Short deduction

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vivek (Querist)
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22 August 2012 Sir
I just wanted to Know the Actual meaning of the Term Short Deduction in Taxation.When it is imposed and what are its Effect on Taxation.

Guest

Guest (Expert)

23 August 2012 you can simply understand this from the below case.

DCIT vs. M/s. S. K. Tekriwal (ITAT Kolkata)
(162.7 KiB, 1,960 DLs)

No s. 40(a)(ia) disallowance for short-deduction TDS default

The assessee paid Rs. 3.37 crores as “machine hire charges” on which it deducted TDS u/s 194C at 1%. The AO held that the payment was “rent” and TDS ought to have been deducted at 10% u/s 194-I. He disallowed the expenditure u/s 40(a)(ia). This was reversed by the CIT (A). On appeal by the department, HELD dismissing the appeal:

S. 40(a)(ia) provides for a disallowance if amounts towards rent etc have been paid without deducting tax at source. It does not apply to a case of short-deduction of tax at source. As the assessee had deducted u/s 194C, it was not a case of “non-deduction” of TDS. If there is a shortfall due to difference of opinion as to which TDS provision would apply, the assessee may be treated as a defaulter u/s 201 but no disallowance can be made u/s 40(a)(ia). (Chandabhoy & Jassobhoy (ITAT Mumbai) followed – included in file)

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