Wednesday, January 22, 2014

Sec. 40(a)(ia) contemplates actual tax deduction and not mere debit entry in account of payee

The Tribunal held in favour of revenue as under:
1)  Deduction of tax at source as contemplated by section 40(a)(ia) needs to be real and not illusory;
2)  Deduction of tax at source implies subtraction of the amount of tax from the amount payable by the assessee to the payee out of which tax is deductible at source before it is paid to the payee or is credited to the account of the payee;
3)  It is after deduction of such tax from the amount payable to the payee that the assessee can pay/credit the remaining amount;
4)  The law contemplates real deduction of tax at source out of amount payable by the assessee and not mere book entries by which such tax is debited to the running account of the payee in the books of the assessee, unless such entries are supported by actual deduction;
5)  There was no evidence before the revenue that tax was actually deducted by the assessee at source out of the amounts paid or credited by it to the payees, although such tax was deductible at source;

6)  Unless the assessee proves that it has actually deducted the tax at source out of amounts paid/credited in favour of the payees, it was not possible to delete the impugned disallowance. Therefore, the appeal of the assessee was liable to dismissed. - Atul Auto Ltd. v. JCIT [2013] 40 394 (Rajkot - Trib.)