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TMI Blog2006 (6) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... eductee or the assessee who had made the deduction. What is significant is that the interest which is compensatory in character is paid to the Revenue till the date the amount of tax is actually deposited. That is precisely what has been done in the instant case. The question framed earlier is answered accordingly. Appeal allowed. - Judge(s) : T. S. THAKUR., SHIV NARAYAN DHINGRA. JUDGMENT The judgment of the court was delivered by T. S. THAKUR J.-All these appeals arise out of a common order passed by the Income-tax Appellate Tribunal, Delhi Bench, and shall stand disposed of by this order. Before adverting to the questions that arise for consideration, it is necessary to briefly state the facts giving rise to these appeals. The respondent-company is running a five star hotel in Ludhiana, Punjab. In the course of a survey of the premises of the respondent, it was found that it had failed to deduct tax at source under section 194A of the Income-tax Act, 1961 (for short "the Act"), while paying interest on the loan borrowed by the respondent from the Tourism Finance Corporation of India Ltd. ("TFCI"). The Assessing Officer held the respondent-company to be "an assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Central Board of Direct Taxes Circular of January 29, 1997, referred to earlier clarifies that liability to charge interest under section 201(1A) of the Act till the date of payment of taxes by the deductee does not get altered even if the taxes were paid by the deductee-assessee. Interest under section 201(1A) of the Act is mandatory and there is no pre-condition of consideration of reasonable cause or 'good and sufficient cause'. In fact the proviso to section 201 incorporates the principle of 'good and sufficient' reasons but only for the purposes of penalty under section 221. The language of section 201(1A) uses the term 'shall'. Interest under section 201(1A) of the Act is mandatory and automatic and is compensatory in nature as held by the Delhi High Court in the case of CIT v. Prem Nath Motors P. Ltd. reported in [2002] 253 ITR 705. This proposition is also supported by the Kerala High Court judgment in the case of CIT v. K. K. Engineering Co. reported in [2001] 249 ITR 447, the Bombay High Court judgment in the case of Pentagon Engineering P. Ltd. v. CIT [1995] 212 ITR 92 and the Guwahati High Court judgment in the case of CIT v. Assam Small Industries Development Corp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly so that such payments were not exempt from deduction at source. That finding is in favour of the Revenue and in the absence of any appeal by the assessee against the same, we are not called upon to examine the correctness thereof. Learned counsel for the parties have, therefore, argued these appeals on the assumption that the payments made to TFCI were not exempt from deduction of tax at source. Mr. Jolly contended that the Tribunal was in a palpable error in holding that the respondent-assessee was under a bona fide belief that the payments made to TFCI were not exempt from deduction of tax at source. He urged that there was neither any basis for recording that finding nor was any such consideration germane to the question whether the assessee was in default. We find merit in those submissions. The Assessing Officer and the Commissioner (Appeals) had both repelled the contention based on the alleged bona fide belief of the assessee that the payments made to TFCI were exempt from TDS. There is indeed no material to support the plea of bona fide belief of the assessee nor has any such evidence been referred to or discussed in the order impugned in these appeals. More important ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o deduct tax at source would make not only the amount of tax that ought to have been deducted recoverable. from the assessee but also the interest on the said amount at the stipulated rate calculated from the date on which the said tax was deductible to the date such tax was actually paid. Inasmuch as the Tribunal had overlooked the true legal position, it had committed an error apparent on the face of the record. On behalf of the respondent, it was contented by Mr. Vohra that even in cases where the assessee was in default the Revenue could not recover the amount of tax twice over by insisting that the person liable to make the deduction should not only pay interest but the principal amount of tax also. He contended that in cases where tax had been paid by the deductee, the person responsible to make the deduction at source will not be liable to make any further payment. All that was necessary in such cases was payment of interest under section 201(1A) of the Act from the date the amount should have been deducted till the date the deductee-assessee has paid the tax. In support of the submission he relied upon the instructions issued by the Central Board of Direct Taxes dated Jan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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