2016 (8) TMI 773 - AT - Income Tax

Non-deduction/payment of TDS u/s 194C, 194J and 194I - levy of interest u/s 201(1A) against the assessee from April 2005 to March 2011 i.e. till the date of the order dated 31.3.2011 passed by the AO u/s 201(1) and 201(1A) - Held that - The provisions of Section 201(1A) of the Act are very clear that interest can only be charged till the date on which such tax was actually paid by the assessee. We are of considered view that interest being compensatory in nature, the assessee is liable to pay interest u/s 201(1A) of the Act till the date of actual payment of TDS by the assessee to the credit of Central Government and we do not see that how Revenue is aggrieved once outstanding TDS amount stood duly paid by the assessee to the Credit of Central Government and thus we order that Revenue is entitled for interest on outstanding amount of TDS only till the date of actual payment of TDS by the assessee to the Credit of Central Government and not till the date of framing of the order on 31-03-2011 by the AO u/s 201(1) and 201(1A) of the Act. We order accordingly.

Summary

Issues:
Interest charged under section 201(1A) of the Income Tax Act for non-deduction and non-payment of TDS.
Calculation of interest under Section 201(1A) of the Act.

Analysis:
The appeal was filed by the assessee company against the appellate order passed by the Commissioner of Income Tax (Appeals) for the assessment year 2006-07. The grounds of appeal raised by the assessee challenged the confirmation of interest levied by the Assessing Officer under section 201(1A) of the Act for the provision of expenses. Additionally, the appeal raised concerns about the computation of interest under Section 201(1A) of the Act until the date of the assessment order instead of the date of TDS payment in the subsequent year.

The case involved a survey action conducted against the assessee, leading to notices under section 201(1) and 201(1A) of the Act. The Assessing Officer disallowed a certain amount for non-deduction and payment of tax deducted at source under various sections. The AO raised demands for non-deduction and non-payment of TDS under section 201(1) of the Act, along with interest under section 201(1A) for the period from April 2005 to March 2011.

The Commissioner of Income Tax (Appeals) held that the assessee could not be held liable under section 201(1) of the Act as the TDS was paid in a subsequent assessment year. However, the demand for interest under section 201(1A) was confirmed, citing the compensatory nature of interest based on a Supreme Court decision. The assessee then appealed to the Tribunal against this decision.

During the Tribunal proceedings, the counsel for the assessee argued that interest under section 201(1A) should be charged only until the actual payment of TDS to the Central Government. The Tribunal observed that the assessee had paid the TDS in the subsequent assessment year, leading to the deletion of the demand under section 201(1) of the Act. Regarding interest under section 201(1A), the Tribunal held that interest is compensatory in nature and should be charged only until the date of actual TDS payment, not until the framing of the order by the Assessing Officer.

Ultimately, the Tribunal allowed the assessee's appeal for the assessment year 2006-07, ordering that interest under section 201(1A) should be charged only until the date of actual payment of TDS to the credit of the Central Government, not until the date of the AO's order.