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Issues involved: Appeal against reduction of interest charged u/s 201(1A) for assessment years 1985-86 and 1986-87.
Summary: The appeal was filed by the Income-tax Officer challenging the reduction of interest charged u/s 201(1A) for the assessment years 1985-86 and 1986-87. The firm, as the assessee, had paid interest to M/s United Rosin Industries without deducting tax at source as required by section 194A of the Income-tax Act, 1961. The Deputy Commissioner of Income-tax (Appeals) reduced the interest levied, considering the advance tax payments made by the payee. The Revenue contended that the period covered by payee's advance tax payment should not be condoned. The assessee argued that if the payee had already paid the tax, there was no default on the part of the payer. The legal provisions regarding tax deduction at source were discussed, emphasizing the responsibility of the payer to deduct tax and pay it to the Government. The scheme aimed at recovering tax at source for specified incomes. The purpose of interest payment u/s 201(1A) was to compensate the Government for the delayed tax payment. The Madhya Pradesh High Court's decisions were cited to support the view that if the tax was paid by the payee, the payer should not be held liable for interest. The Tribunal upheld the Deputy Commissioner's decision, stating that the view taken was not incorrect. In conclusion, the appeal was dismissed, affirming the reduction of interest charged u/s 201(1A) for the assessment years in question.
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