2019 (2) TMI 623 - AT - Income Tax

Delay in remittance of TDS - AO calculated the interest as per the British calendar month and calculated interest for three months - method and manner of calculation of interest - Held that - AO had taken the month to be the British calendar month as defined in Section 3(35) of the General Clauses Act and it is only on that premise, he calculated one day in March and two days in May as two full months and calculated interest for three months including the month of April also. In CIT vs. Arvind Mills Ltd. 2011 (9) TMI 244 - GUJARAT HIGH COURT in the context of interest on refunds u/s 244A as held that the term month must be given the ordinary sense of the term i.e. 30 days of period and not the British calendar month as defined u/s 3(35) of the General Clauses Act and such a definition under the General Clauses Act cannot be adopted for the purposes of Section 244A of the Act inasmuch as such importation of definition would lead to anomalous situation. Section 244A(1) is analogous to provisions of Section 201(1A)(ii) read with Rule 119A of the Act and a month must be given ordinary meaning of the term by taking period of 30 days and not British calendar month as defined u/s 3(35) of the General Clauses Act. See M/S. NAVAYUGA QUAZIGUND EXPRESSWAY (P) LIMITED, VERSUS DY. COMMISSIONER OF INCOME-TAX CIRCLE 15 (1) HYDERABAD 2015 (3) TMI 1083 - ITAT HYDERABAD We are unable to endorse the view of the AO and accept the calculation of month reckoned by him. However, in view of the fact that the assessee did not furnish the requisite information as observed by the learned CIT(A) in para 2.3 of his order, we deem it just and necessary, while setting aside the impugned order, to remand the matter to the file of the learned CIT(A) to enable the assessee to submit the actual calculation showing the discrepancies in the calculation of interest by the AO and the assessee respectively. - Decided in favour of assessee for statistical purposes.

Summary

Issues:
Calculation of interest on late payment for tax deducted at source for salary and domestic cases, interpretation of the term 'month' in Section 201(1A).

Analysis:
The judgment pertains to challenging a common order regarding the calculation of interest on late payment of tax deducted at source for salary and domestic cases for the assessment year 2013-14. The assessee disputed the method used by the Assessing Officer (AO) to calculate interest based on the British calendar month, leading to discrepancies in the amounts calculated by the AO and the assessee. The assessee contended that the term 'month' should be interpreted as a 30-day period, not as per the British calendar month, citing legal precedents. The Department, however, relied on the General Clauses Act for the definition of 'month.' The Tribunal analyzed the facts and legal positions, including decisions by the Gujarat High Court and other Tribunals, emphasizing the ordinary meaning of a month as a 30-day period.

The Tribunal observed that the AO's calculation method, considering parts of months as full months based on the British calendar, was incorrect. Citing the decision in CIT vs. Arvind Mills Ltd., the Tribunal reiterated that the term 'month' should be understood as a 30-day period, not as per the British calendar month. Relying on precedents, the Tribunal held that the definition of 'month' under the General Clauses Act cannot be applied in this context as it would lead to anomalies. Consequently, the Tribunal set aside the impugned order and remanded the matter to the CIT(A) for the assessee to provide detailed calculations showing discrepancies. The CIT(A) was directed to consider the ordinary meaning of a month as a 30-day period while deciding the matter.

In conclusion, the Tribunal allowed the appeals of the assessee for statistical purposes, emphasizing the interpretation of the term 'month' as a 30-day period in Section 201(1A) for calculating interest on late payment of tax deducted at source. The judgment highlights the importance of interpreting legal terms in tax matters based on established legal principles and precedents to ensure consistency and fairness in decision-making.