 'tax‟ on the assessee's behalf. For convenience, the relevant part of the booklet is extracted hereafter: 4.2 Credit of TDS Where taxes have been deducte....