No disallowance of expenditure on short deduction of TDS

There have been several instances where the tax authorities disallow the entire expenditure in case of short deduction of withholding tax (‘TDS’) or TDS under a different provision (say, at 2%) while the tax authorities allege that TDS should have been at a different rate (say, 10%). In a big relief, the Mumbai ITAT in the case of Dish TV has ruled that TDS short deduction will not will not trigger the disallowance provisions under the Income-tax Act, 1961. The tax tribunal opined that a disallowance can trigger only when the taxpayer fails to TDS or deposit the same with the authorities. This decision is a welcome relief and should be applied for cases under litigation.

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