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38. Amendment of section 191. |
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In section 191 of the Income-tax Act, for the Explanation, the following Explanation shall be substituted and shall be deemed to have been substituted with effect from the 1st day of June, 2003, namely:
Explanation.For the removal of doubts, it is hereby declared that if any person, including the principal officer of a company,
(a) who is required to deduct any sum in accordance with the provisions of this Act; or
(b) referred to in sub-section (1A) of section 192, being an employer,
does not deduct, or after so deducting fails to pay, or does not pay, the whole or any part of the tax, as required by or under this Act, and where the assessee has also failed to pay such tax directly, then, such person shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default within the meaning of sub-section (1) of section 201, in respect of such tax.".
Clause 38 seeks to amend section 191 of the Income-tax Act, which relates to direct payment.
The Explanation to the said section provides that if any person, referred to in section 200 and the principal officer of the company referred to in section 194, does not deduct the whole or any part of the tax and such tax has not been paid by the assessee direct, then, such person, the principal officer of the company shall, without prejudice to any other consequences which he or it may incur, be deemed to be an assessee in default as referred to in sub-section (1) of section 201 in respect of such tax.
The said Explanation thus covers in its ambit persons referred to in section 200. Section 200 in turn refers to a person deducting any sum in accordance with the provisions of Chapter XVII-B and who is required to pay within the prescribed time the sum so deducted to the credit of Central Government. Thus, this provision leaves room for an interpretation that a person required to deduct tax at source but not deducting the same will not be deemed an assessee in default under section 201. Such an interpretation is contrary to legislative intent.
The proposed amendment, therefore, seeks to substitute the said Explanation to clarify that where a person is required to deduct tax at source but fails to do so, he shall also be deemed to be an assessee in default under section 201.
This amendment will take effect retrospectively from 1st June, 2003.
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