2017 (8) TMI 235 - AT - Income Tax

Levy of interest on late deposit of tax deducted at source - Held that - Undisputedly the amount of TDS was debited from the bank account of the assessee on the due date i.e. October 7, 2009 and the delay in deposit of such tax by a day was on account of system and connectivity issues at the bankers end, which was beyond the control of the assessee. The learned Commissioner of Income-tax (Appeals) was thus not justified in holding the levy of interest on the alleged late deposit of tax deducted at source under section 201(1) read with section 201(lA) of the Act. He was, however, justified in deciding the issue of delay in payment of TDS in favour of the assessee questioned by the Revenue in view of the decision of the hon ble Supreme Court in the case of CIT v. Ogale Glass Works Ltd. 1954 (4) TMI 3 - SUPREME Court . In the present case the amount of TDS was debited from the bank account of the assessee on the due date instead of payment by cheque - Decided in favour of assessee.

Summary

Issues:
1. Delay in payments of TDS
2. Levy of interest on late deposit of tax deducted at source

Analysis:
1. The judgment involved cross-appeals where the Revenue challenged the first appellate order favoring the assessee on the delay in TDS payments, while the assessee contested the levy of interest on late tax deposit. The main issue centered on determining the date of remitting the e-tax payment, whether it was the date of remittance/debit on October 7, 2009, or the date of challan issuance on October 8, 2009.

2. The assessee argued that the TDS amount was debited from their bank account on the due date, attributing the delay to system and connectivity issues at the banker's end beyond their control. The Department, however, relied on the assessment order, contending that the date of payment should be the date of presenting the cheque to the bank, not the date of debit.

3. The Tribunal found that the TDS amount was indeed debited from the assessee's account on the due date, and the delay in deposit was due to external factors beyond the assessee's control. The Tribunal disagreed with the first appellate authority's decision to levy interest on the late tax deposit under section 201(1) and 201(1A) of the Act. The Tribunal also referenced the Supreme Court's decision in CIT v. Ogale Glass Works Ltd. [1954] 25 ITR 529 (SC) to support its findings.

4. Ultimately, the Tribunal dismissed the Revenue's appeal and allowed the assessee's appeal. The judgment clarified that the delay in payment of TDS was justified in favor of the assessee due to the circumstances surrounding the debit from the bank account on the due date. The decision highlighted the distinction between payment by cheque and direct debit, emphasizing that the levy of interest was unwarranted in this case. The judgment was pronounced on May 31, 2017.