Various issues about TDS U/s. 193, 194, 194A, 194B, 194BB, 194D, 194E, 194EE, 194G, 194LA, 194LB, 194LC
Q.1. Whether assessee liable to deduct TDS u/s 193 on provision of interest in case payee is not identified.
Ans. Explanation to section 193 cannot be invoked in a case where person who is to receive interest cannot be identified at stage at which provision for ‘interest accrued but not due’ is made and therefore there was no obligation upon assessee to deduct tax at source, there could not be any question of levy of penalty and interest under section 201 upon assessee. Industrial Development Bank of India v. ITO [2007] 107 ITD 45 (ITAT- MUM.).
Q.2. Whether TDS u/s 193 deductible on Interest on own debentures?
Ans. No, please refer CIT V Nattarasankottai Electric Supply Corporation (1947) 15 ITR 495 (Mad).
Q.3. Whether TDS u/s 193 deductible on Interest on debentures issued by cooperative bank?
Ans. No. please refer CIT v. Lakshmi Vilas Bank Ltd. (1997) 228 ITR 697 (Mad).
Q.4. Whether TDS u/s 194 applicable to both types of dividends, i.e., normal dividend as well as deemed dividend?
Ans. Section 194 requires TDS only when payment is made to a shareholder. Payments to shareholders will cover both types of dividends, i.e., normal dividend as well as deemed dividend. Otherwise also, deemed dividend will be taxed in the hands of the shareholder and not in the hands of non-shareholder payee. Therefore, section 194 does not require TDS when payment is made to a non-shareholder. Please refer NZ Reality (P.) Ltd. v. ITO, [2009] 29 SOT 61 (ITAT- JP.)(URO).
Q.5. Whether TDS u/s 194 is deductible at the time of preparation of Warrant or at the time of dispatch of warrants?
Ans. When company declaring dividend is liable to deduct tax from dividends when warrants are sent out to shareholders and not on date on which dividends warrants are prepared. CIT v. Hindustan General Industries Ltd. 2000] 113 TAXMAN 506 (DELHI)
Q.6. Whether credit of TDS can be denied on the footing that TDS certificate does not show the actual date of payment of tax to Government treasury.
Ans. Assessing Officer could not deny credit of TDS from dividend on ground that TDS certificate filed in Form No. 19 did not show actual date of payment of tax to Government treasury and that it did not contain seal of company. M.M. PUBLICATIONS LTD. V. ACIT [1997] 92 TAXMAN 51 (ITAT-COCH.) (MAG.)
Q.7 Whether TDS u/s 194A deductible on interest on delayed payment of purchase bills?
Ans. Payment which has direct link and immediate nexus with trading liability will not fall within category of interest; while paying interest on delayed payment of purchase bills, no TDS obligation arises. Sri Venkatesh Paper Agencies (Hyd.) (P.) Ltd. v. Dy. CIT [2012] 24 taxmann.com 52 (Hyd.)
Q.8. Whether TDS u/s 194A deductible on reimbursement of Interest?
Ans. Reimbursement of interest by subsidiary to parent company which, in turn, had repaid it to lender bank, did not involve any element of income and, thus, no TDS liability would arise under section 194A on reimbursement. Onward e-Services Ltd. v. ACIT* [2012] 22 taxmann. com 60 (ITA T-Mum .)
Q.9. Whether TDS u/s 194A deductible on delayed receipt of compensation on land acquisition?
Ans. Interest received as a payment for delayed receipt of compensation on land acquisition is a revenue receipt liable to TDS under section 1 94A. Rameshwar v. Ujjain Development Authority [2012] 23 taxmann.com 6 (MP)
Q.10. Whether TDS u/s 194A deductible on interest paid to RRRDA?
Ans. Where Rajasthan Rural Road Development agency (RRRDA) kept funds released by Ministry of Rural Development in a separate account opened with assessee-bank to be utilized for purpose of approved work under Pradhan Mantri Gram Sadak Yojna (PMGSY), interest paid by assessee to RRRDA would not be liable to tax deduction at source under section 1 94A. ITO v. Branch Manager, State Bank of Bikaner & Jaipur* [2012] 19 taxmann.com 221 (ITAT-JP.)
Q.11. Whether TDS u/s 194A deductible on interest neither credited nor paid during relevant period?
Ans. Where assessee has not credited interest in its books of account and such interest has not been paid in relevant year, mandate of section 194A cannot be attracted to further invoke disallowance under section 40(a)(ia). Pranik Shipping & Services Ltd. v. ACIT*[2012] 19 taxmann. com 107 (I TA T-Mum.)
Q.12. Whether credit of TDS and assessment of income permissible in two different years?
Ans. Credit of tax based on TDS certificates be allowed in respect of interest income in the year in which subject-matter of deduction of tax is assessed. CIT v. H. Krishna Vijoy Arora* [2012] 20 taxmann.com 655 (Ker.)
Q.13. Whether TDS u/s 194A deductible on interest credited but not paid due to loss?
Ans. Tax was to be deducted at source under section 194A where due to losses no interest was paid by assessee to its creditor but credit entry was made as if interest was paid to creditors. Solar Automobiles India (P.) Ltd. v. Dy.CIT (TDS), [2012] 17 taxmann.com 260 (Kar.).
Q14. Whether interest u/s 194A deductible on interest income of trust where beneficiaries are individuals?
Ans. No, Please refer ML family trust v State of Gujrat (1995) 213 ITR 152 (Guj), see also Food Corporation of India v ITO (2007) 18 SOT 289 (Del), ITO v Arihant Trust (1995) 214 ITR 306 (Mad).
Q.14. Who is responsible to deduct tax u/s 194B.
Ans. A person, who conducts any scheme in name of lottery or drawing by lot by giving a person a chance to win by participating in scheme, is responsible to deduct tax at source on value of goods given to winner. Hind Motors India Ltd.* v. ITO 2006] 9 SOT 556 (I TA T-CHD.)
Q.15.Whether provisions of S. 194B applicable where participants identified on the basis of their skill or knowledge?
Ans. In ‘World Cup Football Forecast’ or ‘Lok Sabha Election Forecast’ contests were held by assessee-company and no price was paid for participation, but only skill or knowledge was criterion and prize winners were selected by lot, said contests did not amount to lottery and, therefore, assessee was not liable to deduct tax at source before distribution of prize money of said contests as contemplated under section 1 94B. ITO v. Malayala Manorama Co. Ltd. [2005] 94 ITD 195 ( ITA T-COCHIN)
Q.16. Whether provisions of S. 194B applicable on amount of refund of prize money from unsold tickets of lotteries and unclaimed prizes?
Ans. Refund by Directorate of State Lotteries to organising agent of prize money from unsold tickets of lotteries and unclaimed prizes would not attract provisions of section 1 94B ACIT v. Director of State Lotteries . [2002] 123 TAXMAN 405 (GA U.) see also Commercial Corporation of India V ITO (1993) 201 ITR 348 (Bom).
Q.1 7. Whether provisions of S. 1 94B applicable on monthly prize scheme?
Ans. Assessee was carrying as a prized scheme, in which 250 members were enrolled – Members were required to subscribe Rs. 300 every month for a period of 52 months – Every month there was a lucky draw and once a subscriber was declared a winner in any such draw, he need not make any payment thereafter – All others, who were not successful in previous draw had to go on paying every month till completion of Scheme – After completion of scheme all subscribers who were not successful in monthly draws would get back their contributions without interest – Whether scheme in question could be treated as `lottery’ scheme and assessee was liable to deduct tax at source under section 1 94B – Held, yes. Lakshmi Gnaneswara Enterprises & Financiers v. ITO [2000] 72 ITD 295 (ITAT-HYD.)see also CIT v Sanjiv Kumar (1980)123 ITR 187 (P&H).
Q.18. Whether deduction of floor limit of Rs. 2,500 is to be allowed from each winning from horse race?
Ans. Yes. Please refer Delhi Race Club (1940) Ltd. V. Dy.CIT [2007] 17 SOT 39 (Delhi)(URO)
Q.19. Whether tax u/s 194BB is deductible only from net income?
Ans. Tax is required to be deducted only from net income arising out of horse race to punter from any particular race after deducting investment made by him in purchasing all tickets relating to such horse race. Royal Calcutta Turf Club v. Dy. CIT [2001] 76 ITD 237 (ITA T-CAL.)
Q.20. Whether TDS u/s 194D is deductible on commission paid on reinsurance accepted by assessee?
Ans. No. Please refer General Insurance Corpn. of India v. Asstt. CIT [2009] 28 SOT 453 (Mum.), Tata AIG General Insurance Co. Ltd. * v. ITO [2011] 43 SOT 215 (ITAT- Mum)
Q.21. Whether TDS u/s 194E deductible on payments to non-resident sportsman or sports association for participation in match in India ?
Ans. Amount paid to foreign team for participation in match in India in any shape, either as prize money or as administrative expenses, is income deemed to have accrued in India and is taxable under section 11 5BBA and, thus, section 1 94E is attracted. INDCOM* v. CIT [2011] 11 taxmann.com 109 (Cal.)
22. Whether obligation to deduction under section 194E is not affected by DTAA ?
Ans. Obligation to deduction under section 194E is not affected by the DTAA, since such a deduction is not the final payment of tax nor can it be said to be an assessment of tax. The deduction has to be made and after it is done, the assessee concerned gets the credit of the same and once it is found later on, that income from which the deduction is made is not exigible to tax, then on application being made refund with interest is always allowed. Fundamental distinction between the deduction at source by the payer is one thing and obligation to pay tax is another thing. Advantage of the DTAA can be pleaded and taken by the real assessee on whose account the deduction is made and not by the payer. Therefore, irrespective of the existence of the DTAA, the obligation under section 194E has to be discharged once the income accrues under section 115BBA. Pilcom* v. CIT [2011] 198 Taxman 555 (Cal.)
Q. 23. Whether TDS u/s 194E deductible on guarantee fee paid by assessee to overseas cricket boards?
Ans. The guarantee fee paid by the assessee was to the cricket bodies of the countries with which India had entered into tax treaties. It is settled legal position that in view of the provisions of section 90(2), the provisions of the tax treaty prevail over that of the domestic law unless the domestic law is more beneficial to the assessee. Therefore, in case it was concluded that the payment in question was not taxable in terms of the provisions of the applicable tax treaty, there was no need to address to the scope of provisions of the domestic law. Unless it is of the income nature, there is no question of taxability thereof. ITO v. Board for Cricket Control in India [2007] 14 SOT 287 (ITA T-M UM.)
Q.24. Whether TDS u/s 194G is applicable where petitioner purchased lottery tickets at discount from State Government?
Ans. Section 194G envisages deduction of tax at source only if any commission, remuneration or prize is paid. Here in present case petitioner, who was authorized lottery ticket agent, purchased lottery tickets in bulk at a discount from State Government. Whether since tickets were given to agents on a discount and there was no payment of commission to agent at time of purchase of ticket, section became automatically inapplicable. M.S. Hameed v. Director of State Lotteries[2001] 114 TAXMAN 394 (KER.)
Q.25. Whether question of deducting tax at source arises at time of making payment and it has nothing to do with date of award of compensation?
Ans. Section 1 94LA was not on the statute book on the date of the award, i.e., 30-5-1995 and that the said section was inserted, subsequently, by the Finance Act, 2004 with effect from 1-10-2004. Compensation was paid on 28-4-2010 and on that day, section 1 94LA was on the statute book and, therefore, tax had to be deducted while making the payment of compensation. Leela Bhagwansing Advani v. Union of India*[2012] 21 taxmann.com 124 (Bom.)
Q.26. Whether TDS u/s 194 LA deducted on compensation paid for acquiring agriculture land?
Ans. “194LA. Any person responsible for paying to a resident any sum, being in the nature of compensation or the enhanced compensation or the consideration or the enhanced consideration on account of compulsory acquisition, under any law for the time being in force, of any immovable property (other than agricultural land), shall, at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to ten per cent, of such sum as income-tax thereon: There is no jurisdiction to make deduction from compensation for agricultural land. Risal Singh v. Union of India2010] 321 ITR 251 (PUNJ. & HAR.)
Q.27. Whether definition of ‘agricultural land’ contained in section 2(14)(iii) (a) & (b) cannot be borrowed to influence definition of ‘agricultural land’ contained in Explanation to section 194LA?
Ans. There are two definitions of the agricultural land in the Act. One is provided in section 2(14) and the other in section 194LA. The question now arises which definition is to be used for deciding the issue, whether land acquired by the LAO is agricultural land or not or what is acquired is part and parcel of or inclusive of agricultural land. For deciding the issue one has to see the purpose and object for which the two definitions have been enacted. Since in section 2(14)(iii)(a) & (b) definition of agricultural land is given in the context of deciding what should be the capital asset then this definition can be used only for that purpose. The definition in section 2(14)(iii ) is linked with section 45 where chargeability of capital gains is provided on transfer of capital asset. Therefore, the definition of agricultural land as capital asset in section 2(14), read with section 45, cannot be imported to influence the concept of agricultural land as specifically provided for in section 194LA.
The definition of immovable property given in section 1 94LA, and the definition of agricultural land given therein are specific to the activity of deduction of tax. Specific enactment for specific purpose should alone be invoked. Special Land Acquisition Officer * v. ITO[20 10] 42 SOT 9 (ITA T-AHD.)
Q.28. Whether interest on delayed payment of enhanced compensation in respect of acquisition of immovable property is revenue receipt eligible to tax u/s 4 and, therefore, is liable to TDS u/s 194A?
Ans. It has been concluded by the Supreme Court in various cases that interest on delayed payment on the acquisition of immovable property would be revenue receipt and would, thus, be exigible to tax.
Once interest is regarded as revenue receipt, then it would fall within the mischief of section 4, which is a charging section. Therefore, TDS under section 1 94A was to be paid by the petitioner in respect of the interest income on the delayed payment. Karnail Singh v. State of Haryana*[2010] 326 ITR 501(PUNJ. & HAR.)
Q.29.Whether claimant is not liable to pay income-tax or if he is entitled to pay tax at lower rates, he will have to obtain necessary tax deduction certificate from Land Acquisition Officer and claim such benefit before competent authority under Act?
Ans. It is a well settled position of law that whenever any authority deducts income-tax at source, he is bound to issue a tax deduction certificate to the claimant. So, the claimant is entitled to get a certificate of tax deducted at source or tax paid under sub-section (1A) of section 192 by the Land Acquisition Officer. Under rule 31(1) a certificate shall be issued within the time fixed under the rules and in the form prescribed. If the compensation and interest due under a decree is to be divided among a number of claimants, income-tax has to be deducted from the share found due to each claimant and separate tax deduction certificates issued to each of them. State of Kerala* v. Mariyamma[2006] 280 ITR 225 (KER.)
