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    TDCAN requirement modernisation centralises TAN/PAN linkage and reporting, tightening compliance and correction procedures.
    Clause 397 requires persons deducting or collecting tax to apply for and, once allotted, quote a Tax Deduction and Collection Account Number (TDCAN) in all prescribed documents; it consolidates deduction and collection numbers, sets out statutory carve-outs and government-notified exemptions, integrates PAN linkage and consequences for non-furnishing, and centralises payment, reporting and correction mechanisms including procedures for non-resident payments and government offices.
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    TDS/TCS certificate obligation requires deductors and collectors to issue prescribed certificates enabling tax credit and digital reporting.
    Clause 395(4) requires every person deducting or collecting tax at source to issue a certificate to the deductee/collectee specifying the amount of tax deducted or collected, the rate, and any other prescribed particulars within a prescribed period; employers who pay tax on behalf of employees must similarly furnish a certificate confirming payment to the Central Government. The clause covers both TDS and TCS, delegates format and timing to subordinate rules, and anticipates digital and harmonized implementation while leaving rectification, duplicate issuance and penalty mechanics to rules.
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    Non-exclusivity of source-based tax collection allows authorities to pursue additional recovery methods when payments are provisional.
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    TDS/TCS enforcement: deeming of defaulting deductors as assessees in default triggers interest, charge on assets, and conditioned relief.
    Clause 398 deems persons required to deduct or collect tax, including principal officers and specified collectors, to be an assessee in default where tax is not deducted, not collected, or not paid to the government; relief is available if the recipient files a return, includes the relevant sum, pays the tax due and the deductor/collector furnishes a prescribed accountant's certificate. Interest is prescribed for the periods between deductibility, deduction and payment, unpaid tax plus interest is a statutory charge on assets, time limits for default orders are specified, and penalty requires satisfaction of lack of good and sufficient reasons.
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    Centralised TDS/TCS processing: automated, time bound framework mandates intimation within a year and covers correction statements.
    Clause 399 creates an automated framework for processing TDS and TCS statements, including correction statements, requiring rectification of arithmetical errors and adjustment of apparent incorrect claims, computation of interest and fee, determination of net payable or refundable amounts after adjusting prior payments, issuance of a formal intimation to the deductor/collector, and grant of any refund due; it also mandates that intimations be sent within a year from the end of the tax year and empowers the Board to make a centralised processing scheme.
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    TDS/TCS compliance: expanded reporting and verified statement obligations, including cross-border and below-threshold payment reporting.
    Clause 397(3) requires persons responsible for deduction or collection of tax, and certain employers, to pay amounts to the credit of the Central Government within prescribed time and to submit verified statements in prescribed form and manner; it mandates reporting of payments to non-residents whether or not chargeable, requires special statements for government payments without challans, permits correction statements within six years, obliges reporting of below-threshold interest payments by specified entities, and makes collectors who fail to collect liable to pay the tax.
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    Tax credit for source deductions ensures remitted taxes are treated as payment on behalf of the relevant taxpayer and allocated by rule.
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    Tax deducted is income received: gross receipts included for tax computation with credit for foreign withholding.
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    TDS nil-declaration prevents withholding when estimated total income is below taxable threshold, subject to prescribed declaration and reporting.
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    Lower Deduction Certificates: streamlined TDS/TCS certification requiring AO satisfaction and binding certificate rates.
    Clause 395(1) creates a mechanism for Lower Deduction Certificates allowing taxpayers to apply for lower or nil deduction of tax at source; the Assessing Officer must issue a certificate when satisfied on objective material, the deductor must apply the specified rate until the certificate's validity, and procedural details, scope, validity periods and ancillary measures are to be provided by rules.
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    TDS on securities income: clarified withholding rules, treaty relief mechanics, and exemptions for capital gains and exempt fund receipts.
    Clause 393 establishes a tabular TDS regime on income from securities, distinguishing taxable securities income from capital gains and exempt receipts. Clause 393(2) prescribes withholding entries for Foreign Institutional Investors with rates referenced to an interpretative note and a 10% rate for specified funds, subject to documentation for treaty benefits. Clause 393(4) consolidates exemptions by excluding capital gains payable to foreign investors and exempt income of specified funds from TDS, aiming to avoid unnecessary withholding and refund procedures.
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    Tax Deduction at Source clarifies withholding obligations on cross border bond and GDR payments to non residents, including DTAA interaction.
    Clause 393(2) Table S. No. 13 and 14 requires withholding on payments to non residents of interest or dividends and long term capital gains from bonds and GDRs referred to in section 209, mandates deduction at the earlier of credit or payment by any person responsible for the payment, prescribes fixed concessional withholding rates, integrates general TDS machinery including declarations and higher deduction for missing PAN, and preserves DTAA relief and exceptions where income is not chargeable.
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    TDS on offshore fund income and capital gains: withholding at credit or payment, with higher exit withholding and treaty considerations.
    Clause 393(2) requires any person paying income in respect of specified units or long term capital gains on transfer of such units to deduct tax at source at the prescribed rates at the time of credit or payment, without any monetary threshold; the provision cross refers to definitions in section 208, deems credits to suspense accounts as payment for TDS, and is subject to subsections dealing with exceptions, declarations and specified exclusions, while raising interpretative issues on definitions, treaty interaction, gross up obligations and transitional treatment compared with the prior Section 196B regime.
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    Withholding tax on non-resident unit income: consolidation preserves treaty relief and UTI exemption under prescribed conditions.
    Clause 393 consolidates TDS on income in respect of units paid to non-residents: Clause 393(2) requires deduction by any payer on units of specified mutual funds and specified companies paid to non-resident individuals and foreign companies at rates per Note 2 with DTAA benefits subject to prescribed documentation; Clause 393(4) exempts income on Unit Trust of India units payable to NRIs and non-resident HUFs subject to prescribed conditions and FEMA compliance, thereby retaining the legacy UTI carve-out while delegating exemption details to subordinate rules.
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    TDS exemption for specified public entities prevents withholding on interest, dividends and other income, simplifying payer compliance.
    Clause 393(5) provides an overriding TDS exemption for payments to the Government, the Reserve Bank of India, statutorily tax exempt corporations established by or under a Central Act, and mutual funds specified in Schedule VII, covering interest, dividends (in respect of securities or shares owned by or in which they have full beneficial interest) and any other income accruing or arising to them, with the non obstante language ensuring the exemption prevails over other withholding obligations.
    Act RulesBills
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    Grossing-up requirement preserves tax base where payer bears recipient's tax liability, altering TDS computation and compliance.
    Clause 393(10) mandates a grossing-up requirement where the payer bears the recipient's tax: taxable income must be increased so that, after deduction of tax at the rates provided in the Chapter (including applicable surcharge and cess), the net amount equals the contractual payment. The clause applies to TDS payments under the Chapter except specified salary cases, covers residents and non residents, and requires use of the applicable DTAA rate when beneficial. Key practical issues include computation of add ons, allocation across composite payments, currency fluctuation effects, and contract drafting to evidence net of tax obligations.
    Act RulesBills
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    TDS on payments to non-residents: a table-based framework modernizes withholding obligations and aligns rates with treaty benefits.
    Clause 393(2) Table S.No.17 imposes a residuary TDS obligation on interest (excluding specified categories) and any other sum chargeable under the Act, excluding salaries, payable to non-residents or foreign companies; deduction is by "any person" at the earlier of credit or payment at the "rates in force," with treaty rates available subject to procedural compliance, and operates alongside exemptions, lower/nil deduction certificates, suspense-account deeming rules and grossing-up anti-avoidance provisions.
    Act RulesBills
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    TDS on partner payments: mandatory withholding on specified firm-to-partner payments with prescribed threshold and compliance duties.
    Mandatory withholding applies to sums in the nature of salary, remuneration, commission, bonus or interest paid or credited (including to the capital account) by a firm to a partner, deductible at ten per cent at the earlier of credit or payment, with a per-partner annual threshold exemption and declaration-based non-deduction mechanisms; the firm bears the deduction obligation and normal TDS procedures apply.
    Act RulesBills
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    TDS on virtual digital assets imposes withholding obligations with targeted exemptions for small-value and small-taxpayer transfers.
    The Bill requires withholding on any benefit or perquisite arising from business or profession whether cash or non-cash, obliges the provider to deduct tax and, if consideration is wholly or partly in kind with insufficient cash, to ensure tax payment before release. A parallel VDA withholding regime mandates deduction on transfers of virtual digital assets with specified exemptions for small-value transactions and small taxpayers, similar safeguards for non-cash consideration, and procedural rules addressing timing, aggregation and crediting for compliance.
    Act RulesBills
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    TDS on non-monetary benefits: providers must withhold tax on in-kind and indirect business advantages, affecting compliance and valuation.
    Clause 393(1)[Table: S.No. 8(iv)] and section 194R require the provider of any benefit or perquisite arising from business or profession to deduct tax at source on the value or aggregate value of such benefits, covering cash and non-cash advantages, with specified thresholds and exemptions for smaller providers; the Bill consolidates this obligation, clarifies anti-overlap treatment with other TDS provisions, links timing of deduction to credit or payment, and preserves reliance on administrative guidance for valuation and operational issues.

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      Due Compliance with Section 138C(4) of the Customs Act, 1962 for Admissibility of Electronic Records (Computer Printouts) in Customs Proceedings

      27 January, 2026

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      This note presents a concise research digest of the judicial decision, summarising the key issues, findings, and outcome. The judgment is analysed in the context of its factual background, issues framed, and conclusions reached by the Court.

      2025 (9) TMI 76 - Supreme Court

      Case Snapshot

      A set of statutory appeals under Section 130E of the Customs Act, 1962 arose from an order of the appellate tribunal which had set aside a customs adjudication primarily on the ground that electronic evidence relied upon by the department was inadmissible due to alleged non-compliance with Section 138C(4) of the Customs Act, 1962.

      The core controversy concerned what constitutes due compliance with the certificate requirement under Section 138C(4) when computer printouts and electronic records are sought to be tendered in evidence in proceedings under the Customs Act, 1962. The Court held that, on the facts, there was due compliance in substance, and therefore the tribunals approach was erroneous. The matter was remanded to the tribunal for decision on grounds other than Section 138C(4).

      Material Facts

      The respondents (referred to as the importers/assessees) were engaged in importing branded food items and selling them in the domestic market. The department carried out searches of business and residential premises and collected material, including electronic records retrieved from electronic devices.

      The departments case was that, while filing Bills of Entry for the imported goods, the importers failed to declare the actual RSP/MRP at which goods were being sold to ultimate consumers. It was alleged that a lower RSP/MRP was declared, resulting in evasion/short payment of customs duty.

      A show cause notice was issued proposing recovery of differential duty (a substantial demand), along with interest and penalty, and proposing confiscation of imported goods. The adjudicating authority confirmed the proposals by an order-in-original and imposed interest and penalties.

      On appeal, the appellate tribunal allowed the assessees appeals and set aside the adjudication order. The tribunals principal basis was that the electronic documents (computer printouts and related electronic records) relied upon by the department could not be admitted in evidence due to non-compliance with Section 138C(4) of the Customs Act, 1962. The tribunal also noted that contentions were raised regarding Section 138B of the Customs Act, 1962, but it did not decide those issues as it allowed the appeals solely on Section 138C(4).

      In further appeal by the revenue, the record placed before the Court included contemporaneous records of proceedings relating to extraction and printing of electronic data from external storage devices and electronic devices, bearing signatures of persons associated with the assessees, and statements recorded under Section 108 of the Customs Act, 1962 acknowledging the printouts and their authenticity/presence during printing. It was also material that such statements were not retracted and were not disputed in the reply to the show cause notice, to the extent relevant for the Section 138C(4) compliance issue.

      Issue Involved

      Whether the appellate tribunal erred in holding that the department failed to comply with Section 138C(4) of the Customs Act, 1962 for admitting and relying upon computer printouts/electronic records, and whether, on the facts, the available record of proceedings and Section 108 statements could amount to due compliance with Section 138C(4) even in the absence of a certificate in the strict format.

      Decision

      The Court partly allowed the revenues appeals. The tribunals order was set aside. The assessees appeals before the tribunal were restored and remanded for rehearing on grounds other than Section 138C(4) of the Customs Act, 1962.

      The Court expressly clarified that the tribunal must rehear the appeals on their own merits, without being influenced by the Courts observations, and that the Courts observations were confined only to the issue of Section 138C(4) of the Customs Act, 1962.

      Key Observations

      1. Textual requirement under Section 138C(4) of the Customs Act, 1962

      Section 138C(4) of the Customs Act, 1962 requires that where it is desired to give a statement in evidence by virtue of Section 138C, a certificate should (a) identify the document and describe the manner of its production, (b) give particulars of the device involved to show production by a computer, and (c) deal with matters related to the conditions mentioned in Section 138C(2). The certificate must purport to be signed by a person occupying a responsible official position in relation to the operation of the relevant device or management of the relevant activities.

      2. Statutory linkage with the Indian Evidence Act framework for electronic evidence

      The Court considered Sections 65A and 65B of the Indian Evidence Act, which provide that the contents of electronic records may be proved in accordance with Section 65B, and that a computer output is deemed to be a document admissible in proceedings if Section 65B conditions are satisfied.

      The Court treated Section 65B(4) of the Indian Evidence Act as pari materia to Section 138C(4) of the Customs Act, 1962, and therefore drew interpretive support from the approach to Section 65B(4) as discussed by the Court in Arjun Panditrao Khotkar v. Kailash Kushanrao Gorantyal and Others (citations not stated here for compliance reasons).

      3. Mandatory character and the impossibility maxims

      While recognising that the certificate requirement is mandatory in principle, the Court referred to the established maxims impotentia excusat legem and lex non cogit ad impossibilia to explain that the law does not compel the impossible. The Court noted that the application of these principles depends on facts and circumstances, including whether a party has done everything possible to comply and whether obtaining the certificate depends on factors beyond its control.

      4. Due compliance need not mean a strict-format certificate in every case

      On the facts, the Court held that there was due compliance with Section 138C(4) of the Customs Act, 1962. The Court reasoned that due compliance should not be understood to mean that a particular certificate stricto sensu in the exact format must necessarily be on record in every case. Instead, the contemporaneous records of proceedings concerning extraction/printing of data, coupled with statements recorded under Section 108 of the Customs Act, 1962 acknowledging the printouts and their authenticity/presence during printing, were held sufficient to constitute due compliance in substance for the limited purpose of Section 138C(4).

      5. Non-retraction and non-dispute as reinforcing factors (limited to Section 138C(4))

      The Court emphasised that the Section 108 statements were not retracted at any point, and even in the reply to the show cause notice, the contents of such statements were not disputed. The Court treated this as relevant to the question of due compliance with Section 138C(4). However, the Court cautioned that this was only for the limited purpose of assessing Section 138C(4) compliance.

      6. Evidentiary value in other contexts and the role of Section 138B

      The Court specifically observed that the evidentiary value of Section 108 statements in any other proceedings would have to be considered in accordance with law, including compliance with Section 138B of the Customs Act, 1962. The remand direction preserved the tribunals role to consider other grounds (including those not examined earlier) on their own merits.

      7. Certificate format not determinative where authenticity is not in dispute

      The Court also relied on the proposition that a certificate not given in a prescribed format would not per se make it invalid, particularly when authenticity of the marked documents is not in dispute. This observation supported the conclusion that the tribunal was not justified in rejecting the electronic material solely on a rigid view of the certificate requirement, given the nature of the record and acknowledgments available.

      Practical Relevance

      1. For customs investigations and adjudication

      The decision indicates that, in proceedings under the Customs Act, 1962, the certificate requirement under Section 138C(4) is central, but compliance may, in appropriate factual settings, be assessed substantively rather than by insisting on a single formal document labelled as a certificate. For departmental practice, contemporaneous documentation of extraction/printing processes and clear identification of devices and outputs assume importance.

      2. For assessees contesting electronic evidence

      Where the challenge is founded on Section 138C(4), the decision suggests that acknowledgments recorded during proceedings and statements under Section 108 may be treated as relevant to whether the statutory conditions have been met in substance. At the same time, the decision preserves the possibility of contesting evidentiary value on other statutory grounds where applicable, including the procedural requirements tied to statements under Section 138B.

      3. For appellate strategy and remand outcomes

      Tribunals may be required to avoid disposing of appeals solely on a narrow evidentiary objection when the record may show substantive compliance, and to adjudicate remaining grounds. Remand in such cases underscores that the Section 138C(4) issue may not be outcome-determinative once due compliance is found, shifting focus to other merits/issues raised but not previously decided.

      4. Interface with Sections 65A and 65B of the Indian Evidence Act

      By treating Section 138C(4) of the Customs Act, 1962 as pari materia to Section 65B(4) of the Indian Evidence Act, the decision reinforces a harmonised approach to electronic evidence in fiscal adjudication. Practitioners should therefore assess both the statutory wording of Section 138C(4) and the generally accepted interpretive approach to Section 65B(4) when framing objections or supporting admissibility of electronic records.

       


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      2025 (9) TMI 76 - Supreme Court

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