TDS though it stands for Tax Deduction at Source,it is generally considered as TEDIOUS.It is tedious primarily due to the fact that there are 42 Sections.,which deal with the subject.These Sections have been included in Chapter XVII, which has two parts-Part A,and Part B.These Sections are apart from the Sections relating to Penalty and prosecution. Then there are Rules and Forms.Subject becomes difficult because there are no common rates or common dates or common forms.Rates at which TDS is top deducted,Time of deduction of tax and Dates of deposit of tax and then dates of filing of different forms and returns are different in each category of the payment where TDS is required to be deducted.For example,some of the rates of TDS are included in sections itself (section 194C,I ,J),some rates are on the basis of rates in force for the financial year in which payment is made (Section 192)still some are ‘ at the rates in force (Sections 193.,194A).In case of payments to non-residents, rates prescribed under Double Taxation Avoidance Agreements (DTAA)are also required to be taken care of

STEPS INVOLVED IN TDS:
There are four steps involved in deduction of tax at source::

TAX DEDUCTION AND COLLECTION ACCOUNT NUMBER: (S. 203A):

Every person,deducting or collecting tax is required to apply for Tax Deduction and Collection Account Number within one month from the end of the month in which the tax was deducted or collected.Relevant Rule is 114A and relevant Form is Form No.49B.

Here the problem arises,as tax in many cases is required to be deposited by 7th of the succeeding month.Banks do not accept the challans without quoting the TAN number and TDS deposit get late.

TAN or TDCAN is required to be quoted on all Challans, certificates,statements and returns relating to TDS.(Section 203A(2))

Failure to apply for TDCAN (Form 49B)or failure to quote TAN or quoting of false TAN invites penalty U/S 272BB,which is Rs.10000/-.Of course,opportunity of being heard will be given before levy of any such penalty.

OTHER IMPORTANT POINTS:

1. TDS/TCS is one of the various modes of making payment of income tax.Others include advance tax,self asstt.tax and tax u/s 192(1A).—Section 190

2. If tax is not deducted,though it was required to be deducted, income tax shall be payable by the assessee direct.(Section 191)

3.  Where tax is deductible and has been deducted andevidence in that respect has been furnished by the payee, the payee cannot be called upon to pay the tax so deducted. The AO can force recovery from the payer and not the payee (Section 205)

4 .  NO DOUBLE DEMAND OF TAX
Where the assessee has paid tax himself under section 191, the liability under section 201(1)shall be eliminated. (Clarification by Board (F.No.276/201/96-IT (B)DATED 29.1.1997)however,this will not alter the liability to charge interest u/s 201(1A)or penalty u/s 271C.

5.   PAYMENT BY CHEQUE 
It is well settled proposition of law that if payment by any cheque is accepted and the cheque on presentation is encashed,the payment relates back to the date when the cheque had been received.

6.    DEPOSIT OF TAX BY HEAD OFFICE EVEN THOUGH DEDUCTED AT SOURCE IN BRANCH 
(Circular No.719 dt.22.8.1995 and 744 dated 6.5.1996): Where all matters relating to TDS were handled (like deposit of tax,filing of returns,etc.)at Head Office or some other office,then though tax is deducted at branch office,it can be deposited at Regional/Head office.Circular no.719 and 744 are there.Though these circulars are only in respect of payment of salary.But these circulars have been followed by Orissa High Court in Larsen &Toubro Ltd.V ITO (2005) 278 ITR 369 in matters relating to TDS U/S 192 and U/S 194C.

7.   DUPLICATE CERTIFICATE 
In case the original TDS certificate is lost,the payee can get a duplicate TDS certificate,which can be issued on a plain paper.The duplicate certificate should be filed along with an indemnity bond (U/R 31(5)).

8.   CONSEQUENCES OF BELATED ISSUE OR NON ISSUE OF TDS CERTIFICATE:
Failure to issue TDS certificate within the time allowed U/R 31(3)attracts penalty of Rs.100/-per day of default.(Sec 272A(2)(g).)However, penalty will not exceed the amount of tax deductible or collectible,as the case may be.Of course,penalty can be imposed by Joint Commissioner after giving an opportunity of being heard

9.   CREDIT OF TAX DEDUCTED (SECTIONS 199, 203 & 205):

CBDT Cir.No.5/2001 dated 2.3.2001:“Where advance rent is spread over more than one financial year and tax is deducted thereon,credit shall be allowed in the same proportion in which such income is offered for taxation for different asstt.years based on the single certificate furnished for tax so deducted on the entire advance rent.

Where subsequent to the deduction of tax at source on advance rent pertaining to one or more financial year,the agreement gets terminated/cancelled resulting into refund of the balance amount of advance rent to the tenant,credit for the entire balance amount of TDS, which has not been given credit so far, shall be allowed in the asstt.year relevant to financial year during which the balance amount of advance rent is refunded back.”

It may be noted that word used is assessable and not assessed Meaning thereby that in case some income is wrongly included in the computation chart in a wrong assessment year and the same is assessed accordingly,credit for TDS may be denied in that year,as the income is assessable in some other year.(Stallion Securities Ltd.V. ITO (2004)91 ITD 338 (Hyd).

(For example,in case legal or audit fee is being offered on cash basis.If some income is taken into account on accrual basis and TDS is claimed accordingly,it will not be allowed. Further,credit for TDS will not be allowed even in the year in which the income is received because,in that year income is not included in total income.)

Venture Capital undertaking - as defined in SEBI (Venture Capital Funds) Regulations, 1996 means a domestic company-

10.   REFUND OF TAX WRONGLY DEPOSITED

Refund of excess TDS paid by the payer can be claimed by applying to ITO (TDS)as per Circular No.285 dated 21.10.1980.

It is possible in a case where tax has been wrongly deposited U/S 195,then an appeal can be preferred to CIT (A)U/s 248 for declaration that the person is not liable to make such deduction and refund can be granted by CIT (A).(Tata Engineeting &Locomotive Ltd.Case ((2005)92ITD 111 (Mum)

12.   DISALLOWANCE OF EXPENDITURE
U/S 40(a)(i):In case of payment of any interest,royalty,fee for technical services or other sum chargeable under this Act,which is payable,

On which tax is deductible at source and such tax has not been deducted or,after deduction,has not been paid as per the provisions of Section 200(1),the amount will be disallowed

In case of payments to resident Section 40(a)(ia) is applicable,which prescribes that any interest (S.194A), commission or brokerage (Sec 194H),rent,royalty,fee for professional services or fees for technical services (Sec 194J) amounts payable to a contractor or sub-contractor (Section 194C) on which tax is deductible at source and such tax is either not deducted or after deduction has not been paid within the time prescribed u/s 200(1),then these amounts,on which such default has been made,will not be allowed as expenditure.

However,there is a saving provided under provisos in both these clauses which provides that such sum shall be allowed as deduction in the year in which such tax has been paid

Here the question is, in case of less deduction of Tax or part deduction of tax, will the whole amount be disallowed. In my views, a clarification is required. However, on the principle of natural justice, proportionate deduction should be allowed.

The author is a member of the Institute and the views expressed herein are his personal views and do not necessarily represent the views of the Regional Council.