The Income Tax Appellate Tribunal (ITAT), Ahmedabad bench ruled that the provisions of TDS are not applicable to recovery of late payment charges and Service Tax.
The taxpayer M/s. Prithvi Outdoor Publicity LLP incurred the payment to M/s Andhra Pradesh Road Transport Corporation (APSRTC) to the tune of Rs.10,48,125/-. The AO ruled that the taxpayer would not deduct the Tax Deducted at Source (TDS) on that and hence, disallowed the claim of the taxpayer.
The assessee claimed that the amount of Rs.10,48,125 /- consists of a late fee to the increase of Rs.9,77,429/- and service tax to the tune of Rs.1,16,155/-. Therefore, it was contended that there is no provision under the Act to deduct TDS on late fees and service tax, thus no addition would incurred.
Dr Arjun Lal Saini, Accountant Member, and Ms Madhumita Roy, Judicial Member who is on the division bench of ITAT see that the id counsel submitted that the taxpayer would file Rs 2,27,56,222/- to APSRTC, and out of this, the TDS on payment of Rs.2,17,08,097/- was deducted and balance amount of Rs.10,48,125/- (Rs.2,27,56,222-Rs.2,17,08,097) was managed through the APSRTC for the recovery of the late payment charges, services tax, and others.
And hence the taxpayers did not deduct the TDS on that, as a penal in nature. Excluding from the same, id counsel indeed submitted that the payee would comprise the sum of Rs 10,48,125 in its income and provided the tax. Since the specified amount is related to the TDS late fee and the service tax and hence the provisions of the TDS would be applicable to the late fee and the service tax thus we delete the addition of Rs 10,48,125/-, that the Assessing Officer made.
