Appeal allowed for assessment year 2006-07: Interest under Income Tax Act charged until TDS payment.

The Tribunal allowed the assessee's appeal for the assessment year 2006-07, ruling that interest under section 201(1A) of the Income Tax Act should be charged only until the actual payment of TDS to the Central Government, not until the Assessing Officer's order date. The demand under section 201(1) was deleted as the TDS was paid in a subsequent assessment year.

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Issues:
Interest charged under section 201(1A) of the Income Tax Act for non-deduction and non-payment of TDS.
Calculation of interest under Section 201(1A) of the Act.

Analysis:
The appeal was filed by the assessee company against the appellate order passed by the Commissioner of Income Tax (Appeals) for the assessment year 2006-07. The grounds of appeal raised by the assessee challenged the confirmation of interest levied by the Assessing Officer under section 201(1A) of the Act for the provision of expenses. Additionally, the appeal raised concerns about the computation of interest under Section 201(1A) of the Act until the date of the assessment order instead of the date of TDS payment in the subsequent year.

The case involved a survey action conducted against the assessee, leading to notices under section 201(1) and 201(1A) of the Act. The Assessing Officer disallowed a certain amount for non-deduction and payment of tax deducted at source under various sections. The AO raised demands for non-deduction and non-payment of TDS under section 201(1) of the Act, along with interest under section 201(1A) for the period from April 2005 to March 2011.

The Commissioner of Income Tax (Appeals) held that the assessee could not be held liable under section 201(1) of the Act as the TDS was paid in a subsequent assessment year. However, the demand for interest under section 201(1A) was confirmed, citing the compensatory nature of interest based on a Supreme Court decision. The assessee then appealed to the Tribunal against this decision.

During the Tribunal proceedings, the counsel for the assessee argued that interest under section 201(1A) should be charged only until the actual payment of TDS to the Central Government. The Tribunal observed that the assessee had paid the TDS in the subsequent assessment year, leading to the deletion of the demand under section 201(1) of the Act. Regarding interest under section 201(1A), the Tribunal held that interest is compensatory in nature and should be charged only until the date of actual TDS payment, not until the framing of the order by the Assessing Officer.

Ultimately, the Tribunal allowed the assessee's appeal for the assessment year 2006-07, ordering that interest under section 201(1A) should be charged only until the date of actual payment of TDS to the credit of the Central Government, not until the date of the AO's order.

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