9911796707
TMI Blog2011 (9) TMI 224X X X X Extracts X X X X X X X X Extracts X X X X ..... wer rate?" 2. The assessee herein is Chennai Metropolitan Water Supply and Sewerage Board, who had engaged the services of a Malaysian Company to carry out certain works. The assessee deducted tax at source at the rate of 2% while making payment to the Malaysian Company. As the rate at which tax was to be deducted was 40%, the Assessing Officer raised a demand on account of shortfall in TDS under Section 201 of the Income Tax Act as well as consequential demand of interest under Section 201(1A) of the Income Tax Act. Aggrieved by the same, the assessee filed an appeal before the Commissioner of Income-Tax (Appeals), who allowed the appeal holding that the demand under Section 201(1) of the Income Tax Act was not sustainable, as the recipient had no taxable income from this transaction who had also filed a return showing 'nil' income. However, he held that the interest under Section 201(1A) of the Income Tax Act was correctly levied. 3. As against the order of the Commissioner of Income-Tax (Appeals), the assessee as well as the Revenue went on appeal before the Income Tax Appellate Tribunal. Following the decision of the Guj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal consequences in the nature of levy of interest apart from levy of penalty under Section 271(C). A reading of the provisions of Section 201(1A) of the Income Tax Act shows that the levy of interest starts from the date on which T.D.S. is to be deducted to the actual payment date. Even though learned counsel appearing for the assessee relied on the decision reported in (2007) 293 ITR 226 (Hindustan Coca Cola beverage P. Ltd. V. Commissioner of Income-Tax), which refers to the circular No.275/201/95-IT(B) dated 29th January, 1997, yet, as far as the present case is concerned, the fact remains that the assessee, apart from deducting at 2% as against 40%, it did not make any further payment even after coming to know about the state of affairs. To this, learned counsel appearing for the assessee submitted that the recipient being a loss making company, the question of payment of interest does not arise. 8. We do not think such a contention could be accepted in the light of the decision of this Court reported in (2001) 250 ITR 464 (Commissioner of Income Tax V. Ramesh Enterprises) holding that the assessee has a duty to deduct tax at source, even i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r mode, whichever is earlier. The only condition insisted under Section 195 of the Income Tax Act is that the amount paid must be a sum chargeable under the provisions of the Act. Section 195(2) of the Income Tax Act enables an assessee to file an application before the Assessing Officer to determine the appropriate proportion of the sum chargeable under the Act and upon such determination, tax has to be deducted under sub-section (1) on that proportion of the sum which is so chargeable. The person deducting the tax at source has to furnish the statement as prescribed by the Board. The payment thus made is credited to the account of the payee. As regards the consequences of failure to pay tax, sub-section (3) of Section 195 of the Income Tax Act, reads as under: "195(3) - Subject to rules made under sub-section (5), any person entitled to receive any interest or other sum on which income-tax has to be deducted under sub-section (1) may make an application in the prescribed form to the Assessing Officer for the grant of a certificate authorising him to receive such interest or other sum without deduction of tax under that sub-section, and where a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; In the circumstances, the question of it further making a deduction and remitting to the State did not arise. The Circular referred to recognises the fact that once the payee remits the differential tax, the question of further recovery of the self-same sum from the payer did not arise and till the payment made by the dedutee assessee, interest would be charged. 16. Applying the said circular herein, with no liability thus arisen at the hands of the payee, the terminal point as regards the calculation of interest necessarily has to be given a meaningful interpretation. Given the fact that the interest levy is an automatic one, the determination on the ultimate liability of the payee company to pay or not to make payment being a procedural exercise has nothing to do with the liability of the assessee to deduct tDS. As such, the loss return filed by the payee company cannot be treated as a circumstance to be taken in in favour of the assessee company from not applying the provisions of Section 201(1A) of the Income Tax Act. On the facts herein, the only reasonable interpretation one can give to the provision under Section 201(1A) as regards the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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