High Court upholds mandatory interest payment under Income-tax Act 1961 for delayed tax payments

The High Court of BOMBAY ruled in favor of the Revenue, affirming the mandatory nature of section 201(1A) of the Income-tax Act, 1961 for levying interest without considering a reasonable cause for non-payment of taxes deducted under section 192. The court held that the provision's language using "shall" makes interest payment obligatory, and the Income-tax Officer is not required to consider any reasonable cause for delayed tax payments. Consequently, the court decided against the assessee, supporting the Revenue's position and stating that no costs were to be awarded in this case.

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Issues involved: Interpretation of section 201(1A) of the Income-tax Act, 1961 regarding the levy of interest for non-payment of taxes deducted under section 192.

Summary:
The High Court of BOMBAY delivered a judgment in response to a reference made under section 256(1) of the Income-tax Act, 1961. The case involved a private limited company for assessment years 1973-74 to 1979-80, where the Income-tax Officer calculated interest under section 201(1A) for delayed tax payments collected from employee salaries. The assessee objected to the interest levy citing extreme financial difficulties. The Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal upheld the interest calculation. The main question revolved around the interpretation of section 201(1A) of the Act, with the assessee arguing that reasonable cause should be considered before levying interest.

Upon examining section 201(1A) of the Act, the court noted the mandatory nature of the provision, stating that the use of "shall" makes the interest payment obligatory without the need to consider a reasonable cause for non-payment. Citing a previous case, the court affirmed that the Income-tax Officer was not required to take into account any reasonable cause for non-payment of taxes deducted under section 192. Consequently, the court ruled in favor of the Revenue and against the assessee, affirming the mandatory nature of section 201(1A) for levying interest without considering reasonable cause.

Therefore, the court answered the question referred in the affirmative, supporting the Revenue's position, and decided that no costs were to be awarded in this matter.

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