In Apollo Tyres Ltd v. DCIT, the Delhi bench of the Income Tax Appellate Tribunal (ITAT) observed that the provisions relating to Income Tax Act are not applicable in cases where the payee/ beneficiary is not identifiable.
In the instant case, the appellant-assesseewas aggrieved by the order passed under section 201(1A) of the Income Tax Act Assessing authority who held that it failed to deduct the TDS in respect of provisions made under several heads of income. The assessee maintained that they couldnt’ deduct tax since the payee was not identifiable.
The revenue, on the other hand, asserted that TDS under section 194C(2) of the Income Tax Act is payable where any sum is credited to any account whether called suspense account or by any other name in the books of account of the person liable to pay such income.
Relying upon a bunch of case laws, the Tribunal noted that the identification of the person from whose account income tax was deducted at source is a pre-requisite condition so as to make the provision for Chapter XVII-B workable.
“Tax deducted at source is considered to be tax paid on behalf of the person from whose income the deduction was made and, therefore, the credit for the same is to be given to such person. When the payee is not identifiable, to whose account the credit for such TDS is to be given. Section 203(1) lays down that for all tax deductions at source, the tax deductor has to furnish a certificate to the person to whose account such credit is to be given. Therefore, when the tax deductor cannot ascertain the payee who is the beneficiary of a credit of tax deduction at source, the mechanism of Chapter XVII-B cannot be put into service.”
While concluding, the bench directed the assessee to verify whether the payee is identifiable and the amount payable to him is ascertainable and if, the payee is not identifiable, the provision of Chapter XVII-B i.e., tax deduction at source, cannot be pressed into service, the assessee is not required to deduct tax at source.
Read the full text of the order below.
