Khushi Doshi
Published on: March 5, 2022 at 10:09 IST
The Bombay High Court has ruled that a disallowance based on the Assessee’s Failure to deduct Tax Deducted at Source (TDS) cannot be made if the Employee’s Commission is shown as a Part of Salary Income.
The Division Bench of Justices Amit B. Borkar and K.R.Shriram ruled that, unlike other TDS provisions, Section 192 of the said Act requires Deduction of Tax at source under the heading
“Salary only at the time of Payment and not otherwise.”
The matter at hand concerned Disallowance under Section 40(a)(ia) of the Income Tax Act.
The Assessing Officer acknowledged that the Respondent/Assessee had made a Provision for commission for the Company’s Chairman and Managing Director (CMD) at the end of the Fiscal Year but had not debited TDS under Section 194H of the Income Tax Act.
After deducting TDS, the Commission was paid to the Chairman and Managing Director the following year, i.e. During the Assessment Year 2010-2011.
Respondent contended before the Commissioner of Income Tax (Appeals) that Chairman and Managing Director was a full-time employee of the company and thus this Payment was Salary covered by TDS provisions under Section 192 and Section 194H of the Income Tax Act, which deal with TDS on Commission Payments.
TDS is deductible from Salary Payments only at the time of Payment, not at the time of making provision, according to Section 192 of the Income Tax Act, and thus no disallowance is required in the given circumstances. The Respondent’s arguments were accepted by CIT (A).
“The Tribunal has not committed any Perversity or applied incorrect Principles to the given facts,” the Court stated, “And when the Facts and Circumstances are Properly Analysed and the correct test is applied to decide the issue at hand, we do not believe that the questions as pressed raise any Substantial Question of Law.”
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