2016 (6) TMI 966 - HC - Income Tax

Interest charged u/s 201(1A) - non tds on port services - Tribunal cancelled interest levy - Held that - Though assessee had not deducted tax from the amount payable to the contractor, the contractor had already paid the tax. It was held that if the person on whose behalf tax was to be deducted at source had paid such tax and that too at the time when it had become due, it would not be proper on the part of the Revenue to levy interest under section 201(1A) of the Act. See CIT vs. Rishikesh Apartments Cooperative Housing Society Ltd 2001 (6) TMI 17 - GUJARAT High Court - Decided in favour of assessee

Summary

Issues:
- Whether the Appellate Tribunal erred in canceling the interest charged under section 201(1A)?

Analysis:
The judgment involves a group of appeals concerning the same assessee and a common question raised by the Revenue regarding the cancellation of interest charged under section 201(1A). The appeal pertains to the assessment year 2007-08, where the respondent assessee, engaged in shipping support services, failed to deduct tax at source from payments received from Kandla Port Trust (KPT). Although the assessee was liable to be declared a defaulter under section 201(1) of the Income Tax Act, the Tribunal decided in favor of the assessee based on the KPT's payment of full tax by the due date. The Tribunal relied on a previous court decision and considered the advance tax payments made by KPT, leading to the cancellation of interest under section 201(1A).

In a similar case cited in the judgment, the Court had ruled that if the person for whom tax was to be deducted had already paid the tax when due, it would not be appropriate for the Revenue to levy interest under section 201(1A). The Court emphasized that as long as the tax was paid on time and in excess of the amount due, the Revenue should not benefit from charging interest on the already settled tax amount. The judgment highlighted the importance of considering whether the tax liability was met by the concerned party before imposing interest under section 201(1A).

Given the similarities in facts between the present group of appeals and the referenced case law, the Court concluded that no question of law arose. Consequently, the Tax Appeals were dismissed, upholding the Tribunal's decision to cancel the interest charged under section 201(1A). The judgment underscores the significance of timely tax payments and the implications for interest charges under the Income Tax Act.