2015 (10) TMI 1006 - AT - Income Tax

Computation of interest under section 201(1A) - what is the connotation of every month or part thereof appearing in Section 201(1A)- does it mean a calendar month or part thereof, or does it mean a period of one month or part thereof? - Held that - What is to be seen is the gap of time between the point of time when tax ought to have been deducted at source vis- -vis the point of time when the tax was actually deducted, and it is in this context that connotation of expression month is to be examined. Now, if one has to compute the months as per the British calendar, the period from 21st October to 3rd November, as taken in the first example, is less than a month because it is only when the same date comes in the next month, the period of one month can be said to have elapsed. Similarly, the period of 21st March to 18th March of the subsequent year, as per the British calendar, is less than 12 months since the period of twelve months has not elapsed in between these two dates. Coming to the case in hand, the period of time gap between 16th November 2010 to 14th December 2012 is less than 25 months because, on 14th December 2012, the period of 25 months has not elapsed from 16th November, 2010. The period which is elapsed between these two dates is 24 months and 28 days. Going by the provisions of the General Clauses Act, therefore, the period of time between 16th November 2010 to 14th December 2012 is less than 25 months, and, accordingly, interest under section 201(1A) could not have been levied for a period of more than 25 months. As a matter of fact, as evident from the discussions the expression month refers to a month reckoned according to the British calendar . A month as per the British calendar and a month reckoned (emphasis supplied by me) as per British calendar are not the same thing and cannot be used interchangeably. While former refers to a calendar month by itself, the latter refers to a period of time which qualified to be treated as a month . The subtle distinction between the scope of these two expressions cannot be ignored. Thus uphold the grievance of the assessee that, on the facts of this case, interest under section 201(1A) could not have been charged for more than 25 months. The Assessing Officer is, accordingly, directed to recompute the interest under section 201(1A) in the light of my observations above. - Decided in favour of assessee

Summary

Issues: Interpretation of the term 'every month or part thereof' in Section 201(1A) of the Income Tax Act, 1961.

In these eleven appeals, the main issue revolves around the interpretation of the term 'every month or part thereof' as mentioned in Section 201(1A) of the Income Tax Act, 1961. The controversy arises from a previous judgment by the Hon'ble Supreme Court directing that the assessee cannot be held as an assessee in default for a specific period, leading to a dispute regarding the calculation of interest under section 201(1A) for the relevant period. The Assessing Officer computed the interest for a period of 26 months, considering each calendar month as a separate unit, while the assessee argued that the total period should be considered as 24 months and 28 days. The crux of the issue is whether 'every month or part thereof' should be construed as a calendar month or a period of one month.

The judgment delves into the legal interpretation of the term 'month' within the context of Section 201(1A). The Tribunal examines the General Clauses Act's definition of 'month' as "a month reckoned according to the British calendar," emphasizing the need to calculate time according to the British calendar unless the context suggests otherwise. The Tribunal highlights that the levy of interest under section 201(1A) aims to compensate for the time value of money due to delayed tax deduction, emphasizing the importance of analyzing the time gap between the due date and the actual deduction. The Tribunal concludes that the period from the due date to the deduction date should be calculated based on the British calendar, where a month is considered to elapse only when the same date occurs in the subsequent month.

Furthermore, the Tribunal clarifies the distinction between a 'calendar month' and a 'month reckoned as per the British calendar,' emphasizing that these terms have different connotations and cannot be used interchangeably. The judgment rejects the argument that 'month' should be interpreted as a period of thirty days, asserting that it should be understood in alignment with the British calendar's reckoning of time. The Tribunal relies on first principles and the plain meaning of statutory provisions to resolve the issue, ultimately ruling in favor of the assessee's contention that interest under section 201(1A) could not have been charged for more than 25 months based on the specific time period in question.

In conclusion, the Tribunal allows all eleven appeals, directing the Assessing Officer to recompute the interest under section 201(1A) in accordance with the Tribunal's interpretation of the term 'every month or part thereof' as per the British calendar's reckoning of time.