The Income Tax Appellate Tribunal held that if there are bona ...

Employers Not Liable for Interest on Early Year Tax Shortfalls if Corrected by Year-End, Rules Tribunal.

December 2, 2024

Case Laws     Income Tax     AT

The Income Tax Appellate Tribunal held that if there are bona fide reasons for deducting lower tax in the earlier months of the financial year, and the shortfall is rectified immediately upon noticing it, then Section 192(3) of the Income Tax Act would save the employer from liability to pay interest u/s 201(1A). Merely short deduction of tax at source from salaries paid to employees does not invoke Section 201(1A), unless the total tax deducted by the end of the year is less than the tax deductible from the salary paid to the employee in that year. The Tribunal also held that Section 220(2) interest is applicable only when amounts specified in the demand notice u/s 156 are not paid within the stipulated period, which was not the case here. Consequently, the levy of interest u/ss 201(1A) and 220(2) was deleted.

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