TDS Limitation Must Be Computed Quarter-Wise From Filing of TDS Statements, Not Annually: Bombay HC in Vodafone case [Read Order]

In a recent ruling, the Bombay High Court held that the limitation under Section 201(3) of the Income-Tax Act must be computed quarter‑wise from the filing of each TDS statement, rather than on an annual basis, and dismissed the revenue's appeal against Vodafone Cellular Ltd.

The matter arose in Assessment Year 2009–10, when the Assessing Officer passed an order on 15 March 2012 declaring Vodafone Cellular Ltd. to be in default under Section 201(1). The ITAT held that the order was beyond the two-year limitation period prescribed under Section 201(3) for the first three quarters, but within the limitation for the fourth quarter since its TDS return was filed in the subsequent financial year.

A.K. Saxena, the learned counsel for the Appellant, submitted that the Tribunal committed an error of law. According to him, though TDS Returns are filed quarterly, the liability is to be considered on an annual and cumulative basis, and the liability ought not to be computed quarter-wise.

On the other hand, counsel for Vodafone, Jitendra Singh, stated that Rule 31A of the Income Tax Rules mandates quarterly filing of TDS statements, each with independent due dates, thereby creating separate limitation periods.

After considering all the submissions, the division bench of Justice M.S. Karnik and Justice Gautam A. Ankhad observed that “The scheme of TDS compliance under the Act and the Rules treats each quarter as a separate compliance period, with distinct due dates and independent statements. Each filing consequently furnishes a separate starting point for limitation under Section 201(3).”

The high court noted that limitation provisions in taxing statutes must be strictly construed and cannot be extended by implication. Since the first three quarters’ returns were filed in FY 2008–09, the order dated 15 March 2012 was beyond two years from the end of that year.

Also, underscored that taxpayers cannot be penalized for delays attributable to the Assessing Officer. Limitation provisions in tax law must be applied strictly and cannot be stretched by implication.

Accordingly, the appeal filed by the Revenue was dismissed

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