Withholding Tax Default Bites The Payer After 10 Years

In a recent judgement (M/s Mass Awash Private Limited v CIT (International Taxation) [2017] 83 taxmann.com 306 (Allahabad)) (Judgment) a division bench of the Hon'ble Allahabad High Court (High Court) upheld recovery proceedings initiated against the payer for failure to withhold taxes from the payment which was made to a 'non-resident' 10 years ago.

Interestingly, section 201 of the Income-tax Act, 1961 (IT Act) provides that with respect to payments made to a 'resident', recovery proceedings cannot be initiated against the payer after the expiry of seven years from the end of the financial year in which such failure happened.

However, with respect to payments to a 'non-resident', no such limitation period has been prescribed. In this context, the High Court held that in the absence of any such statutory limitation period, while the proceedings had to be initiated within a 'reasonable period'; the action of the tax authorities (IT Department) was valid as the