2019 (7) TMI 178 - AT - Income Tax

Interest u/s 201(1A) - delay in deposit of TDS to the credit of Central Government ranging for the period from 15 days to 35 days - whether month is to be interpreted as period of 30 days and not British Calendar Month? - month and part of month - HELD THAT - Month is to be interpreted as period of 30 days and not British calendar. There are other judgments also relied upon by assessee wherein similar view has been taken. See ARVIND MILLS LIMITED 2011 (9) TMI 244 - GUJARAT HIGH COURT We allow the appeal of the assessee, by holding that for purpose of computation of interest payable u/s. 201(1A)(ii) of the 1961 Act read with Rule 119A(b) of the 1962 Rules, month is to be interpreted as period of 30 days and not British Calendar Month. However, now for the purpose of computation of interest payable by the assessee in accordance with our decision in this order, we are restoring the mater back to the file of AO for limited purpose of computing the interest payable by assessee u/s 201(1A)(ii). AO is directed to compute interest payable by the assessee u/s 201(1A) of the 1961 Act in accordance with our decision in this order.

Summary

Issues Involved:
1. Levy of additional interest under Section 201(1A) for late payment of Tax Deducted at Source (TDS).

Detailed Analysis:

1. Levy of Additional Interest Under Section 201(1A) for Late Payment of TDS:

The primary issue in this case is the levy of additional interest under Section 201(1A) of the Income Tax Act, 1961, for the late payment of TDS by the assessee. The assessee had deducted TDS in October 2013, which was due for deposit by 7th November 2013 but was actually deposited on 11th November 2013. The delay ranged from 15 to 35 days. The assessee had voluntarily computed and paid interest of ?5,73,046/- for the delay while filing the TDS return for the 3rd quarter of the financial year 2013-14. However, the Revenue computed the total interest at ?9,92,136/-, leading to an additional demand of ?4,19,090/-.

The Revenue's computation was based on considering any fraction of a month as a full month, leading to the interest being calculated for two months (October and November 2013). The assessee contended that the interest should be computed based on the actual number of days of delay, treating 30/31 days as one month.

The CIT(A) upheld the Revenue's computation, stating that Section 201(1A) explicitly mandates that interest should be calculated for any fraction of a month as a full month. The CIT(A) relied on the clear wording of Section 201(1A) and rejected the assessee's argument that the interest should be computed based on the actual number of days of delay.

The assessee appealed to the tribunal, arguing that the computation of interest should be based on the actual number of days of delay, supported by various judicial precedents. The tribunal considered the rival contentions and the material on record, including cited laws and judicial precedents.

The tribunal referred to several judicial precedents, including the decision of the Gujarat High Court in CIT v. Arvind Mills Limited, which held that the term "month" should be interpreted as a period of 30 days and not as a British calendar month. The tribunal also referred to decisions of the Allahabad High Court and the Delhi Tribunal, which supported the interpretation of "month" as a period of 30 days in the context of Section 201(1A).

The tribunal concluded that the consistent view taken by the courts and tribunals is that the term "month" should be interpreted as a period of 30 days for the purpose of computing interest under Section 201(1A). The tribunal allowed the assessee's appeal and directed the AO to recompute the interest payable by the assessee based on this interpretation.

Conclusion:

The tribunal allowed the appeal of the assessee, holding that for the purpose of computation of interest payable under Section 201(1A)(ii) read with Rule 119A(b) of the Income-tax Rules, 1962, the term "month" should be interpreted as a period of 30 days and not as a British calendar month. The matter was remanded back to the AO for recomputation of the interest payable by the assessee in accordance with this interpretation.