ITAT Deletes Rs 1.16 Lakh Late Filing Fee U/S 234E As TDS Was Not Deducted

The Income Tax Appellate Tribunal (ITAT), Mumbai, has recently ruled in favour of an appellant who was hit with a Rs 1.16 lakh penalty for late filing of TDS returns.

The company, M/s. J Duncan Healthcare Pvt. Ltd., debited payments to two Russian companies named JSC OLS Ltd. and JSC Viterani for services. On these payments, the company deducted TDS (Tax Deducted at Source) at 10%.

However, the Russian companies did not have a PAN (Permanent Account Number) in India, due to which the assessee could not file the TDS returns. Later, the company reversed the entries and did not claim any payments to both the foreign companies. Since the company did not make payments and did not deduct TDS, it was not required to file the TDS return.

However, the Income Tax Department wrongly levied a late fee of Rs 1,16,000 under Section 234E for not filing TDS returns on time. The assessee challenged this with the ITAT Mumbai, claiming that the JCIT did not consider the fact that the services were not rendered by the foreign companies and therefore the company reversed the accounts. The company argued that since it did not deduct TDS, it is not required to file a TDS Return.

The ITAT agreed with the assessee and held that there was no question of filing any TDS return if the payment was not made and TDS was not deducted on it. Accordingly, the ITAT directed the AO to cancel the levy of the fee and delete the addition of Rs 1,16,000.