I-T Unearths over Rs 3,500 Crore TDS Default by Oil and Telecom Firms in Delhi

The Income Tax Department has detected TDS default of more than Rs 3,500 crore after it surveyed a major oil company and a telecom operator in the national capital, the CBDT said on Wednesday.

It called these instances a "major breakthrough".

In the case of the oil firm, the CBDT said that Tax Deducted at Source (TDS) default of about Rs 3,200 crore was detected.

"The defaults included short deduction of tax and non-deduction of tax, respectively. Short deduction of tax pertained to TDS under section 194J (of the I-T Act) for several years on payment of fee for technical services for installation and maintenance of high-tech oil refineries, payments for chemical process of re-gasification and transportation of LNG," it said.

"Default of non-deduction was detected on composite contracts involving service and purchase of products on which TDS at the rate of 2 per cent should have been deducted, but which was not deducted resulting in the said default," the CBDT said in a statement.

In the case of the telecom firm, the TDS default amounts to Rs 324 crore.

"The company did not make the required TDS of 10 per cent under section 194J of the I-T Act on technical contracts worth Rs 4,000 crore. The amount is further liable to go up once the enquiry is completed," it said.

The Central Board of Direct Taxes (CBDT), which frames policy for the tax department, did not name the entities involved.

In a similar action, the department found several hospitals in Delhi were "openly flouting" norms of TDS and Tax Collected at Source (TCS) and were paying less tax to the department.

"During survey at two premier hospitals, one with more than 2,500 bed capacity and another with 700 beds, it was found that the former was not making any TDS on construction contracts as statutorily required while the latter was deducting tax at the rate of 10 per cent only on salary paid to doctors, instead of the present TDS rate of 30 per cent applicable for salary payments," the CBDT said.

It added that enquiries made during the survey revealed that the terms of appointment between the hospital and the doctors indicated an employer-employee relationship on which the hospital was required to deduct tax at 30 per cent instead of 10 per cent as was being made by the hospital.

"TDS defaults of Rs 70 crore and Rs 20 crore, respectively were detected in the said hospitals," the statement said.

Further probe found that the hospitals were also "not making" the required TDS at 10 per cent from the maintenance charges paid for the hi-tech sophisticated operation theatre and diagnostic equipments.

It had also been seen that many hospitals were still not complying with the TCS norms that came into effect from June 1, 2016 under which, on any cash payment received in excess of Rs 2 lakh, the hospital was required to collect TCS at the rate of 1 per cent and deposit it to the government account.

The department detected similar irregularity or TDS default in the case of a real estate group of Delhi against which it conducted a survey early this week.

"Verification and analysis indicated outstanding TDS liability and interest payable of Rs 214 crore," it said.

The CBDT said the department has stepped up enforcement action against TDS default cases as this category of revenue contributes to more than 45 per cent of the total direct tax collection in the country.

As per the rules, it said TDS has to be paid to the credit of the central government within seven days from the end of the month in which the deduction is made.