Tribunal Upholds Interest Liability for TDS Default: Assessee Companies' Appeals Dismissed

The Tribunal upheld the decision of the CIT(A) and dismissed all appeals of the assessee companies, confirming their liability to pay interest under Section 201(1A) of the Income-tax Act, 1961 for failing to remit TDS on certain payments. The Tribunal held that interest under Section 201(1A) is automatic and compensatory, applicable regardless of the tax liability of the deductee, supported by various judicial precedents.

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Issues Involved:
1. Whether the assessee companies are liable to pay interest under Section 201(1A) of the Income-tax Act, 1961 for non-remittance of tax deducted at source (TDS).

Issue-wise Detailed Analysis:

1. Liability to Pay Interest under Section 201(1A):
The primary issue in these appeals is whether the assessee companies are liable to pay interest under Section 201(1A) of the Income-tax Act, 1961 for failing to remit TDS on certain payments.

Facts of the Case:
The assessee companies, engaged in bio-sciences research, were subjected to a survey under Section 133A of the Income-tax Act on 26/7/2013. It was discovered that they had not remitted TDS on certain payments. The Assessing Officer (AO) treated them as 'assessee in default' under Section 201(1) and determined the tax liability, charging interest under Section 201(1A) through orders dated 30/6/2014. The Commissioner of Income Tax (Appeals) [CIT(A)] provided partial relief but upheld the charging of interest under Section 201(1A).

Contentions of the Assessee:
The assessee companies contended that:
- Interest under Section 201(1A) is compensatory.
- Since the recipients of the income had filed loss returns and no taxes were payable, the question of delay in recovery of taxes and interest for delay does not arise.
- The authorities erred in charging interest without proper appreciation of law and judicial pronouncements.
- The calculation of interest was erroneous and excessive.

Tribunal's Analysis:
The Tribunal noted that the issue of liability to pay interest under Section 201(1A) had been considered and held against the assessee by a co-ordinate bench in the case of Power and Control Systems (ITA Nos. 883 to 887/Bang/2018 dated 4/6/2018). The Tribunal referred to several judicial precedents, including:
- The proviso to Section 201(1A) inserted by the Finance Act, 2012, which states that interest is payable from the date tax was deductible to the date of furnishing of the return of income by the deductee.
- The Supreme Court's decision in Hindustan Coca Cola Beverages Pvt. Ltd., which clarified that no demand under Section 201(1) should be enforced if taxes due have been paid by the deductee, but interest under Section 201(1A) is still chargeable.
- The Punjab & Haryana High Court's decision in CIT(TDS) Chandigarh vs. Punjab Infrastructure Development Board, which held that interest under Section 201(1A) is payable even if the deductee has filed a loss return.

Conclusion:
The Tribunal concluded that:
- Even if the recipient of income had no tax liability due to losses, the payer is still liable to pay interest under Section 201(1A) from the date tax was deductible to the date the deductee filed their return.
- The levy of interest is automatic and compensatory, irrespective of the tax liability of the deductee.
- The decisions of the High Courts and the Supreme Court support the view that interest under Section 201(1A) is chargeable in such cases.

Final Judgment:
The Tribunal upheld the CIT(A)'s decision and dismissed all four appeals of the assessee companies, confirming the liability to pay interest under Section 201(1A).

Order Pronouncement:
The order was pronounced in the open court on 1st August 2018.

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