2010 (1) TMI 775 - AT - Income Tax

Assessee failed to deduct sur-charge while deducting the tax Assessing Officer has not mentioned under what section surcharge is to be charged from the payment made under sec. 194(1) of the Act - Held that - Matter remanded to Assessing Office.

Summary

Issues:
1. Failure to deduct surcharge while deducting tax.
2. Interpretation of section 194(1) of the Income-tax Act, 1961.
3. Liability of the deductor for interest on delayed payment of surcharge.

Analysis:

1. The appeal before the Appellate Tribunal ITAT, Delhi involved the issue of failure to deduct surcharge while deducting tax for the assessment year 1997-98. The Assessing Officer treated the assessee as defaulting under sec. 201(1)/201(1A) of the Income-tax Act, 1961, as the assessee did not deduct surcharge while making payments. The learned CIT(Appeals) set aside the order of the Assessing Officer, stating that the Assessing Officer did not specify the section under which surcharge should be charged from payments made under sec. 194(1) of the Act. It was observed that sec. 194(1) does not provide for the levy of surcharge, leading to the vacating of the Assessing Officer's order.

2. The controversy also involved the interpretation of section 194(1) of the Income-tax Act, 1961. The representatives acknowledged that the assessee was required to deduct the surcharge. Citing the Supreme Court decision in Hindustan Cocacola Breweries (P) Ltd. vs. CIT, it was argued that if the payee had already paid the surcharge to the department in their income tax return, the department could not recover the tax from the deductor on the same income. The request was made to set aside the issue for verification by the Assessing Officer, and if the deductee had paid the surcharge, that amount should be excluded from the tax liability of the assessee. The liability of the assessee was limited to interest on delayed payment of surcharge.

3. Considering the facts and the Supreme Court's decision in Hindustan Cocacola case, the Tribunal set aside the issue for the Assessing Officer to verify if the deductee had paid the surcharge. If confirmed, the amount paid by the deductee should be excluded from the tax liability of the assessee. The Assessing Officer was directed to reexamine the levy of interest in case of any delay in surcharge payment, ensuring compliance with the law and providing the assessee with an opportunity to be heard. Ultimately, the appeal filed by the revenue was allowed for statistical purposes, and the decision was pronounced in open court on 20.1.2010.