2008 (11) TMI 687 - AT - Income Tax

Summary

Issues involved: Applicability of provisions of section 201 and 201(1A) for default in deducting tax at source.

Summary:

Issue 1: Applicability of provisions of section 201 and 201(1A) for default in deducting tax at source

The assessee, a subsidiary of Bank of Baroda engaged in credit card business, did not deduct tax at source on payments made to Master Card International and Visa International. The Assessing Officer held the assessee in default for not deducting tax under section 195. The CIT(A) upheld the decision, stating that adjustments in payments to non-residents are covered under "any other mode of payment." The Tribunal set aside the default under section 201(1) but held the assessee liable for interest under section 201(1A) for any delay in payment, citing it as compensatory in nature. The matter was remanded to the Assessing Officer for further examination.

This judgment clarifies the liability of an assessee in deducting tax at source under section 195 and the consequences of default under sections 201 and 201(1A). The Tribunal emphasized the importance of complying with tax deduction obligations while also recognizing the compensatory nature of interest under section 201(1A.