03 April 2009
Section 201 of the Income-Tax Act 1961 deals with failure to deduct tax at source or failure to deposit such TDS in government account. TDS has to be paid into government account within the prescribed time.
Section 201 treats a person failing to do so as an assessee in default. Courts have held that if the person who has received the payment without TDS had already paid the tax on the amount, then there can be no liability on the part of the deductor for interest on the amount which should have been deducted.
There can be no question of double recovery, both from the person responsible for deduction and from the person who has received the payment without TDS.
03 April 2009
The Central Board of Direct Taxes, in Circular No. 275/201/94-IT (B) of January 29, 1997, had declared that no demand visualised under Section 201 of the Act should be enforced after the tax deductor has satisfied the department that taxes due have been paid by the deductee-assessee. However, this will not alter the liability to charge interest under Section 201 (1A) till the date of payment of taxes by the deductee-assessee or the liability for penalty under Section 271 C of the Act.
This Circular was referred to by the Supreme Court in Hindustan Cococola Beverage (P) Ltd vs CIT (293 ITR 226). It was held that if the deductee had paid the tax, there can be no question of recovering the same once again from the deductor.
Judicial controversy arose with regard to liability for tax/interest on the person responsible for TDS in cases covered by payments by the deductee. The Finance Act, 2008 has amended both Sections 201 and 191.
It is clarified that where a person does not deduct tax or, after so deducting, fails to pay the same into government account, he will be deemed a defaulter.
There will be a liability both for interest and penalty. To enlarge the scope for TDS, the amendment includes Association of Persons (AoP) and Body of Individuals (BoI) as persons responsible for TDS under Section 194C covering payments to contractors and sub-contractors.
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