Appeal upheld in tax deduction case; assessee held in default under Income Tax Act.

The appeal against the CIT(A)'s dismissal of the appeal regarding non-payment of TDS and low deduction of tax at source was upheld. The assessee was held in default under sections 201(1) and 201(1A) of the Income Tax Act for the assessment year 2009-10. The judgment in Hindustan Coca Cola Beverages (P) Ltd. was applied, stating that if the payee has paid tax on the income with short deduction of tax at source, the tax cannot be recovered from the tax deductor. The matter was remanded to the Assessing Officer for further verification. Interest under section 201(1A) was to be charged until the payee paid the tax, even if no longer in default under section 201(1). The appeal was allowed for statistical purposes.

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Issues:
1. Dismissal of appeal by CIT(A) against orders u/s 201(1) and 201(1A) of the Income Tax Act, 1961.
2. Determination of short deduction of tax at source on interest.
3. Applicability of the judgment in Hindustan Coca Cola Beverages (P) Ltd.
4. Power of CIT(A) to remand proceedings to the Assessing Officer.
5. Interpretation of Explanation to sec. 191 regarding default in deduction of tax at source.
6. Liability for interest u/s 201(1A) till the tax is paid by the payee.

Analysis:
1. The appeal was filed against the CIT(A)'s order dismissing the appeal regarding non-payment of TDS, low deduction of tax at source, and late payment of tax deducted at source. The total short deduction of tax at source on interest was determined, leading to the assessee being held in default under sections 201(1) and 201(1A) of the Income Tax Act for the assessment year 2009-10.

2. The Hon'ble Supreme Court's judgment in Hindustan Coca Cola Beverages (P) Ltd. was cited, stating that if the payee has paid tax on the income where there was a short deduction of tax at source, the tax cannot be recovered again from the tax deductor. The CIT(A) directed the assessee to verify with the TDS officer, but lacked the power to remand the proceedings to the Assessing Officer.

3. The Explanation to sec. 191 clarifies that a person responsible for deducting tax at source can be considered in default only if the payee has not paid tax on the income. Therefore, if the payee has paid tax on the income, the deductor cannot be considered in default, as reiterated by the Supreme Court's precedent in Hindustan Coca Cola Beverages (P) Ltd.

4. The matter was sent back to the Assessing Officer for necessary verification, requiring the assessee to provide evidence that all payees included the interest income in their total income and paid tax on it.

5. Regarding interest u/s 201(1A), it was clarified that interest is chargeable from the date tax was deductible till the date it was paid by the payee, even if the payee is no longer in default under sec. 201(1). The determination of interest was remitted to the Assessing Officer for fresh consideration.

6. The appeal was allowed for statistical purposes, and the order was pronounced in the open court on 9/4/2014.

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