TDS on Net Salary is Permissible under Income Tax Act: ITAT deletes Income Tax Addition [Read Order]

TDS - Net Salary - Income Tax Act - ITAT - Addition - taxscan

The Indore bench of the Income Tax Appellate Tribunal ( ITAT ) has held that the deduction of TDS on net salary instead of gross salary is permissible under the Income Tax Act, 1961.

The assessee, M/s Patwa Abhikarna Private Limited has madededuction of TDS out of salary paid to two employees, viz. Mr. Hemant Kumar Patwa and Mr. Jayant Kumar Patwa. While processing the income tax return, the department has computed shortage in TDS of Rs. 57640/- and interest thereon Rs. 28,590/-.

The assessee contended that the actual TDS was Rs. 2,05,000/- and Rs. 3,00,000/- out of salary paid to Mr. Hemand Kumar Patwa and Mr. Jayant Kumar Patwa respectively, although the TDS deductible was Rs. 2,71,951/- and Rs. 2,88,390/- respectively. Therefore, according to assessee, the TDS actually deducted was in fact more than the TDS deductible and hence there was no short-deduction.

A two-Member Tribunal comprising Ms. Madhumita Roy, Judicial Member & Shri Bhagirath Mal Biyani, Accountant Member observed thatthe controversy of short deduction between the revenue and assessee is for the reason that the revenue has computed deductible amount of TDS on “gross salary”, whereas the assessee has computed TDS deductible on the basis of “net salary” i.e. gross salary (-) deductions under Chapter VI-A.

Ruling in favour of the assessee, the Tribunal held that “We observe that the approach of assessee is in accordance with the provisions of TDS as prescribed in Income tax Act, 1961, which permit the consideration of deductions under Chapter VIA while computing deductible amount of TDS. Therefore, we do not find any mistake in assessee’s action. That brings us to observe that the revenue authorities have wrongly computed short-deduction of Rs. 56,650/- and consequently interest thereon of Rs. 28,590/-. We do not find any merit in these demands created by revenue which are not as per law.”

Shri Chandan Lasod appeared for the appellant-assessee.

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