2018 (5) TMI 1170 - HC - Income Tax

Interest levied u/s 201 1A - non deduction of tds on interest on Deep Discount Bonds to HDFC Bank - Held that - Following additional issues that the Tribunal may examine upon remand, which we propose to provide, are as under - A Whether the HDFC Bank as a payee has deposited entire tax arising out of such payment in advance, and therefore, the ratio laid down in a decision of this Court in case Commissioner of Income-Tax v. Rishikesh Apartments Coop. Housing Society Limited 2001 (6) TMI 17 - GUJARAT High Court would apply. B In absence of any such advance payment, should the assessee not pay interest on delayed deposit of tax by the payee, as clarified by the Supreme Court in the case of Hindustan Coca Cola Beverages Private Limited 2007 (8) TMI 12 - SUPREME COURT OF INDIA . C If need be, in other words, if the answer to these questions is against the assessee, the Tribunal would be required to examine the assessee s legal contention that in any case, looking to the nature of payments in question, liability of the assessee to deduct tax at source did not arise at all.

Summary

Issues:
1. Whether the Appellate Tribunal erred in deleting the interest levied under Section 201 [1A] of the Act?

Analysis:
The case involved a company registered under the Companies Act, 1956, which had paid interest on Deep Discount Bonds to HDFC Bank Limited for the assessment year 2007-2008. The Assessing Officer disallowed the expenditure as the tax was not deducted at source during the payment. The company contended that the payment was not interest but a repurchase price, exempt from TDS. The Commissioner allowed the company's appeal, leading the Revenue to approach the Tribunal.

Before the Tribunal, the company maintained its stance that TDS was not required and cited a Supreme Court judgment. The Tribunal dismissed the Revenue's appeal, prompting the Revenue's grievance that the Tribunal did not consider interest recovery on delayed payment by HDFC, as per the Supreme Court's ruling in a specific case. The Court acknowledged the oversight and ordered a final disposal notice.

The Court agreed that the Tribunal overlooked certain aspects. The Tribunal was directed to re-examine whether HDFC Bank had paid the entire tax in advance, following a specific court decision. Additionally, the Tribunal was tasked to determine if the company should pay interest for delayed tax deposit by HDFC and to address the company's argument that TDS was not applicable based on the nature of payments. The Court set aside the Tribunal's judgment, remanding the case for fresh consideration in line with the law.

This detailed analysis of the judgment showcases the legal complexities involved in the case, including interpretations of tax laws, application of precedents, and the need for a thorough re-evaluation by the Tribunal to address all relevant issues comprehensively.