1. We are satisfied that the order under challenge is a just order. The rea-sorting appearing at paragraph 6 of the judgment and/or order under challenge reads as follows:
“In the present case before us, the assessee has deducted tax under section 194C(2) of the Act being payments made to sub-contractors and it is not a case of non-deduction of tax or no deduction of tax as is the import of section 40(a)(ia) of the Act. But the Revenue's contention is that the payments are in the nature of machinery hire charges falling under the head ‘rent’ and the previous provisions of section 194-I of the Act are applicable. According to the Revenue, the assessee has deducted tax at 1 per cent, under section 194C(2) of the Act as against the actual deduction to be made at 10 per cent, under section 194-I of the Act thereby lesser deduction of tax. The Revenue has made out a case of lesser deduction of tax and that also under different head and accordingly disallowed the payments proportionately by invoking the provisions of section 40(a)(ia) of the Act. The learned Commissioner of Income-tax, Departmental representative, also argued that there is no word like ‘failure’ used in section 40(a)(ia) of the Act and it referred to only non-deduction of tax and disallowance of such payments. According to him, it does not refer to the genuineness of the payment or otherwise but addition under section 40(a)(ia) can be made even though the payments are genuine but tax is not deducted as required under section 40(a)(ia) of the Act. We are of the view that the conditions laid down under section 40(a)(ia) of the Act for making addition is that tax is deductible at source and such tax has not been deducted. If both the conditions are satisfied then such payment can be disallowed under section 40(a)(ia) of the Act but where tax is deducted by the assessee, even under bona fide wrong impression, under wrong provisions of TDS, the provisions of section 40(a)(ia) of the Act cannot be invoked. Here, in the present case before us, the assessee has deducted tax under section 194C(2) of the Act and not under section 194-I of the Act and there is no allegation that this TDS is not deposited with the Government account. We are of the view that the provisions of section 40(a)(ia) of the Act has two limbs one is where, inter alia, the assessee has to deduct tax and the second where after deducting tax, inter alia, the assessee has to pay into the Government account. There is nothing in the said section to treat, inter alia, the assessee as defaulter where there is a shortfall in deduction. With regard to the shortfall, it cannot be assumed that there is a default as the deduction is not as required by or under the Act but the fact is that this expression, ‘on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction has not been paid on or before the due date specified in sub-section (1) of section 139’. This section 40(a)(ia) of the Act refers only to the duty to deduct tax and pay to the Government account. If there is any shortfall due to any difference of opinion as to the taxability of any item or the nature of payments falling under various TDS provisions, the assessee can be declared to be an assessee in default under section 201 of the Act and no disallowance can be made by invoking the provisions of section 40(a)(ia) of the Act.
Accordingly, we confirm the order of the Commissioner of Income-tax (Appeals) allowing the claim of the assessee and this issue of the Revenue's appeal is dismissed.”
2. We find no substantial question of law is involved in this case and, therefore, we refuse to admit the appeal.
3. Accordingly, the appeal is dismissed.
4. In view of dismissal of the appeal itself, the connected application has become infructuous and the same is also dismissed.
5. Urgent xerox certified copy of this order, if applied for, be supplied to the parties subject to compliance with all requisite formalities.