2017 (12) TMI 534 - AT - Income Tax

TDS u/s 194A - non deduction of tds on interest payment - assessee-in-default under section 201(1) - as per assessee TDS is not made as the amount involved is only surrender of interest to these concerns - interest liability calculation under section 201(1A) - Held that - A.O. has given details at page-4 of the order in which the amount of interest paid and taxed under section 201(1) on interest paid and then interest liability is calculated. No infirmity have been pointed out in the order of the A.O. for calculating the interest liability payable by the assessee under section 201(1A). The assessee also failed to produce any order from the Competent Authority that assessee need not to make any TDS as the payee has paid the advance tax including the impugned transactions in the return of income. It is well settled law that charging of interest is mandatory under section 201(1A) of the I.T. Act. The provision for payment of interest are mandatory and automatic and interest has to be paid from the date on which the tax was chargeable till the date on which tax is actually paid. Even if recipient has paid the tax, for the short fall, the interest shall have to be paid by the assessee. Thus interest in question is chargeable. The assessee has failed to produce any details before the authorities below as well as before the Tribunal to point out any error in the computation of tax liability under section 201(1A) by the A.O. Therefore, in the absence of any evidence on record, in our view, the matter need not be remanded to the A.O. for fresh calculation of interest. - Decided against assessee.

Summary

Issues:
Charging of interest under section 201(1A) of the I.T. Act, 1961 for failure to deduct TDS on interest payments made to certain entities during F.Y. 2008-2009.

Detailed Analysis:
1. The Assessing Officer (A.O.) observed that the assessee failed to deduct TDS on interest payments to M/s. Indiabulls Financial Services Ltd. and S.E. Investment Ltd. during F.Y. 2008-2009, as required by Section 201(1) read with Section 194A of the I.T. Act, 1961. The A.O. rejected the assessee's argument that TDS was unnecessary since the payees had already paid tax on the amounts received. The A.O. calculated interest liability under section 201(1A) as ?28,92,314, based on the interest paid by the assessee and the tax liability of the payees.

2. The assessee challenged the levy of interest before the Ld. CIT(A) contending that interest should only be charged until the date the tax was actually paid, as per Section 201(1A). The Ld. CIT(A) upheld the interest levy, stating that TDS provisions aim to prevent revenue leakage, and interest under section 201(1A) serves as compensation for delayed tax deposits. The Ld. CIT(A) dismissed the appeal, emphasizing the mandatory nature of TDS provisions and the consequential levy of interest for non-compliance.

3. The Learned Counsel for the Assessee argued that since the payees had already paid taxes recorded in their books, the assessee should not be considered in default, and thus, no interest should be charged. The counsel requested a remand to the A.O. for recalculating interest based on the taxes paid by the recipients. However, the Ld. D.R. supported the interest levy under section 201(1A) as mandatory, citing relevant case laws.

4. The Tribunal found no merit in the assessee's appeal, noting that the A.O. correctly calculated interest liability under section 201(1A). The Tribunal emphasized that interest is mandatory and automatic from the date the tax was due until it was paid, irrespective of the payees' tax payments. Since the assessee failed to provide evidence or orders exempting TDS, the interest charge was deemed valid. The Tribunal dismissed the appeal, stating that the assessee failed to demonstrate any errors in the interest calculation or justify interference.

5. The Tribunal upheld the interest levy under section 201(1A) and dismissed the assessee's appeal, concluding that no grounds for interference were established, and the appeal lacked merit. The Tribunal affirmed the charging of interest for failure to deduct TDS on interest payments, as mandated by the I.T. Act, 1961.

In conclusion, the Tribunal upheld the levy of interest under section 201(1A) against the assessee for not deducting TDS on interest payments, emphasizing the mandatory nature of TDS provisions and the compensatory purpose of interest charges for delayed tax deposits.