TDS component paid on expenses incurred is not in nature of ‘income-tax’ of assessee: ITAT

Case Details: Welkin Telecom Infra (P.) Ltd. v. DCIT - [2022] 142 taxmann.com 146 (Kolkata-Trib.)

Judiciary and Counsel Details

• • A.T. Varkey, Judicial Member & Rajesh Kumar, Accountant Member
  • S.K. Tulsiyan, Adv. for the Appellant.
  • Smt. Ranu Biswas, Addl. CIT for the Respondent.

Facts of the Case

Assessee-company was engaged in the business of providing support services to various telecom operators in the field of operation & maintenance/surveillance management services for tower sites. It had made delayed payment of its statutory dues, i.e., service tax, professional tax, and TDS.

The assessee claimed that the TDS paid by it was not in the nature of ‘income-tax’ of the assessee or ‘tax levied on its profits and gains of business’. Thus, the TDS component paid on the expenditure is not disallowable under section 40(a)(ii).

ITAT Held

The Tribunal held that section 40(a)(ii) uses the phrase “profits or gains of any business or profession” which has reference only to profits or gains as determined under section 28/29. Hence it can be safely inferred that section 40(a)(ii) cannot bring within its ambit any tax or interest paid on any other sums apart from profits or gains earned in business.

In the instant case, the assessee had paid interest under section 201(1A) on delayed payment of TDS. The said TDS represented the taxes paid on behalf of the payees to the credit of the Government.

In other words, TDS is treated as the tax paid on behalf of the person in respect of whose income such payment of tax has been made. It is therefore evident that ‘TDS’ qua the assessee, is not income-tax on its “profits or gains of any business or profession” assessable under section 28. Instead, it is the tax on the profits and gains of the business of the recipient.

In view of this, the tax deducted at source (TDS) is not like the income tax which is required to be paid on profits & gains chargeable to tax under section 28 and thus not disallowable under section 40(a)(ii). Consequently, the interest paid under section 201(1A) upon late payment of TDS also cannot be disallowed under section 40(a)(ii).

List of Cases Reviewed

• • Smt. Shakila Abdul Gofar Khan v. Vasant Raghunath Dhoble 2003 AIR SCN 5343 (para 15)
  • Israr v. State of UP 2004 AIR SCW 6916 (para 15)
  • TUV India (P.) Ltd. v. Dy. CIT [2019] 110 taxmann.com 175/179 ITD 238 (Mum. – Trib.) (para 16) followed
  • Pr. CIT v. Rimjhim Ispat Ltd. [2017] 81 taxmann.com 86/[2016] 382 ITR 152 (All.) (para 18)
  • Smt. Malti Gupta v. CIT [2019] 110 taxmann.com 413/415 ITR 168 (Punj. & Har.) (para 18)
  • Sandeep Marwah v. Asstt. CIT [2019] 101 taxmann.com 123/260 Taxman 231 (Delhi) (para 18)
  • CIT v. Bhagwati Developers (P.) Ltd. [2003] 261 ITR 658 (Cal.) (para 19)
  • L.M. Thapar v. CIT [1984] 149 ITR 383 (Cal.) (para 19) distinguished.
  • CIT v. Bata India Ltd. [1993] 201 ITR 884 (Cal.) (para 32) followed.
  • Lachmandas Mathura das v. CIT [2002] 122 Taxman 828/254 ITR 799 (SC) (para 37)
  • CIT v. Chennai Properties & Investment Ltd. [1999] 105 Taxman 346/239 ITR 435 (Mad.) (para 37)
  • CIT v. Oriental Insurance Co. Ltd. [2009] 183 Taxman 186/315 ITR 102 (Kar.) (para 39)
  • Bharat Commerce & Industries Ltd. v. CIT [1998] 98 Taxman 151/230 ITR 733 (SC) (para 40) followed
  • Jaipuria Samla Amalgamated Collieries Ltd. v. CIT [1971] 82 ITR 580 (SC) (para 42) distinguished.

List of Cases Referred to

• • Smt. Shakila Abdul Gofar Khan v. Vasant Raghunath Dhoble 2003 AIR SCN 5343 (para 15)
  • Israr v. State of UP 2004 AIR SCW 6916 (para 15)
  • TUV India (P.) Ltd. v. Dy. CIT [2019] 110 taxmann.com 175/179 ITD 238 (Mum. – Trib.) (para 16)
  • ACIT v. Shyam Sunder Agarwal [IT Appeal No. 1182 (Kol.) of 2013, dated 27-05-2016] (para 17)
  • Pr. CIT v. Rimjhim Ispat Ltd. [2017] 81 taxmann.com 86/[2016] 382 ITR 152 (All.) (para 18)
  • Smt. Malti Gupta v. CIT [2019] 110 taxmann.com 413/415 ITR 168 (Punj. & Har.) (para 18)
  • Sandeep Marwah v. Asstt. CIT [2019] 101 taxmann.com 123/260 Taxman 231 (Delhi) (para 18)
  • CIT v. Bhagwati Developers (P.) Ltd. [2003] 261 ITR 658 (Cal.) (para 19), L.M. Thapar v. CIT [1984] 149 ITR 383 (Cal.) (para 19)
  • CIT v. Bata India Ltd. [1993] 201 ITR 884 (Cal.) (para 32)
  • Lachmandas Mathuradas v. CIT [2002] 122 Taxman 828/254 ITR 799 (SC) (para 37)
  • CIT v. Chennai Properties & Investment Ltd. [1999] 105 Taxman 346/239 ITR 435 (Mad.) (para 37)
  • CIT v. Oriental Insurance Co. Ltd. [2009] 183 Taxman 186/315 ITR 102 (Kar.) (para 39)
  • Bharat Commerce & Industries Ltd. v. CIT [1998] 98 Taxman 151/230 ITR 733 (SC) (para 40)
  • Jaipuria Samla Amalgamated Collieries Ltd. v. CIT [1971] 82 ITR 580 (SC) (para 42).