Uttarakhand High Court
Commissioner Of Income Tax vs Samsung Heavy Industries Company … on 10 July, 2025
2025:UHC:5945-DB
RESERVED JUDGMENT
IN THE HIGH COURT OF UTTARAKHAND
AT NAINITAL
THE HON'BLE CHIEF JUSTICE MR. G. NARENDAR
AND
THE HON'BLE JUSTICE Mr. ALOK MAHRA
INCOME TAX APPEAL NO.10 of 2024
Commissioner of Income Tax,
International Taxation-3, New Delhi. ...Appellant
Versus
Samsung Heavy Industries Company Limited
C/o Price Wate House Coopers Pvt. Limited,
Building No.10, 17th Floor, Tower-C,
DLF, Cyber City Gurgaon 122002
PAN AAJCS7859K. ...Respondent
(Mr. Hari Mohan Bhatia, Advocate for the appellant)
(Mr. Arijit Prasad, Senior Advocate assisted by Mr. Pulak Raj Mullick, Advocate
for the respondent)
Reserved on :24.06.2025
Delivered on :10.07.2025
ALOK MAHRA, J.
JUDGMENT
The present Income Tax Appeal has been
filed by the Commissioner of Income Tax under Section
260-A of the Income Tax Act, 1961, assailing the order
2025:UHC:5945-DB
dated 22.12.2023 passed by Income Tax Appellate
Tribunal, Dehradun in ITA No.873/DEL/2017 for
Assessment Year 2012-2013.
2. Facts of the case, in brief, are that Samsung
Heavy Industries Company Limited (respondent herein)
filed its return of income under Section 139(1) of the
Income Tax Act, 1961 on 29.09.2012, declaring an
income of ₹51,79,380/-; that the return of income was
selected for scrutiny assessment and the notices under
Section 143(2) and Section 142(1) of the Income Tax
Act, 1961 were served upon the respondent; that on
12.05.2015, the Assessing Officer completed the
assessment and passed the final assessment order
under Section 143(3) of the Income Tax Act at total
income of ₹117,11,60,400/-; that against the order
passed by the Assessing Officer, the assessee
(respondent herein) preferred an Appeal before the
Commissioner of Income Tax (Appeals)-2, Noida; that
the Commissioner of Income Tax, vide his order dated
19.12.2016 in Appeal No. 36/CIT(A)-2/2015-16, partly
allowed the Appeal of the assessee but uphold the
additions of ₹2,81,90,744/- and ₹4,20,03,868/- made
for short-deduction of tax at source under Section
40(a)(ia) in respect of payments made for Interior and
Electrification Works, and observed as under:
“5.18 Recently, in the Kerala High Court in
the case of P V S Memorial Hospital Ltd. held
that if the tax is deductible under Section
194J of the Act but is deducted under Section
194C of the Act, the disallowance under
Section 40(a)(ia) of the Act is still applicable.
The High Court observed that the expression
2
2025:UHC:5945-DB‘tax deductible at source under Chapter XVII-
B’ occurring in Section 40(a)(ia) of the Act
has to be understood as tax deductible at
source under the appropriate provision of
Chapter XVII-B of the Act. Further, the latter
part of this Section that such tax has not
been deducted again refers to the tax
deducted under the appropriate provision of
Chapter XVII-B of the Act.”
3. Against the order of learned Commissioner of
Income Tax (A)-2, Noida for A.Y. 2012-2013 dated
19.12.2016, both, assessee and revenue filed Appeals
before the Income Tax Appellate Tribunal. The grounds
raised by the assessee in his Appeal, before the Income
Tax Appellate Tribunal, are as under: –
“1.2. Without prejudice to the above, the Ld.
CIT(A) erred in applying the provisions of
Section 40(a)(ia) without appreciating that
the same is not applicable in the cases of
short deduction of taxes.
1.3. Without prejudice to the above, the
CIT(A) failed to understand that provisions of
section 40(a)(ia) is applicable only to those
expenses which are outstanding at the end of
the year.”
4. Learned Income Tax Appellate Tribunal vide
order dated 22.12.2023 allowed the Appeal filed by the
assessee and held as under: –
“13. The only issue is to be decided in this
appeal of the assessee is whether the
provisions of section 40(a)(ia) of the Act
could be made applicable for short deduction
of tax at source.
14. We have heard the rival submission and
perused the material available on record. It is
not in dispute that the assessee made
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2025:UHC:5945-DBpayments to Arjun Engineering Pvt. Ltd. and
Builcraft Interior Pvt. Ltd and deduced tax at
source @2% thereon in terms of section
194C of the Act for carrying out electrification
work and interior work respectively. The
revenue concluded that the said work falls
under the limb of professional services and
fee for technical services warranting
deduction of tax at source u/s 194J of the Act
@10%. Since the assessee had not deducted
tax at source in terms of section 194J of the
Act, the ld AO proceeded to disallow the
expenses u/s 40(a)(ia) of the Act. Now the
short question that arises for our
consideration is whether the provision of
section 40(a)(ia) of the Act per se could be
made applicable for short deduction of tax at
source. This issue is no longer res integra in
view of the decision of Hon’ble Calcutta High
Court in the case of S. K. Tekriwal in ITA No.
183/2012 GA No. 2067/2012 dated
03.12.2012 wherein it had been categorically
held that section 40(a)(ia) of the Act cannot
be made applicable to short deduction of tax
at source and the disallowance made was
deleted. Further the Hon’ble Delhi High Court
in the case of PCIT Vs. Future First info
Services Pvt. Ltd in ITA No. 195/2022 dated
14.07.2022 had also given the same
proposition. The ld CIT(A) however relied on
the decision of the Hon’ble Kerala High Court
in the case of PVS International Hospital Ltd
reported in 380 ITR 284 (Ker) and decided
the issue against the assessee. As could be
seen above, none of the High Court decisions
referred are the decisions rendered by the
Hon’ble Jurisdictional High Court. The Hon’ble
Supreme Court in the case of Vegetable
Products Ltd reported in 88 ITR 192 had held
that when there are divergent views of
various non- Jurisdictional High Courts on an
identical issue, the construction that is
favourable to the assessee should be
considered. Respectfully following the said
decision of the Hon’ble Supreme Court, we
are inclined to follow the ratio laid down by
4
2025:UHC:5945-DBthe Hon’ble Calcutta High Court and decision
rendered by the Hon’ble Delhi High Court
referred (supra) and hold that section
40(a)(ia) of the Act cannot be made
applicable for short deduction of tax at
source. Accordingly, the ld AO is hereby
directed to delete the disallowance thereon.
The grounds raised by the assessee are
allowed.”
5. Learned counsel for the appellant submitted
that admittedly this is a case pertaining to short
deduction of T.D.S. The T.D.S. was deducted by the
assessee under Section 194C at the rate of 2 percent,
instead of deduction under Section 194J at the rate of
10 percent, therefore, the Assessing Officer invoked the
provision under Section 40(a)(ia) of the Income Tax
Act, 1961. In order to buttress his argument, learned
counsel for appellant placed reliance upon the
judgment rendered by High Court of Kerala in the case
of “Commissioner of Income Tax Vs. PVS Memorial
Hospital Ltd.“, reported in (2016) 380 ITR 284
(Kerala), wherein the Court, in paragraph no.9, held as
under:
“9. If Section 40(a)(ia) is understood in the
manner as laid down by the Apex Court, it
can be seen that the expression “tax
deductible at source under Chapter XVII-B”
occurring in the Section has to be understood
as tax deductible at source under the
appropriate provision of Chapter XVII-B.
Therefore, as in this case, if tax is deductible
under Section 194J but is deducted under
Section 194C, such a deduction would not
satisfy the requirements of Section 40(a)(ia).
The latter part of this Section that such tax
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2025:UHC:5945-DB
has not been deducted, again refers to the
tax deducted under the appropriate provision
of Chapter XVII-B. Thus, a cumulative
reading of this provision, therefore, shows
that deduction under a wrong provision of law
will not save an assessee from Section
40(a)(ia).”
6. Per contra, Mr. Arijit Prasad, learned Senior
Counsel assisted by Mr. Pulak Raj Mullick, learned
counsel for the respondent (assessee) submitted that
the Income Tax Appellate Tribunal has rightly relied on
the law laid down by Hon’ble Calcutta High Court in the
case of Commissioner of Income Tax Vs. S.K. Tekriwal,
reported in [2014] 361 ITR 432 (Calcutta).
7. Learned Senior Counsel for the respondent
placed reliance on the judgment rendered by Hon’ble
Supreme Court in the case of Commissioner of Income
Tax Vs. Vegetable Products Ltd., reported in [1973] 88
ITR 192 (SC), wherein it is held that when there are
divergent views of various non-jurisdictional High
Courts on an identical issue, the construction that is
favourable to the assessee should be considered.
8. In view of the law laid down by Hon’ble
Supreme Court in the aforesaid case, this Court has no
hesitation in upholding the finding returned by learned
Income Tax Appellate Tribunal, wherein it has held that
Section 40(a)(ia) of the Income Tax Act, 1961 cannot
be made applicable to short deduction of tax at source
and the disallowance made was directed to be deleted.
This finding of learned Income Tax Appellate Tribunal is
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2025:UHC:5945-DB
based on the judgment rendered by Hon’ble Calcutta
High Court in the case of Commissioner of Income Tax
Vs. S.K. Tekriwal (supra). Learned Income Tax
Appellate Tribunal have negated the submission of the
revenue, which relied on the decision of Kerala High
Court in the case of Commissioner of Income Tax Vs.
PVS Memorial Hospital Ltd.(supra), by relying on the
judgment passed by the Hon’ble Apex Court in the case
of “Commissioner of Tax Vs. Vegetable Products“,
reported in [1973] 88 ITR 192 (SC), wherein it was
held that when there are divergent views of various
non-jurisdictional High Courts on an identical issue, the
construction that is favorable to the assessee should be
considered.
9. Learned counsel for the appellant further
submitted that the judgment of Hon’ble Kerala High
Court has been challenged before the Hon’ble Supreme
Court in Special Leave to Appeal No. 26075-26076 of
2016 M/s. PVS Memorial Hospital Ltd. Vs. The
Commissioner of Income Tax and, vide order dated
02.11.2018, the Hon’ble Supreme Court granted leave
in the matter and now it has been converted to Civil
Appeal No(s). 10915-10916/2018 and, as per the
website of Hon’ble Supreme Court, the case is ripe-up
for final hearing and is still pending consideration
before the Hon’ble Supreme Court, therefore, the
hearing of present Appeal may be deferred till decision
in the aforesaid Civil Appeal.
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2025:UHC:5945-DB
10. We do not find any infirmity in the order of
the Income Tax Appellate Tribunal.
11. In the light of above observations, in our
considered view, no substantial question of law arises
for consideration in the present Appeal and, therefore,
we refuse to admit the Appeal.
12. Accordingly, the Income Tax Appeal stands
dismissed. However, liberty is granted to the Revenue
to approach this Court, if the aforesaid Civil Appeal is
decided in their favour and the order passed by Hon’ble
Kerala High Court is upheld.
(G. NARENDAR, C.J.)
(ALOK MAHRA, J.)
Arpan
ARPAN
Digitally signed by ARPAN JAISWAL
DN: c=IN, o=HIGH COURT OF UTTARAKHAND,
ou=HIGH COURT OF UTTARAKHAND,
2.5.4.20=eabb68a3895e41937c266c23964c04853654
45e3a20dddb7393398f9fe45ba3e,
JAISWAL
postalCode=263001, st=UTTARAKHAND,
serialNumber=060FC17022BEAE3DE215D68D9D454
C5109CB987446351E4DF04AADAA2C2CEA66,
cn=ARPAN JAISWAL
Date: 2025.07.10 11:32:35 +05’30’
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