May 2010
TDS : S. 194A of Income-tax Act, 1961 : Interest other than interest on securities : Once a decree is passed, it is a judgment and order of Court which culminates into final decree being passed which has to be discharged only on payment of amount due unde
By K. B. Bhujle | Advocate
New Page 1
16 TDS : S. 194A of Income-tax Act, 1961 : Interest other
than interest on securities : Once a decree is passed, it is a judgment and
order of Court which culminates into final decree being passed which has to be
discharged only on payment of amount due under said decree : Judgment debtor is
not liable to deduct tax at source on interest component of decree.
[Madhusudan Shrikrishna v. Enkay Exports, 188 Taxman
195 (Bom.)]
In this case the dispute was settled and while passing the
order and decree, the counsel appearing on behalf of defendants raised a query
regarding deduction of TDS on the interest component of the decree.
Apprehension was expressed by the learned counsel appearing on behalf of
defendants that under the provisions of S. 194A of the Income-tax Act, on the
interest component which is payable, tax has to be deducted at source and if
it is not so done, the person who does not deduct tax at source on the
interest component would be liable for prosecution and penal consequences
under the provisions of the Income-tax Act. It was, therefore, submitted that
the defendants had withheld the payment of the amount which is payable to the
Income-tax Department as TDS and a certificate to that effect was also kept
ready.
The Bombay High Court held as under :
“Once a decree is passed, it is a judgment and the order of
the Court, which culminates into final decree being passed which has to be
discharged only on payment of the amount due under the said decree. The
judgment debtor, therefore, cannot deduct tax at source, since it is an order
and direction of the Court and, as such, would not be liable for penal
consequences for non-deduction of the tax due. Tax, if payable, can be decided
by the ITO after the amount is paid to the decree holder. The defendants,
therefore, were not entitled to withhold the payment on the pretext that it
had to be deducted as tax at source. Defendants would, therefore, pay the said
amount to the plaintiff and for that purpose they would not be liable for
non-deduction of tax at source as that issue had to be decided by the
income-tax authorities and if tax was payable, the same would be paid by the
plaintiff.”
