1989 (6) TMI 78 - AT - Income Tax

Summary

Issues:
- Cancellation of interest levied under section 201(1A) of the Income-tax Act for four assessment years.
- Interpretation of provisions of section 201(1A) and its application in the case.
- Comparison of provisions of section 201(1) and section 201(1A).
- Effect of amendments made to section 201 by various Finance Acts.
- Consideration of agreed arrangements between assessee and ITO regarding interest payment.

Analysis:

The judgment by the Appellate Tribunal ITAT Amritsar deals with the cancellation of interest levied under section 201(1A) of the Income-tax Act for four assessment years. The Tribunal noted that while the amounts involved were small, the principle governing the appeals was of singular importance due to the absence of precedents. The Tribunal highlighted the importance of understanding the provisions of section 201(1A) in the context of tax deduction and interest payment. The Tribunal scrutinized the decision of the learned AAC, who had canceled the interest without considering the mandatory nature of interest under section 201(1A) and erroneously relied on a Tribunal decision related to non-deduction of tax at source.

The Tribunal referred to the judgment of the Madhya Pradesh High Court in a similar case involving the Life Insurance Corporation of India, where it was held that if the tax had been fully paid by the employee, the ITO had no jurisdiction to demand further tax from the employer. The Tribunal emphasized the distinction between the provisions of section 201(1) and section 201(1A), noting that while the former required satisfaction of non-deduction without reasonable cause for penalty imposition, the latter mandated interest payment without any such rider. The Tribunal also discussed the historical amendments made to section 201, including changes in the rate of interest over the years.

Furthermore, the Tribunal addressed the argument regarding agreed arrangements between the assessee and the ITO regarding interest payment under section 201(1A). The Tribunal concluded that such arrangements did not absolve the assessee from the mandatory payment of interest and reinstated the interest charged for the four years in question. The Tribunal held that the charging of interest under section 201(1A) was not akin to a penalty and was essential to ensure timely payment to the Revenue. Consequently, the Tribunal allowed the Revenue's appeals, overturning the AAC's order and upholding the interest charged under section 201(1A) for the respective assessment years.