1995 (6) TMI 51 - AT - Income Tax

Summary

Issues Involved:
1. Charging of interest u/s 201(1A) for non-deduction of tax at source u/s 194A.
2. Validity of declarations filed on Form No. 15A versus Form No. 15H.
3. Computation of interest u/s 201(1A) and its applicability.

Summary:

Issue 1: Charging of interest u/s 201(1A) for non-deduction of tax at source u/s 194A

The assessee, a private limited company, did not deduct tax at source on interest payments to its Chairman for the assessment years 1983-84, 1984-85, and 1985-86. The Assessing Officer charged interest u/s 201(1A) for non-compliance. The CIT(A) upheld this decision, noting that the payee had not filed declarations on Form No. 15H, which overrides the provisions of section 194A.

Issue 2: Validity of declarations filed on Form No. 15A versus Form No. 15H

The assessee argued that declarations on Form No. 15A were filed by the payee, which should exempt them from deducting tax at source. The CIT(A) found that Form No. 15A had no effect due to the overriding provisions of section 197A, which requires Form No. 15H. However, the Tribunal held that the declarations on Form No. 15A were valid based on CBDT Circular No. 351, which provides an additional facility to the payee. Thus, no tax was required to be deducted at source, and no interest u/s 201(1A) was exigible.

Issue 3: Computation of interest u/s 201(1A) and its applicability

The assessee contended that interest u/s 201(1A) could not be computed as the date of actual payment of tax was unknown. The Tribunal agreed, noting that section 201(1A) does not have the concept of continuing default as found in sections 220(2) and 221. Therefore, the computational process fails, and no interest is chargeable. The Tribunal also noted that the principal liability for tax payment lies with the recipient of the income, and if the payee has paid the tax, the default for non-deduction at source effectively disappears.

Conclusion:

The Tribunal allowed the assessee's appeals, holding that no interest u/s 201(1A) was chargeable due to the valid declarations on Form No. 15A and the failure of the computational process. The revenue's appeals, which related to the computation of interest, were dismissed as infructuous.