2017 (4) TMI 723 - AT - Income Tax

Interest chargeable under section 201 (1A) - AO has charged interest up to 31st of March 2010 for the reason that from the copies of the income tax acknowledgement filed by the deductee the exact date of payment of taxes by the deductee hospitals cannot be ascertained - Held that - Interest under section 201 (1A) can be charged from deductor for failure to deduct tax from the date of default till the date of actual tax paid by the deductee only. We do not approve the order of the Ld. assessing officer of charging interest up to 31st of March 2010, as the coordinate bench has held that interest is required to be charged from the date of default till the date of actual tax paid by the hospitals. Even the circular No. 8 /2009 dated 24/11/2009 also said that the liability to charge interest under section 201 (1A) of the income tax act shall rest up to payment of taxes by the deductee on the assessee. In view of this we restore the issue of charging interest under section 201 (1A) to the file of the Ld. assessing officer to work out the interest from the date of default till the date of tax paid by the hospitals in each such case of default. The assessee is also directed to cooperate by furnishing the requisite details of the date of default and the date of payment of taxes by the hospitals for working out the interest chargeable under section 201 (1A) of the act.

Summary

Issues:
1. Interpretation of interest chargeability under section 201(1A) for failure to deduct tax.
2. Consideration of certificates for tax deduction and interest charge deletion.

Issue 1: Interpretation of interest chargeability under section 201(1A) for failure to deduct tax:
The case involved an appeal by the revenue against the order of the ld CIT(A) regarding the non-deduction of tax under section 194J on payments made by the appellant as third-party administrator services to hospitals. The central issue was the chargeability of interest under section 201(1A) of the Income Tax Act. The revenue contended that interest should be charged until the date on which the deductee filed their return of income. Both parties referred to a previous decision by a coordinate bench, which clarified that interest can be charged from the date of default until the date of actual tax paid by the deductee. The Tribunal upheld this interpretation, dismissing the revenue's appeal.

Issue 2: Consideration of certificates for tax deduction and interest charge deletion:
The appellant, engaged in providing administrative services to insurance companies, argued that approximately 95% of certificates were produced, and the remaining were unavailable due to logistic issues. The appellant sought deletion of interest charges based on this argument. The revenue objected, stating that interest should be charged until the date of filing the return of income if the actual tax payment date by hospitals is unknown. The Tribunal reviewed the case and found that interest should only be charged until the date of actual tax payment by hospitals. It directed the assessing officer to calculate interest based on this principle and ordered the appellant to provide necessary details for the assessment. Consequently, the Tribunal allowed the appeal of the assessee partially for statistical purposes.

In conclusion, the judgment clarified the interpretation of interest chargeability under section 201(1A) and emphasized the importance of providing accurate details for tax assessment and interest calculation.