2013 (12) TMI 1109 - AT - Income Tax

Levy of interest u/s 201(1A) Held that - Following Solar Automobiles India (P) Ltd v. Deputy Commissioner of Income-tax 2011 (9) TMI 637 - KARNATAKA HIGH COURT - The interest is payable for the period it is not paid after deduction - The principal liability of paying tax is that of the creditor and a statutory duty is cast on the debtor to deduct tax on the income of interest payable and remit the same to the company irrespective of liability of the principal debtor - The AO has to find out whether the creditors (hospitals) have filed their returns and paid the taxes. If they have filed the returns and paid the taxes, the liability of the asessee ceases from the day they have paid the taxes - This exercise has not been done by the AO - He had adopted the due date of filing of return of income for the purpose of calculation of interest u/s 201(1A) The issue was restored for fresh decision.

Summary

Issues:
- Appeal against levy of interest u/s 201(1A) of the Act till the due date of filing of returns of income for relevant financial years.

Analysis:
The Appellate Tribunal ITAT Bangalore dealt with six appeals by an assessee company challenging the CIT (A)'s order confirming the action of the AO (TDS) on the levy of interest u/s 201(1A) of the Act. The issue revolved around the assessee's failure to deduct TDS on payments to hospitals, leading to the AO treating the assessee as 'an assessee in default' and levying interest for multiple assessment years. The CIT (A) had directed the AO to re-compute the interest only till the date of payment of taxes by the hospitals. However, the AO calculated interest till the due date of filing returns, citing reasons related to tax payments and lack of information.

The assessee contended that the AO's action was contrary to the CIT (A)'s directions and misinterpreted the date of filing returns as the date of tax payment by hospitals. The CIT (A) noted judicial precedents and held that interest u/s 201(1A) should be levied only till the date of payment of taxes by the payee, emphasizing the importance of tax filing and payment. The assessee further argued for summoning hospitals for relevant information, relying on a High Court ruling in a related case.

Upon careful consideration, the Tribunal referred to the High Court's observations emphasizing the need to verify if the hospitals had filed returns and paid taxes to determine the assessee's liability accurately. The Tribunal found the AO's approach of using the due date of filing returns for interest calculation contrary to the legal principles and directed a re-evaluation of interest liability. Consequently, the appeals for the assessment years 2004-05 to 2009-2010 were treated as allowed for statistical purposes, indicating a favorable outcome for the assessee.

In conclusion, the Tribunal's detailed analysis highlighted the importance of accurate interest calculation based on tax filing and payment by payees, emphasizing compliance with legal principles and judicial precedents. The judgment provided clarity on the correct approach for determining interest liability under section 201(1A) of the Act, ensuring a fair resolution of the dispute in favor of the assessee.