2017 (12) TMI 59 - HC - Income Tax

Refusal to waive interest under Sections 234A, 234B and 234C - disallowance for want of deduction of tax at source under Section 40(a)(ia) - Held that - This Court is of the opinion that there is no error in the impugned order passed by the respondent Chief Commissioner of Income-tax. It is clearly and categorically held that he has no discretion under the CBDT Instructions or Circular dated 26.6.2006 inasmuch as the petitioner during the contemporary period itself very well knew that non- deduction/remittance would be disallowable for want of deduction of tax at source under Section 40(a)(ia) of the IT Act. Therefore, such additions to the returned income cannot be said to have arisen or accrued after the due date of payment of first or subsequent instalment of advance tax which was neither anticipated nor was in contemplation of the assessee and therefore in such circumstances, levy of interest under Sections 234A, 234B and 234C was automatic and the same cannot be waived. - Decided against assessee.

Summary

Issues:
Challenge to order refusing waiver of interest under Sections 234A, 234B, and 234C of the Income-tax Act, 1961.

Analysis:
The petitioner, M/s Gaonkar Mines, challenged the order of the Chief Commissioner of Income-tax (CCIT) refusing to waive interest under Sections 234A, 234B, and 234C of the Income-tax Act, 1961. The CCIT's order was based on the fact that there was a clear liability to deduct tax, known to the assessee, which was not fulfilled, resulting in disallowance under Section 40(a)(ia) for non-deduction/remittance of tax on contract payments. The CCIT held that the liability to pay TDS had arisen during the financial year itself, making the charge of interest under Sections 234B and 234C automatic and mandatory. The CCIT's decision was in line with existing instructions on reduction or waiver of interest issued by the Board. The petitioner argued that payments to contractors were not taxable, and the disallowance under Section 40(a)(ia) was still pending adjudication. However, the Court found no error in the CCIT's order, stating that the petitioner was aware of the non-deduction/remittance consequences and that the levy of interest was automatic under the circumstances. The Court upheld the CCIT's decision, noting that it was based on sound reasoning and in accordance with CBDT Instructions.

In conclusion, the High Court dismissed the writ petition, finding it devoid of merits. The Court affirmed the CCIT's order refusing to waive interest under Sections 234A, 234B, and 234C of the Income-tax Act, 1961. The petitioner's argument that the disallowance under Section 40(a)(ia) was pending adjudication and that payments to contractors were not taxable was not accepted, as the Court held that the levy of interest was automatic given the circumstances. The decision was based on the fact that the petitioner was aware of the consequences of non-deduction/remittance and that the CCIT's order was in line with CBDT Instructions.