2014 (9) TMI 320 - HC - Income Tax

Levy and payment of interest u/s 201(1) and 201(1A) Liability to deduct TDS on payment of tax by employees Held that -The foreign employees of the assessee had paid tax in India either by way of advance tax or self-assessment tax - the AO had himself not levied interest commencing from the period of deductibility of tax till the end of the Financial Year relying upon Commissioner of Income Tax TDS vs. M/s. American Express Bank Ltd. 2011 (12) TMI 142 - DELHI HIGH COURT - if the employees had paid taxes as per the individual return/assessment, no amount as tax would be payable to that extent and the liability for interest would be only for the period commencing from the date of such tax was deductible to the date on which tax was actually paid Decided against revenue.

Summary

Issues:
1. Levy of interest under Section 201(1) and 201(1A) of the Income Tax Act, 1961.
2. Liability of the respondent to deduct tax at source from salaries paid to foreign technicians.

Analysis:
1. The respondent, a non-resident company, had a project office in India and engaged foreign technicians. The issue was whether the respondent was liable to deduct tax at source under Section 192 of the Act on the salaries paid to the foreign technicians. The Tribunal rejected the contention that they were not liable to deduct tax at source and upheld the levy of interest under Sections 201(1) and 201(1A). The Tribunal observed that interest was legitimate for delayed payment but disagreed with the period for which interest was levied. The Tribunal directed the Assessing Officer to re-compute the interest from the first date of April following the end of the relevant Financial Year till the date of actual payment, considering advance tax and self-assessment tax paid by the employees.

2. The foreign employees of the respondent had already paid tax in India through advance tax or self-assessment tax. The Tribunal, in line with a Division Bench decision, directed the Assessing Officer to re-compute the interest only for the period from the date tax was deductible to the date of actual payment. The Tribunal's decision was consistent with previous judgments that interest under Section 201(1A) is mandatory and not penal, and hence, cannot be waived based on the cause of default. The Tribunal's decision was further supported by the principle that if employees had paid taxes as per their individual returns, no additional tax would be payable, and interest liability would only be for the period between tax deductibility and actual payment.

In conclusion, the High Court dismissed the appeal by the Revenue, upholding the Tribunal's decision in favor of the respondent/assessee. The Court found no grounds for interference as the Tribunal's order was in accordance with legal provisions and previous judicial decisions.