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The Rajkot Bench of the Tribunal in the case of Essar Oil Ltd. vs. Income-tax Officer (77ITD92) point out to certain important considerations that are to kept in mind while discharging the duty of tax deduction. They are:

a) A certificate of lower or no deduction will in general has no retrospective effect and that the certificate issued on a particular date is applicable to the amount paid on or after that date. Date of application is not material.
b) The mere fact that the Assessing Officer of the payee/recipient allowed the payer assessee to credit or pay without deduction of tax at source in the preceding years would not prove the bonafides of the payer in the subsequent year. In other words it cannot be automatically presumed that tax is not deductible because the same was not deducted during the earlier years.
c) This action against any failure to deduct tax will follow even if in the case of the payee/recipient a refund is determined in assessment. In other words the theory of no loss to the revenue may not hold good. The Bench held that both the provisions for determination of refund and deduction of tax at source appearing in separate chapters have been brought on the statute for some specific purpose and both have to operate independently. The action of the department for failure to deduct tax has nothing to do with the refund, which is due to the payee/recipient.
d) In the case of payment to contractors tax was to be deducted on the total amount paid to the contractor including on sums paid for material inputs even if there is entered into a separate contract for the supply of materials as long as there is a composite work contract for execution of a job. In such cases the splitting will not help. This fact will hold good even in case of splitting of rental between rent and maintenance or fixtures.

Hence assessees must check out on these for corrective measures to avoid any liabilities in future.

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