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Income Tax Appellate Tribunal, DELHI BENCHES “B” : DELHI
Before: SHRI BHAVNESH SAINI & SHRI PRASHANT MAHARISHI
This appeal by assessee has been directed against the order of the Ld. CIT(A)-IX, New Delhi, dated 31st October, 2014 for the A.Y. 2009-2010, challenging the charging of interest of Rs.28,92,314 under section 201(1A) of the I.T. Act, 1961.
2 ITA.No.6802/Del./2014 D.D. Township Ltd., New Delhi. 2. The A.O. observed that assessee paid interest to M/s.
Indiabulls Financial Services Ltd., and S.E. Investment Ltd., during F.Y. 2008-2009 without making any TDS as per Section 201(1) read with section 194A of the I.T. Act, 1961. The A.O. also rejected the statement of the assessee that TDS is not made as the amount involved is only surrender of interest to these concerns. Based on the judicial pronouncements in the case of CIT-XVII vs. Dewan Chand 178 Taxman 173 (Del.) (HC) and Hindustan Coca Cola Beverages P. Ltd., vs. CIT 293 ITR 226 (SC), assessee argued that once payee had paid the tax on the amount received by them, then the assessee cannot be treated as assessee-in-default under section 201(1) of the I.T. Act. The assessee on this argument tried to establish that since advance tax has been paid by the payee, no interest is leviable under section 201(1A) of the I.T. Act. The A.O. rejected the contention of the assessee. The A.O. noted that as the assessee failed to deduct TDS but surrender the expenditure on account of interest paid to these concerns in its taxable income, interest liability under section 201(1A) is calculated as per the details
3 ITA.No.6802/Del./2014 D.D. Township Ltd., New Delhi. mentioned in page-4 of the assessment order up to the date of filing of the return filed by the said two companies. The A.O. accordingly, calculated the interest liability payable by assessee under section 201(1A) amounting to Rs.28,92,314.
The assessee challenged the levy of interest before Ld. CIT(A) and it was submitted that on plain reading of Section 201(1A) is “from the date on which such tax was deductible to the date on which such tax is actually paid and consequently no interest beyond the date of actual payment of the tax can be claimed by the department.” The tax could be recovered from the assessee only once. If that be so, interest must stop accruing, the movement the amount of tax is paid to the Revenue department. It is immaterial whether the tax is paid by the deductee or the assessee who had made the deduction. What is significant is that the interest which is compensatory in nature is paid to the Revenue department till the date the amount of tax is actually deposited. The Ld. CIT(A), however, confirmed the 4 ITA.No.6802/Del./2014 D.D. Township Ltd., New Delhi. levy of interest and dismissed this ground of appeal of assessee.
His findings in para 5.3 of the order is reproduced as under:
“5.3. The reason given by AO and submission of the appellant are considered. The provisions of TDS are made to arrest any leakage of revenue. If the tax is collected by the deductor and deposited in the Government account, the tax comes to revenue of the state. If the deductor does not make the deposit in time, the revenue is lost for the time gap and interest u/s 201(1A) is charged to recover the loss of interest for the period of delay as a compensatory measure. The argument that advance tax has been paid by the deductee does not serve the purpose of TDS provisions and the appellant cannot take a plea not to make TDS which is mandatory. The appellant failed to produce any letter from the competent authority that the appellant need not make any TDS as the payee has paid advance tax including the particular transaction in the return of income. As mentioned by AO, the judicial pronouncements
5 ITA.No.6802/Del./2014 D.D. Township Ltd., New Delhi. cited by the appellant do not take away the mandatory nature of TDS provision and consequential levy of interest on failure to do so. In view of this, the AO has rightly computed the interest leviable for the delay period which requires no interference. Hence, the ground of appeal is dismissed.”
The Learned Counsel for the Assessee submitted that assessee need not to make any TDS as the payee has paid the tax which have mentioned in their books of account. He has further submitted that matter may be remanded to the A.O. for re-calculating the interest against the taxes have been paid by the recipient. He has further submitted that assessee has lost details. Therefore, assessee cannot file the details as to on which date tax have been paid by the recipient. He has submitted that this can be verified from the record of the A.O.
On the other hand, Ld. D.R. relied upon the orders of the authorities below and submitted that even if recipient have paid the tax but interest is mandatory in nature under section 6 ITA.No.6802/Del./2014 D.D. Township Ltd., New Delhi. 201(1A) of the I.T. Act, 1961, which have been correctly charged by the department. The Ld. D.R. relied upon the following decisions.
5.1. In the case of CIT vs. Rathi Gum Industries (1995)
213 ITR 98 (Raj.), the Hon’ble Rajasthan High Court held as under :
“Section 201 of the Income Tax Act, 1961, provides not only for collection of tax which has not been deducted but for levy and charge of interest also. Sub-section (1A) of the said section provides for liability to pay simple interest at the rate of 12 per cent per annum on the amount of tax from the date on which the tax was deductible till the date the tax was actually paid. The provisions for payment of interest are mandatory and automatic and interest has to be paid from the date on which the tax was deductible till the date on which the tax is actually paid. If the tax has already been paid by the recipient on such income the Income Tax Department may not be justified to recover the said amount of tax, but so far as the liability of interest is concerned, that cannot be considered to be non-
7 ITA.No.6802/Del./2014 D.D. Township Ltd., New Delhi. existent on account of deposit of tax by the recipient at a subsequent or later stage.”
5.2. In the case of CIT vs. Dhanalakshmy Weaving Works (2000) 245 ITR 13 (HC) (Kerala), the Hon’ble Kerala High Court held as under :
“Held : that the levy of interest is a compensatory measure for withholding tax which ought to have gone to the exchequer, Section 201(A) of the Income Tax Act, 1961, makes it clear that the levy of interest is mandatory. It is true that use of the expression ‘shall’ is not always determinative of the fact whether a provision is directory or mandatory in nature, but the context in which expression ‘shall’ is used in section 201(A) makes it clear that the levy is mandatory. The purpose of the levy is to claim compensation on the amount which ought to have been deducted and deposited and has not been done. The ultimate liability for tax being not there (since the firm which received the interest from the assessee had paid tax on such interest) did not dilute the requirements for the non-compliance of which interest is levied under section 201(1 A).”
8 ITA.No.6802/Del./2014 D.D. Township Ltd., New Delhi. 5.3. In the case of CIT vs. Prem Nath Motors (Pvt.) Ltd., (2002) 253 ITR 705 (Del.) (HC), the Hon’ble Delhi High Court held as under:
“During the assessment proceedings for the assessment years 1967-68 to 1971-72, the Assessing Officer noted that the assessee had not properly deducted tax at source as required to be done under section 192 of the Act and the same had not been deposited with the Government. He noticed that two of the employees of the company had been paid commission and perquisites apart from salaries. The assessee did not furnish the quantum of commission and perquisites enjoyed by those employees in the annual return and tax had not been deducted at source as was required under section 192 of the Act on the quantum of commission and perquisites. Accordingly, various amounts were levied as interest under section 201(1A). The Tribunal cancelled the levy. On a references :
Held, that the levy of interest was justified.”
5.4. The Ld. D.R. submitted that since assessee failed to produce any material before the authorities below as well as 9 ITA.No.6802/Del./2014 D.D. Township Ltd., New Delhi. before the Tribunal with regard to payment of taxes by the recipient, therefore, matter cannot be remanded to the A.O.
We have considered the rival contentions and do not find any merit in the appeal of the assessee. The assessee contended before the authorities below that once tax is paid by both these companies which is recorded in their books of account, therefore, assessee cannot be held to be in default for payment of the tax. Therefore, no interest is chargeable. The assessee further admitted that assessee has not deducted the TDS on account of interest paid to these two companies. The A.O. has given details at page-4 of the order in which the amount of interest paid and taxed under section 201(1) on interest paid and then interest liability is calculated. No infirmity have been pointed out in the order of the A.O. for calculating the interest liability payable by the assessee under section 201(1A) of the I.T. Act. The assessee also failed to produce any order from the Competent Authority that assessee need not to make any TDS as the payee has paid the advance
10 ITA.No.6802/Del./2014 D.D. Township Ltd., New Delhi. tax including the impugned transactions in the return of income. It is well settled law that charging of interest is mandatory under section 201(1A) of the I.T. Act. The provision for payment of interest are mandatory and automatic and interest has to be paid from the date on which the tax was chargeable till the date on which tax is actually paid. Even if recipient has paid the tax, for the short fall, the interest shall have to be paid by the assessee. The decisions relied upon by the Ld. D.R. clearly support the findings of the authorities below that interest in question is chargeable. The assessee has failed to produce any details before the authorities below as well as before the Tribunal to point out any error in the computation of tax liability under section 201(1A) by the A.O. Therefore, in the absence of any evidence on record, in our view, the matter need not be remanded to the A.O. for fresh calculation of interest.
The assessee miserably failed to makes out any case for interference. The appeal of assessee has no merit. The same is accordingly, dismissed.
11 ITA.No.6802/Del./2014 D.D. Township Ltd., New Delhi. 7. In the result, appeal of the assessee is dismissed.
Order pronounced in the open Court.