TDS u/s 194A

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CA Sanjay Baheti (Querist)
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12 March 2010 A P.F. was formed in Year 2008-09 & its turnover was less than 40 Lacs ,hence No Tax Audit was carried out. However No TDS was deducted u/s 194A in respect of Interest payable on Unsecured Loan beyond the prescribed limit under impression that as the asseese was not subject to Tax Audit.
What will be its post implication.

Ram Avtar Singh

Ram Avtar Singh (Expert)
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12 March 2010 Consequences of non-deduction of tax at source (TDS)

Under section 201, a person is deemed to be an assessee in default if there is a failure to deduct tax at source or for failure to deposit the tax deducted at source after such tax has been deducted. The persons covered under the ambit of section 201 are:-

(i) person referred to in section 200;

(ii) the principal officer and the company of which he is the principal officer in the cases referred to in section 194 [relating to deduction of tax at source on dividends].

Sub-section (1) of section 200 provides that any person deducting any tax at source on payments other than salary shall pay the sum so deducted to the Central Government or as the Board directs within the prescribed time. A view has been expressed that the provisions of sub-section (1) of section 201 do not cover failure to deduct tax at source. Such an interpretation is contrary to the intent of the legislature.

In view of the above, the sub-section (1) of section 201 has been amended to clarify that where a person, including the principal officer of a company who is required to deduct any sum in accordance with the provisions of Income-tax Act does not deduct, or does not pay, or after so deducting fails to pay, the whole or any part of the tax, as required by or under the Income-tax Act, he shall be deemed to be an assessee in default under section 201.

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