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Issues involved: Interpretation of section 201(1A) of the Income-tax Act, 1961 and rule 119A of the Income-tax Rules, 1962 regarding the levy of interest on tax deducted at source and the authority to waive such interest.
Summary: The High Court of Bombay, in the case involving orders u/s 201(1A) of the Income-tax Act, 1961, for the assessment years 1971-72 to 1978-79, upheld the decision of the Commissioner of Income-tax regarding the levy of interest on tax deducted at source. The petitioners had failed to deposit the deducted tax within the prescribed time, making them assessees in default. The Commissioner rejected the petitioners' request for waiver of interest charges under section 201(1A), stating that the levy of interest was mandatory and no authority had the power to waive or reduce it. The petitioners contended that rule 119A of the Income-tax Rules, 1962 should be applied for calculating interest, but the Commissioner disagreed, citing administrative instructions. The High Court dismissed the petition, emphasizing that the liability to pay interest at 12% per annum was immediate upon default and could only be computed based on the law in force at the time, ruling out the applicability of rule 119A introduced later. The Court clarified that section 201(1A) mandates the payment of simple interest, and there is no provision for waiver based on the unintentional nature of the default. In conclusion, the High Court upheld the decision regarding the levy of interest on tax deducted at source, emphasizing the mandatory nature of the payment under section 201(1A) of the Income-tax Act, 1961. The Court dismissed the petition, stating that the liability to pay interest arose immediately upon default and could not be waived based on the circumstances of the default or any other grounds.
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