2024 (11) TMI 219 - AT - Income Tax

Levy of interest u/s 234C - failure on part of the payer to deduct TDS u/s 196D and 194LD - HELD THAT - Tax due on returned income means the tax chargeable on the total income declared in the return of income furnished by the assessee for the assessment immediately following the financial year in which the advance tax is paid or payable, as reduced by the amount of any tax deductible or collectible at source in accordance with the provisions of Chapter XVII on any income which is subject to such deduction or collection and which is taken into account in computing such total income. As seen that the advance tax is reduced by any tax deductible or collectible which means that even the legislators have taken care of liability of the payer to deduct tax at source on payments and to that extent, assessee is not required to pay any advance tax. In the case on hand, since the payers faulted in deducting tax at source, the assessee discharged its liability by paying the full tax. Therefore, in our considered opinion, the assessee cannot be levied with interest u/s 234C of the Act for the fault of the payers. As decided in Ngc Network Asia LLC 2009 (1) TMI 174 - BOMBAY HIGH COURT wherein the Hon ble High Court held that when a duty is cast on the payer to deduct and pay the tax at source, on payer's failure to do so, no interest under section 234B can be imposed on the payee assessee. We are of the considered view that it is not case of deferment in payment of advance tax on income as envisaged in Section 234C of the Act. Since the assessee has discharged the tax liability, no interest is leviable u/s 234C - Thus direct the AO to delete the impugned addition. Decided in favour of assessee.

Summary

Issues:
Levy of interest under section 234C of the Income Tax Act on the assessee.

Detailed Analysis:

1. Background: The appeal by the assessee was against the order of the ld. CIT(A)-58, Mumbai, pertaining to AY 2021-22, challenging the levy of interest under section 234C of the Act amounting to Rs. 51,75,514.

2. Facts of the Case: The assessee, a company incorporated in Singapore, made investments in debt securities and equity shares in India. The return filed declared a total income of Rs. 7,56,66,23,191. The issue arose when the payers did not deduct tax at source on some interest income, leading to a demand notice.

3. Arguments: The assessee contended that it paid full tax on the interest receipts as advance tax, despite the payer's failure to deduct tax at source. The assessee relied on legal precedents to support the argument that interest under section 234C should not be levied due to the fault of the payers.

4. Consideration of Authorities: The Tribunal considered the arguments and legal provisions, emphasizing that the assessee cannot be penalized for the payer's failure to deduct TDS. It was noted that the assessee diligently discharged its tax liability by paying the entire advance tax on the interest income.

5. Legal Provisions: Section 234C of the Act was analyzed, which deals with interest for deferment of advance tax. The Tribunal highlighted that the advance tax is reduced by any tax deductible or collectible at the source, indicating that the liability of the payer to deduct tax at source is considered.

6. Decision: Citing the decision of the Hon'ble Jurisdictional High Court of Bombay, the Tribunal concluded that no interest under section 234C can be imposed on the assessee when the payer fails to deduct tax at source. It was clarified that since the assessee discharged the tax liability, no interest is leviable under section 234C of the Act. Consequently, the AO was directed to delete the addition, and the appeal of the assessee was allowed.

This detailed analysis of the legal judgment provides insights into the issues raised, the arguments presented, the legal provisions considered, and the final decision reached by the Tribunal regarding the levy of interest under section 234C of the Income Tax Act.