1983 (9) TMI 74 - HC - Income Tax

High Court: Interest not leviable under sec 215 ITA 1961 on TDS income.

The High Court ruled in favor of the assessee, holding that interest under section 215 of the Income Tax Act, 1961, could not be levied. The Court ... 'Assessed Tax', 'Deductible' In S. 215, Advance Tax Issues involved: The issues involved in this case are: 1. Whether interest under section 215 could be levied in the assessee's case for the assessment year 1971-72Rs. 2. Whether tax is deductible at source under section 194A in the assessee's case and if there is no assessed tax as defined in section 215(5) on which interest could be leviedRs.Judgment Details:Issue 1:The Income Tax Officer (ITO) had made an assessment for the assessment year 1971-72 on the Madras Fertilisers Limited, levying interest under section 215 of the Income Tax Act, 1961. The interest was computed based on the assessed tax and the period for which it was due. The assessee appealed to the Appellate Assistant Commissioner (AAC) and then to the Tribunal. The Tribunal remitted the question of interest levy back to the AAC for fresh consideration. The AAC upheld the levy of interest under section 215. However, the Tribunal set aside the levy of interest under section 215, stating that tax was deductible at source under section 194A for the interest assessed, and hence, there was no deficit as per section 215(5). The Revenue challenged this view, leading to a reference to the High Court.Issue 2:The High Court considered the provisions of section 215 and section 194A of the Income Tax Act, 1961. The Court noted that the expression 'deductible' in section 215(5) should be understood as 'deducted.' It was acknowledged that tax was deductible at source on the interest income of the assessee, but no tax had been deducted in this case. The Court highlighted the implications of section 201, which holds that if tax deductible at source is not deducted and paid to the Department, the party responsible for deduction can be treated as an assessee in default. The Court emphasized that the concept of 'assessed tax' under section 215(5) includes the tax deductible in accordance with various provisions. It was concluded that interest could not be levied on the assessee for tax deductible at source, as it would lead to double payment of interest on the same income. Therefore, the Court ruled in favor of the assessee, holding that interest under section 215 could not be levied. The costs were awarded to the assessee.This judgment clarifies the interpretation of sections 215 and 194A of the Income Tax Act, emphasizing the importance of tax deduction at source and the implications for interest levies on assessed tax amounts.