2005 (8) TMI 83 - HC - Income Tax

Interest levied under section 201(lA) - When the assessee has paid more tax than the tax payable and refund is due, even tax deducted at source is counted, in such case, there is no justification for charging of interest under section 201 (lA). revenue appeal dismissed

Summary

Issues:
1. Justification of upholding the order of the Commissioner of Income-tax (Appeals) deleting the interest levied under section 201(lA) of the Act.

Analysis:
The High Court of Rajasthan considered the question of whether the Tribunal was justified in law in upholding the order of the Commissioner of Income-tax (Appeals) deleting the interest levied under section 201(lA) of the Act. The Tribunal had found that tax at source was to be deducted on the composite contract, including on the supply of material. The Revenue's appeals were directed against the direction of the Commissioner of Income-tax (Appeals) for deletion of interest charged under section 201(lA) of the Act. The Tribunal noted that the recipient had already deducted tax at source in full. The High Court emphasized that the provision of section 201 not only provides for the collection of tax but also for the levy and charge of interest. It was held that interest is to compensate the Revenue for the loss suffered due to late receipt of tax. The Court referred to previous decisions to support the mandatory and automatic nature of interest payment from the date when tax was deductible till the date it was actually paid.

The High Court further discussed the purpose of the levy under section 201(lA) to claim compensation for the amount that should have been deducted and deposited but was not done by the assessee. The Court highlighted that interest is mandatory and automatic, emphasizing the importance of paying interest even if the tax has been paid by the recipient at a later stage. The decision in CIT v. Rishikesh Apartments Co-operative Housing Society Ltd. was cited to support the view that no interest should be levied if the amount payable to the Revenue has been duly paid. The Court concluded that when the assessee has paid more tax than the tax payable and a refund is due, including tax deducted at source, there is no justification for charging interest under section 201(lA).

In light of the above analysis, the High Court dismissed the appeal at the admission stage, affirming the decision of the Commissioner of Income-tax (Appeals) to delete the interest under section 201(lA) of the Act after verifying the facts and supporting documents.