S.40(a)(ia) Not Applicable to short deduction of TDS: Uttarakhand HC Dismisses Income Tax Appeal Against Samsung Heavy Industries [Read Order]

The Uttarakhand High Court, while dismissing the income tax appeal against Samsung Heavy Industries Company Limited, upheld the Income Tax Appellate Tribunal (ITAT) order holding section 40(a)(ia) of the Income TaxAct, 1961 cannot apply to short deduction of TDS.

The Income Tax Appeal was challenging the order dated 22.12.2023 passed by Income Tax Appellate Tribunal, Dehradun in ITA No.873/DEL/2017 for Assessment Year 2012-2013.

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Samsung Heavy Industries Company Limited , the respondent assesee filed its return of income under Section 139(1) of the Income Tax Act, 1961 on 29.09.2012, declaring an income of ₹51,79,380/-. The return of income was selected for scrutiny assessment and the notices under Section 143(2) and Section 142(1) of the Income Tax Act, 1961 were served upon the respondent; that on 12.05.2015, the Assessing Officer completed the assessment and passed the final assessment order under Section 143(3) of the Income Tax Act at total income of ₹117,11,60,400/-.

Against the order passed by the Assessing Officer, the assessee preferred an Appeal before the Commissioner of Income Tax (Appeals)-2, Noida. The Commissioner of Income Tax partly allowed the Appeal of the assessee but uphold the additions of ₹2,81,90,744/- and ₹4,20,03,868/- made for short-deduction of tax at source under Section 40(a)(ia) in respect of payments made for Interior and Electrification Works.

Against the order of Commissioner of Income Tax (A)-2, Noida for A.Y. 2012-2013 dated 19.12.2016, both, assessee and revenue filed Appeals before the Income Tax Appellate Tribunal. Counsel for the appellant submitted that admittedly this is a case pertaining to short deduction of T.D.S. The T.D.S. was deducted by the assessee under Section 194C at the rate of 2 percent, instead of deduction under Section 194J at the rate of 10 percent, therefore, the Assessing Officer invoked the provision under Section 40(a)(ia) of the Income Tax Act, 1961.

Per contra, Mr. Arijit Prasad, Senior Counsel assisted by Mr. Pulak Raj Mullick, learned counsel for the respondent (assessee) submitted that the Income Tax Appellate Tribunal has rightly relied on the law laid down by Calcutta High Court in the case of Commissioner of Income Tax Vs. S.K. Tekriwal.

In view of the law laid down by Supreme Court, the Court of Chief Justice Mr. G. Narendar and Justice Mr. Alok Mahra upheld the finding returned by Income Tax Appellate Tribunal, wherein it has held that Section 40(a)(ia) of the Income Tax Act, 1961 cannot be made applicable to short deduction of tax at source and the disallowance made was directed to be deleted.

Counsel for the appellant further submitted that the judgment of Kerala High Court has been challenged before the Supreme Court in Special Leave in M/s. PVS Memorial Hospital Ltd. Vs. The Commissioner of Income Tax. The Supreme Court granted leave in the matter and now it has been converted to Civil Appeal No(s). 10915-10916/2018 and, as per the website of Supreme Court, the case is ripe-up for final hearing and is still pending consideration before the Supreme Court, therefore, the hearing of present Appeal may be deferred till decision in the aforesaid Civil Appeal.

The court dismissed the appeal in absence of substantial question of law.

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