The Income-tax Act does not prescribe any statutory time limit. But Hon’ble Bombay Tribunal in case of Raymond Woollen Mills Ltd. vs. ITO (1997) 57 ITD 536 (Bom) has held that where no such time limit has been prescribed, the Act requires to be done within a reasonable period of time. After considering various provisions under the Income tax which prescribe time limit for completion of proceedings other that than under section 201 the Hon’ble Tribunal concluded that a period of 4 years could constitute a reasonable time. This ratio has been applied in following cases:

Sahara Airlines Ltd vs. DCIT (2002) 83 ITD 11 (Del)

Mitsubishi Corporation vs. DCIT (2003) 85 ITD 414 (Del)
 

The Guwahati High Court in case of Om Prakash Gattani vs. ACIT (1996) 222 ITR 489 has held that once the tax has been deducted by the payer, the Income Tax authorities, cannot demand the same from the payee. Similar issue was considered by the Mumbai Tribunal in case of Capt. J. G. Joseph vs. JCIT (2005) 92 ITD 358 (Mum) where it was held that even though credit for TDS cannot be given to the assessee on his failure to submit the TDS certificate from his employer, no demand can be made on the assessee to the extent to which tax has been deducted at source u/s 192, till the IT authorities exercise their powers against the assessee’s employer to enforce the payment of tax deducted at source and issue of certificate in respect thereof.

The Bombay High Court’s latest decision in case of Yashpal Sahni vs. ACIT and Others, 211 CTR 1(Bom) Writ Petition No. 950 of 2006, order dated 18th July, 2007 held as follows,“From the language of section 205, it is clear that once the tax is deducted at source, the same cannot be levied once again on the assessee who has suffered the deduction. Once it is established that the tax has been deducted as source from the salary of the employee, the bar under section 205 of the Act comes into operation and it is immaterial as to whether the tax deducted at source has been paid to the Central Government or not, because elaborate provisions are made under the Act for recovery of tax deducted at source from the person who has deducted such tax.”

“In other words, even if the credit of the TDS amount is not available to the petitioner – assessee for want of TDS certificate, the fact that the tax has been deducted at source from salary income of the petitioner would be sufficient to hold that as per section 205 of the Act, the revenue cannot recover the TDS amount with interest from the petitioner once again.”
 

In case a company has taken car loan from a finance company not being a bank and has given post dated cheques towards quarterly instalments. The company has paid Rs. 2,00,000/- towards the principal amount and Rs. 45,000/- towards interest. What is the liability of the company to deduct tax at source?
 

The company is liable to deduct tax u/s 194A. One has to see as to what is the amount of interest during the whole year. According to section 194A tax has to be deducted at the time of credit, or at the time of payment thereof in cash or by issue of a cheque or a draft or by any other mode, whichever is earlier.

As per Circular No. 643, dated 22-1-1993 (1993) 200 ITR (St.) 181, in respect of cumulative deposits/debentures/bonds tax is required to be deducted at source every time the interest is credited in the account books of the payer and is not to be postponed till the maturity of the deposit/debenture/bond.

In view of above same method can be applied to the quarterly instalments also. Thus tax has to be deducted not to be deducted at the time of issue of post dated cheques but only when the instalment (interest portion) becomes due.