2022 (12) TMI 118 - SCH - Income Tax

Waiver of interest u/s 220(2A) - appropriate competent Authority rejected the application of the petitioner for waiver of interest while exercising the powers - HELD THAT - It is the case on behalf of the petitioner that as the dispute was pending for Mutual Agreement Procedure MAP resolution which subsequently came to be culminated in the year 2012 and the liability to pay the tax thereafter arose and therefore the petitioner shall be entitled to the waiver of interest u/s 220(2)(A)(ii) of the Act. The aforesaid has no substance. Merely raising the dispute before any authority cannot be a ground not to levy the interest and/or waiver of interest u/s 220(2A). Otherwise each and every assessee may raise a dispute and thereafter may contend that as the assessee was bona fidely litigating and therefore no interest shall be leviable. It is required to be noted that under Section 220(2) of the Act, the levy of simple interest on non-payment of the tax @ 1% p.a. is, as such, mandatory. We are in complete agreement with the view taken by the High Court.

Summary

Issues:
Waiver of interest under Section 220(2A) of the Income Tax Act, 1961.

Analysis:
The Supreme Court heard a case concerning the waiver of interest under Section 220(2A) of the Income Tax Act, 1961. The petitioner's application for waiver of interest was rejected by the competent authority and upheld by the High Court. The petitioner argued that since the dispute was pending for Mutual Agreement Procedure (MAP) resolution until 2012, the liability to pay tax arose thereafter, entitling them to interest waiver under Section 220(2)(A)(ii) of the Act. However, the Court found this argument lacking merit, stating that merely raising a dispute does not automatically exempt an assessee from interest payment or waiver under Section 220(2A) of the Act. The Court emphasized that the levy of simple interest on non-payment of tax at 1% per annum is mandatory under Section 220(2) of the Act, regardless of ongoing disputes or litigation.

The Court agreed with the High Court's decision and dismissed the Special Leave Petition. The judgment underscores the importance of adhering to the statutory provisions of the Income Tax Act, particularly regarding the levy of interest on unpaid taxes. It clarifies that the mere existence of a dispute or ongoing litigation does not absolve an assessee from the obligation to pay interest as mandated by the Act. The decision reaffirms the principle that statutory provisions must be strictly followed, and attempts to evade interest payments through prolonged disputes are not permissible under the law.