Alleged Erroneous TDS Deduction u/s 194H of IT Act by LLP Employer when Form 16A filed: Madras HC Orders to file Statutory Appeal [Read Order]

The Madras High Court, in a recent ruling, has instructed the petitioner to file a statutory appeal within two weeks, along with the necessary pre-deposit in a case involving incorrect Tax Deduction at Source ( TDS ) deduction by an LLP employer under Section 194H of the Income Tax Act, 1961.

The petitioner, claiming to be an employee of Smart Way India Enterprises LLP in Coimbatore, contested the erroneous TDS under Section 194H of the Income Tax Act, arguing that he was incorrectly categorised as an agent.

The petitioner's counsel referred to the appointment letter dated 12.11.2015, asserting that the tax liability, including under the Income Tax Act, was to be borne by the limited liability partnership. They argued that the petitioner was an employee entitled to variable remuneration, not an agent.

Responding to the petition, Mr. Ramesh Kutty, senior standing counsel, contended that the petitioner was indeed an agent of the LLP, liable for GST on the commission received for services provided. He argued against interference in the matter.

The counsel submitted that “the petitioner was admittedly an agent of the limited liability partnership and was liable for GST on forward charge basis on the commission received from the entity for services provided by him.”

A Single bench of Justice Senthilkumar Ramamoorthy stated that “On examining the impugned order, it appears that the respondent noticed that Form 16A was filed in respect of the petitioner with regard to TDS. In those circumstances, the tax demand was confirmed along with interest and penalty.”

In addition, the petitioner filed the writ petition on 09.02.2024, after the period of limitation for filing an appeal had expired in December 2023. However, considering the limited delay and the pendency of the writ petition, the Madras High court directed the petitioner to file a statutory appeal with the requisite pre-deposit within two weeks from the date of receipt of the order.

The appellate authority was instructed to receive and dispose of the appeal on merits without considering the question of limitation. Accordingly, the writ petition was disposed of.

To Read the full text of the Order CLICK HERE

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