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TMI Blog2015 (9) TMI 1163X X X X Extracts X X X X X X X X Extracts X X X X ..... nd therefore, it is an A-I-D for the amount of tax not deducted U/S.194A on payment of interest. The provisions of the Act envisage that wherever deductibility arises, the deductor may not deduct tax only in two conditions firstly, where the case falls under the purview of section 197A and secondly, where AO authorises him to do so by issuing a certificate u/s. 197 (read with Rule 28AA) on an application made by the payee/deductee. In no other circumstances the payer of interest can justify upon deduction of tax by taking shelter of ultimate tax effects of the payee. In the case before us, the assessee was not able to demonstrate that either of the two conditions existed in the matter under appeal. We further find that the FAA has given a categorical finding of fact that the assessee had failed to prove that the deductee included the amount received from the deductor in his return of income. In these circumstances, we are of the opinion that the order of the FAA does not suffer from any legal or factual infirmity. As far as charging of interest u/s.201(1A) it is true that use of the expression is not always determinative of the fact whether a provision is directory or mandato ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld not be treated as an A-I-D. In reply, the assessee submitted that the payee had furnished a declaration in Form I5G and had requested it not to deduct tax at source, that it was under bona fide belief that the provisions of section 197A relating to non-deduction of tax in certain cases apply to the instant case, that the assessee stated that the payee's 'income is below taxable limit and there is unabsorbed business loss'. The AO found that the income credited/paid to the payee exceeded the maximum amount which is not chargeable to income-tax and therefore, the provisions of section 197A relating to non-deduction in certain cases did not apply to the instant case. He held that the assessee was required to deduct tax source u/s. 194A, that there was an omission on the part of the assessee to deduct tax at source, that ₹ 2,95,127/- was paid/credited to Arihant Auto Finance (AAF) without tax deduction on the basis of Form No. 15 G, it was similar to the interest of ₹ 14,93,925/- paid/credited to BCB. He treated assessee as an A-I-D and held him liable to pay further tax of ₹ 2,19,620/- u/s. 201(1) including interest of ₹ 19,960/- u/s. 201(1A). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies, that both of them had filed form no. 15G. He referred to the submissions made by the assessee before the AO and the FAA. He relied upon the case of Hindustan Coca Cola Beverages (P.) Ltd. (supra). The Departmental Representative(DR) supported the order of the FAA. 5. We have heard the rival submissions and perused the material before us. Before proceeding further, we would like to deliberate upon a few cases dealing with TDS provisions as well as sections 201(1) and 201(1A) of the Act. In the case of Chennai Metropolitan Water Supply and Sewerage Board Hon'ble Madras High Court has held that the assessee has a duty to deduct tax at source, even in a case where the recipient is a loss-making entity CIT v. Chennai Metropalitian Water Supply Sewerage Board [2012] 348 ITR 530. In the matter of Jagran Prakashan Ltd. v. Dy. CIT [2012] 345 ITR 288 Hon'ble AP High Court has held as under : A deductor who fails to deduct Income-tax at source shall be deemed to be an assessee in default only when the assessee has also failed to pay such tax directly. Thus, there is no occasion to treat the deductor as an assessee in default unless the assessee has not paid the tax direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see's valuation of the likely liability for tax of the recipient of interest payment. It is only in cases where the recipient of interest is in a position to file any certificate or declaration to show that the person's total income is below the taxable limit that the tax on the interest payment made to such person is not to be deducted. In all other cases, it must be deducted as required under section 195 of the Act. The provision requiring deduction of tax at source on interest payment is applicable to all persons paying such interest and it is not left to the individual assessee to decide the extent of compliance that it will make with regard to the obligation imposed by the statutory provision that the Tribunal was clearly in error in accepting the case pleaded for the assessee that it had no duty to deduct and pay tax at source on the ground that one of its sister concerns had filed a loss return and the other sister concern had claimed refund. The concern which had filed the loss' return was at the time of assessment found liable to pay tax and the concern which had claimed refund at the time of original assessment was found not entitled to the refund, though such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shelter of ultimate tax effects of the payee. In the case before us, the assessee was not able to demonstrate that either of the two conditions existed in the matter under appeal. We further find that the FAA has given a categorical finding of fact that the assessee had failed to prove that the deductee included the amount received from the deductor in his return of income. In these circumstances, we are of the opinion that the order of the FAA does not suffer from any legal or factual infirmity. As far as charging of interest u/s.201(1A) is concerned, we would like to state that in the case of Dhanalakshmy Weaving Works, Hon'ble Kerala High Court has elaborately discussed the issue as under: ... the levy of interest is a compensatory measure for withholding tax which ought to have gone to the exchequer. Section 201(1A) of the Income-tax Act, 1961, makes it clear that the levy of interest is mandatory. It is true that use of the expression is not always determinative of the fact whether a provision is directory or mandatory in nature, but the context in which expression is used in section 201(1A) makes it clear that the levy is mandatory. The purpose of the levy is to cl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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