13 July 2012
If an employer has not deducted tax and the same fact is discovered from Form 16 whether the employee needs to pay interest u/s 234B or 234C when he is paying the self assessment tax u/s 140A after March 31?
13 July 2012
Where the assessee’s income is chargeable under the head “Salaries”, the person responsible for paying any income chargeable under the head “Salaries” shall at the time of paying, deduct income tax at source and failure on his part entails an obligation to pay interest under Section 234B of the Act in order to compensate the loss incurred to the revenue and that upon failure on the part of the employer to deduct tax at source, the assessee only becomes liable to pay the tax directly under Section 191 of the Act and does not become liable to pay interest under Section 234B of the Act.
13 July 2012
Read section 192 carefully, Section 234C is not applicable for income from Salary.
Section 192(3) says that the person responsible for making the payment of salary may, at the time of making any deduction, increase or reduce the amount to be deducted under this section for the purpose of adjusting any excess or deficiency arising out of any previous deduction or failure to deduct during the financial year.
Hence, it is illogical to say that section 234C will have implication for short payment of advance tax.
13 July 2012
The contention that Section 234C is not applicable to salary is not very clear to me. Kindly elaborate the same as 234C(1)(b)(i) says that "the advance tax paid by the assessee on his current income on or before the 15th day of March is less than the tax due on the returned income, then, the assessee shall be liable to pay simple interest at the rate of [one] per cent on the amount of the shortfall from the tax due on the returned income :] Provided that nothing contained in this sub-section shall apply to any shortfall in the payment of the tax due on the returned income where such shortfall is on account of under-estimate or failure to estimate— (a) the amount of capital gains; or (b) income of the nature referred to in sub-clause (ix) of clause (24) of section 2, and the assessee has paid the whole of the amount of tax payable in respect of income referred to in clause (a) or clause (b), as the case may be, had such income been a part of the total income, as part of the [remaining instalments of advance tax which are due or where no such instalments are due], by the 31st day of March of the financial year"
13 July 2012
Section 234C is applicable only where there is default in payment of instalment but section 192 says that TDS on salary can be deferred by the Employer. it means TDS may be deducted less in earlier months and more in later months to compensate in that case also section 234C does not attract then it is not possible that section 234C will get attarcted in this case also.
13 July 2012
Interest u/s 234B is not applicable on income which is subject to tds. If payer of money does not deduct TDS, it is liable to pay interest u/s 201 (1A) . The same view is taken by Mumbai ITAT in recent desicion in the matter of TUV Bayren (India) Limited, ITA No.4944/Mum/2002. TUV Management Services GmBH 6th July, 2012.
Further, relevant agrguments and case laws can be refered from Judgment of Allahabad HC in the case of Jagran Prakashan Limited,WRIT TAX No. - 388 of 2012 from question number 6 to 11.
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