[Section 248]: Appeal by Person Denying Liability to Deduct Tax

Under Section 248 of the Income Tax Act, 1961, a person who denies liability to deduct tax at source (TDS) under Chapter XVII-B can file an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)].

1. Who Can File an Appeal Under Section 248?

• Any deductor (payer)who disputes the obligation to deduct TDS on a payment.
• Example Cases:
  • A company argues that a payment was not taxablein the hands of the recipient.
  • A payer claims that the transaction is exemptunder a specific provision (e.g., Section 10).
  • A person disputes being treated as an “assessee in default”under Section 201(1).

2. Conditions for Filing Appeal

• The deductor must not have deducted tax(or deducted less tax) on the grounds that:
  • The payment was not chargeable to taxin the hands of the recipient.
  • The payer was not liable to deduct TDSunder the law.
• Note: If tax was already deducted and paid, this appeal provision does not

3. Procedure for Filing Appeal

1. Form 35must be filed electronically.
2. Time Limit:
   • 30 daysfrom the date of the TDS order/demand notice (extendable up to 1 year with sufficient cause).
3. Documents Required:
   • Copy of the order imposing liability(e.g., Section 201(1) order).
   • Proof supporting the claim that no TDS was required(e.g., exemption certificate, legal opinion).

4. Powers of CIT(A) in Section 248 Appeals

The CIT(A) can:

• Confirmthe AO’s order (uphold TDS liability).
• Cancelthe demand if the appellant proves no TDS was required.
• Modifythe order (e.g., reduce the demand if partial liability exists).

5. Key Judicial Precedents

• Hindustan Coca Cola Beverages Pvt. Ltd. vs. CIT (2007):
  • If the recipient has already paid taxon the income, the deductor cannot be held as “assessee in default”.
• CIT vs. Eli Lilly & Co. (India) Pvt. Ltd. (2009):
  • Deductor can argue no TDS liabilityif the payment is not taxable in the hands of the payee.

6. Practical Considerations

• Alternative Remedy: If tax was deducted but disputed, appeal under Section 246A(against penalty under Section 271C).
• Stay on Demand: Filing an appeal does not automatically stay recovery; a separate stay application may be needed.
• Departmental View: The Income Tax Department may challenge the appeal if they believe TDS was mandatory.

Conclusion

• Section 248provides a special remedy for deductors who genuinely believe they were not liable to deduct TDS.
• Must be filed before CIT(A)within 30 days (extendable).
• Success depends on proving that the payment was not taxableor TDS was not applicable.