September 2022

Late payment charges and service tax do not attract TDS and consequently payment of these amounts without deduction of tax at source does not attract provisions of s.40(a)(ia).

By Jagdish Punjabi, Chartered Accountant
Devendra Jain, Advocate

Reading Time 2 mins

27 Prithvi Outdoor Publicity LLP vs. CIT(A)
ITA No. 1013/Ahd./2019 (Ahd.-Trib.)
A.Y.: 2013-14
Date of order: 29th June, 2022
Section: 40(a)(ia)

Late payment charges and service tax do not attract TDS and consequently payment of these amounts without deduction of tax at source does not attract provisions of s.40(a)(ia).

FACTS
The Assessee incurred advertisement expenditure and made a payment of Rs. 2,27,56,222 to Andhra Pradesh Road Transport Corporation (APRTC). Out of Rs. 2,27,56,222, the Assessee deducted TDS on Rs. 2,17,08,097 and balance Rs. 10,48,125 was paid without deduction of tax. Payment of Rs. 10,48,125 on which no tax was deducted comprised Rs. 9,77,429 paid towards late fees and the balance of Rs. 1,16,155 towards service tax. The Assessee contended that since there is no provision to deduct tax on late fees and service tax, the said amount could not be disallowed u/s 40(a)(ia). Further, since the amount was penal in nature, no tax could be deducted on the same. Lastly, the Assessee contended that the recipient, i.e. APRTC, had included the said payment of Rs. 10,48,125 in its income and offered the same for tax; no disallowance could be made u/s 40(a)(ia).

The Assessing Officer, however, invoked the provisions of s.40(a)(ia) with respect to the payment of Rs. 10,48,125 made without deduction of tax at source.

Aggrieved, the Assessee preferred an

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