Non-deduction of TDS u/s 194H allowed if employee’s commission was part of salary income: HC

Case Details: PCIT v. Indofil Industries Ltd. - [2022] 135 taxmann.com 289 (Bombay)

Judiciary and Counsel Details

• • K.R. Shriram and Amit B. Borkar, JJ.
  • Akhileshwar Sharma for the Appellant.
  •  Harsh M. Kapadia for the Respondent.

Facts of the Case

Assessee-company made a provision for commission and later paid said commission to its Chairman and Managing Director (CMD). The Assessing Officer (AO) noted that assessee had not deducted TDS under section 194H on the provision made for a commission. Thus, he made disallowance under section 40(a)(ia).

On appeal, the CIT(A) reversed the order of AO, which the Tribunal further upheld. Aggrieved-AO filed the instant appeal before the Bombay High Court.

High Court Held

The Bombay High Court held that AO made disallowance contending that TDS was deductible when making provision at the year-end and assessee had failed to do so. It should be noted that section 192 of the Income-tax Act, unlike other TDS provisions, requires tax deduction at source under the head ‘Salary’ only at the time of payment and not otherwise.

The commission paid to the CMD was shown as part of salary in Form-16 for the relevant financial year. The assessee had deducted under section 192 on the entire salary income, including commission income. As per section 192, TDS is deductible from salary payment only at the time of payment and not at the time of making provision therefore no disallowance should be called for in the given circumstances.

List of Cases Referred to

• • CIT v. Nagri Mills Co. Ltd. [1958] 33 ITR 681 (Bom.) (para 8).

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