1990 (10) TMI 117 - AT - Income Tax

Summary

Issues:
Appeals against cancellation of interest charged under s. 201(1A) of the IT Act for asst. yrs. 1978-79 to 1987-88.

Analysis:
1. The appeals were directed against the order passed by the Deputy Commissioner of Income-tax (Appeals) regarding the cancellation of interest charged under s. 201(1A) of the IT Act for various assessment years. The main contention was that the interest wrongly came to be cancelled.

2. The first appellate authority considered the submissions and observed that since Forms 15A were obtained and furnished, the assessee was justified in not deducting income tax at source from interest paid. This led to the cancellation of interest levied for the respective years.

3. The authority also justified the cancellation of interest up to the assessment year 1985-86 on the ground that the recovery of interest for those years was barred by limitation under the IT Act, making the action of the Income Tax Officer invalid.

4. The Revenue argued that the cancellation of interest was not based on separate and independent grounds, and if one ground was found to be incorrect, the entire order should be invalidated. However, the respondent contended that the relief was based on two distinct grounds: the absence of tax deduction obligation due to Form 15A certificates and the time-barred recovery proceedings under s. 231 of the Act.

5. After reviewing the orders, it was established that the assessee was not legally obligated to deduct income tax as they had obtained the necessary certificates. The failure to file statements in Form 27A did not warrant charging interest under s. 201(1A) of the Act, which is linked to the provisions of sub-s. (1) of s. 201.

6. The omission of s. 231 of the Act from April 1, 1989, was noted, affecting the assessment years under consideration. The period of limitation for commencing recovery proceedings was raised from one year to three years from October 1, 1984, impacting assessments made after that date.

7. The Tribunal confirmed the cancellation of interest based on two independent grounds: the absence of tax deduction obligation and the time-barred recovery proceedings. As a result, all Revenue's appeals were dismissed.