2011 (9) TMI 587 - HC - Income Tax

TDS - lessee deducted Tax at 15% instead of 20% - Owner paid differential tax with interest - Held That - no liability on the part of the assessee to pay any interest for short deduction of TDS as the owner has paid the said tax.

Summary

Issues:
1. Liability of the tenant to pay interest for short deduction of TDS.
2. Assessment of tax and interest on the tenant by the assessing authority.
3. Tribunal's decision on the liability of the tenant regarding tax and interest.
4. Appeal by the Revenue challenging the Tribunal's order.

Analysis:
The High Court judgment revolves around the issue of the tenant's liability to pay interest for the short deduction of TDS. The Tribunal held that once the landlord has paid the tax difference with interest, the tenant cannot be considered in default, absolving them of the liability to pay tax and interest. The assessing authority had initially claimed tax and interest from the tenant, leading to appeals and subsequent confirmation by the Commissioner. However, the Tribunal overturned these decisions based on the landlord's payment of the tax difference with interest, relieving the tenant of further financial obligations.

The court noted that the tenant had deducted 15% tax instead of the required 20%, making them potentially liable for the shortfall. The crucial point was whether the landlord had paid the tax with interest or just the tax difference. The judgment emphasized that if the landlord had settled the tax and interest, the tenant's liability ceased. However, if only the tax was paid, the tenant would still be responsible for the interest payment. The court directed the assessing authority to examine the relevant documentation, including returns and TDS certificates from both the tenant and the landlord, to determine the actual payments made.

In conclusion, the High Court set aside the previous orders and remanded the matter to the assessing authority for a detailed review. The authority was instructed to consider the owner's tax return, the amount paid, the timing of payments, and any interest charges. Subsequently, the authority was directed to make decisions based on the evidence presented, ensuring compliance with the law and fair treatment of the tenant in light of the landlord's payments.