2020 (8) TMI 505 - AT - Income Tax

Levy of interest u/s. 201(1A) of the Act for delay in deduction of tax at source - HELD THAT - It is not in dispute that TTML filed 2018 (2) TMI 192 - BOMBAY HIGH COURT and the Hon'ble High Court quashed the order passed by the Assessing Officer withdrawing the exemption certificate issued to the assessee for NIL deduction of TDS. By virtue of the order of the Hon'ble Bombay High Court quashing the withdrawal order passed by the TDS Officer, the certificate dated 04.05.2017 issued by the AO for NIL rate of tax got revived whereby the position prior to cancellation of the certification on 23.10.2017 was restored. In view of a fresh certificate issued for NIL TDS and is applicable for the period 28.04.2017 to 31.03.2018 NIL certificate got revived and the question of deduction of TDS will not arise. In that case there cannot be any delay. In the circumstances there is no question of levy of interest u/s. 201(1A) of the Act. Thus, we direct the Assessing Officer to delete the interest levied u/s. 201(1A) of the Act. Appeal of the assessee is allowed.

Summary

Issues:
Levy of interest u/s. 201(1A) for delay in deduction of tax at source.

Analysis:
The appeal was filed against the order of the Learned Commissioner of Income Tax (Appeals) regarding the levy of interest u/s. 201(1A) for delay in tax deduction. The assessee company received a Nil rate certificate from TTML but did not deduct tax at source as per the certificate. The TDS Officer later canceled the certificate, leading to the assessee realizing the cancellation only in December 2017. The company then recovered tax at source and paid it to the Government in January 2018. The Bombay High Court held the cancellation order as bad and quashed it. The Assessing Officer levied interest for the delay, which the Ld.CIT(A) upheld.

The assessee argued that a new TDS exemption certificate was issued for the entire period, and the demand arose due to payments made in November 2017, while TDS was deducted and paid in January 2018. The counsel contended that there was no "late deduction" as the certificate was valid for the financial year 2017-18. Therefore, no interest was payable for any delay.

The ITAT noted that the Bombay High Court quashed the withdrawal of the exemption certificate, reviving the NIL rate certificate issued to the assessee. With a fresh certificate applicable for the relevant period, the question of TDS deduction did not arise, eliminating any delay. Consequently, the ITAT directed the Assessing Officer to delete the interest levied under section 201(1A) of the Act.

The appeal of the assessee was allowed, and the ITAT pronounced the order in July 2020 due to delays caused by the COVID-19 pandemic, following the guidelines of the ITAT Rules and the decisions of the Bombay High Court.