2016 (2) TMI 1239 - AT - Income Tax

Levy of interest u/s 201(1A) - calculation of amount - whether the term month could be given ordinary sense i.e. a period of 30 days or whether it could be treated as British Calendar Month as per General Clauses Act? - CIT(A) directed the Assessing Officer to work out interest by adopting period of 30 days as one month - HELD THAT - This issue is squarely covered in favour of the assessee by the case of CIT vs. Arvind Mills Ltd 2011 (9) TMI 244 - GUJARAT HIGH COURT as held that for the purposes of Section 244A term month must be given ordinary sense of term i.e. 30 days of period and not British calendar month as defined under section 3(35) of General Clauses Act. Similar view has been taken in the case of Oil Natural Gas Commission vs. ACIT (TDS) Surat 2015 (10) TMI 1006 - ITAT AHMEDABAD wherein it was held that levy of interest u/s 201(1A) is compensatory in nature and thus gap of time between point of time when tax ought to have been deducted at sources vis- -vis point of time when tax was actually deducted are to be seen and it is in this context that connotation of expression month is to be examined. In view of aforesaid decisions we do not find any infirmity in the order of the CIT(A) which is hereby upheld.

Summary

Issues:
Appeals filed by Revenue against orders of Commissioner of Income Tax for Assessment Years 2013-14 to 2015-16, involving interest on late payment of TDS and u/s 220(2).

Analysis:
1. The appeals raised by the Revenue in ITA No.2931/Ahd/2015 for AY 2013-14 revolve around the interpretation of the term 'month' for the purpose of interest levy u/s 201(1A). The dispute is whether 'month' should be considered as a period of 30 days or a British Calendar Month as per the General Clauses Act. The Assessing Officer calculated interest based on the British Calendar month, while the CIT(A) directed to consider 30 days as one month. The decision refers to the case of CIT vs. Arvind Mills Ltd, where the Gujarat High Court held that 'month' should be interpreted as 30 days for Section 244A. The ITAT also supported this view in the case of Oil & Natural Gas Commission vs. ACIT (TDS), Surat, emphasizing the compensatory nature of interest under u/s 201(1A). Consequently, the order of the CIT(A) was upheld in favor of the assessee.

2. The same issue regarding the interpretation of 'month' arose in other appeals as well. Given the similarity in facts, the reasoning applied in ITA No.2931/Ahd/2015 was extended to these cases. Consequently, there was no identified flaw in the CIT(A)'s order, leading to the upholding of the CIT(A)'s decision in these appeals too.

3. As a result, all appeals filed by the Revenue were dismissed based on the consistent interpretation of 'month' and the compensatory nature of interest u/s 201(1A). The final order was pronounced on 3rd February 2016 in Ahmedabad, concluding the matter.