2022 (2) TMI 110 - AT - Income Tax

Short deduction of tax and interest on short deduction - HELD THAT - We are of the considered view that since the alleged amount has already been offered to tax by deductee and necessary evidence are placed on record to prove this fact we direct the revenue authorities to delete the demand made towards short deduction of tax and the interest demand being consequential in nature is also directed to be deleted. - Decided in favour of assessee.

Summary

Issues Involved:
1. Appeal against order of Ld. CIT(A) related to short deduction of tax at source.

Detailed Analysis:

Issue 1:
The appeal raised various grounds challenging the order of the Assessing Officer and Ld. CIT(A). The primary contention was the treatment of the assessee as defaulting under section 201/201(A) of the Income Tax Act due to short deduction of tax at source.

Issue 2:
The facts revealed that the assessee, a Nationalized Bank, had deducted tax at a lower rate of 10% instead of the required 20% on interest paid to Madhya Pradesh State Agro Industries Development Corporation Limited. This resulted in a short deduction of tax, leading to the assessee being treated as an assessee in default. The total demand raised against the assessee was ?1,38,555.

Issue 3:
In the appeal before the Tribunal, the assessee contended that the deductee had already offered the interest income to tax, as evidenced by the return of income, balance sheet, and profit and loss account. The assessee relied on a previous decision of the Tribunal and a judgment of the Supreme Court to support its case.

Issue 4:
The Tribunal considered the arguments presented by both sides. It noted that the issue of short deduction when the deductee had paid taxes had been previously adjudicated by the Tribunal in a similar case involving the assessee. The Tribunal referred to the Supreme Court judgment in Hindustan Coca Cola Beverage (P) Ltd. vs. CIT and the Circular No. 275/201/95-IT(B) issued by the CBDT to support its decision.

Issue 5:
Based on the findings and precedents, the Tribunal directed the revenue authorities to delete the demand for short deduction of tax and the consequential interest demand. The Tribunal emphasized the importance of verifying whether the short deduction amount had been paid by the deductee and if it had been included in their income tax return.

Conclusion:
The Tribunal allowed the appeal of the assessee, directing the deletion of the demand for short deduction of tax and the associated interest. The decision was based on the principle that when the deductee has paid the taxes, the tax cannot be recovered again from the assessee. The case was remanded back to the Assessing Officer for further verification in line with the Supreme Court judgment and CBDT Circular.