2011 (3) TMI 1029 - AT - Income Tax

Interest u/s 201(1A) - TDS u/s 194A - rule 119A of the Income Tax Rules - Circular No. 261 dated 8th August 79 - it is clear that there was no fault on behalf of the assessee because the amount was collected by the authorized bank on 7th July 2008 which was the due date for payment of TDS for the month of June 2008 - Held that the date of payment was deemed to be 4th July, 2008 and not 8th July 2008 i.e. the date on which the authorized bank credited the amount in the account of the Central Government - Decided in the favour of assessee

Summary

Issues:
Levy of interest under section 201(1A) of the Income Tax Act for alleged delay in depositing TDS.

Detailed Analysis:
Issue 1: Confirmation of levy of interest under section 201(1A) of the Income Tax Act
The appeal was filed against the order of the CIT(A)-III, Lucknow concerning the levy of interest under section 201(1A) of the Income Tax Act for delayed deposit of TDS. The DCIT (TDS) issued a notice for short deductions, including interest on late payment. The assessee contended that TDS was not required on interest payment to a bank under section 194A. Despite timely deposit of TDS, the DCIT levied interest due to a perceived delay in crediting the amount to the Central Government, which was disputed by the assessee.

Issue 2: Appeal to CIT(A) and subsequent arguments
The assessee appealed to the CIT(A), reiterating that the TDS was deposited on time and any delay in crediting the amount was the bank's fault, not theirs. The CIT(A), however, upheld the interest levy based on the date mentioned in the challan. The assessee further argued, citing a judgment, that the bank's delay should not make them liable for interest.

Issue 3: Tribunal's analysis and decision
The Tribunal noted that the TDS was deducted and deposited on time by the assessee. The authorized bank collected the amount on the due date but credited it to the Central Government a day later. The Tribunal emphasized that the delay was on the bank's part, absolving the assessee of any fault. Referring to a circular and a precedent, the Tribunal concluded that the payment should be deemed to have been made on the date of handing over the pay order to the bank. Consequently, the Tribunal set aside the interest levy, ruling in favor of the assessee.

Conclusion:
The Tribunal allowed the appeal, stating that the assessee was not at fault for the delayed crediting of TDS amount to the Central Government. The decision was based on the understanding that the bank's actions caused the delay, and the assessee had fulfilled its obligation by depositing the TDS on time.