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of <h1>TDS interest upheld on failure to deduct payments, emphasizing mandatory provisions and compensatory purpose</h1> <h3>D.D. Township Limited, New Delhi. C/o. Shri Manu Monga Versus The Income Tax Officer Ward 49 (4), New Delhi</h3> D.D. Township Limited, New Delhi. C/o. Shri Manu Monga Versus The Income Tax Officer Ward 49 (4), New Delhi - [2018] 61 ITR (Trib) 1 Issues:Charging of interest under section 201(1A) of the I.T. Act, 1961 for failure to deduct TDS on interest payments made to certain entities during F.Y. 2008-2009.Detailed Analysis:1. The Assessing Officer (A.O.) observed that the assessee failed to deduct TDS on interest payments to M/s. Indiabulls Financial Services Ltd. and S.E. Investment Ltd. during F.Y. 2008-2009, as required by Section 201(1) read with Section 194A of the I.T. Act, 1961. The A.O. rejected the assessee's argument that TDS was unnecessary since the payees had already paid tax on the amounts received. The A.O. calculated interest liability under section 201(1A) as Rs. 28,92,314, based on the interest paid by the assessee and the tax liability of the payees.2. The assessee challenged the levy of interest before the Ld. CIT(A) contending that interest should only be charged until the date the tax was actually paid, as per Section 201(1A). The Ld. CIT(A) upheld the interest levy, stating that TDS provisions aim to prevent revenue leakage, and interest under section 201(1A) serves as compensation for delayed tax deposits. The Ld. CIT(A) dismissed the appeal, emphasizing the mandatory nature of TDS provisions and the consequential levy of interest for non-compliance.3. The Learned Counsel for the Assessee argued that since the payees had already paid taxes recorded in their books, the assessee should not be considered in default, and thus, no interest should be charged. The counsel requested a remand to the A.O. for recalculating interest based on the taxes paid by the recipients. However, the Ld. D.R. supported the interest levy under section 201(1A) as mandatory, citing relevant case laws.4. The Tribunal found no merit in the assessee's appeal, noting that the A.O. correctly calculated interest liability under section 201(1A). The Tribunal emphasized that interest is mandatory and automatic from the date the tax was due until it was paid, irrespective of the payees' tax payments. Since the assessee failed to provide evidence or orders exempting TDS, the interest charge was deemed valid. The Tribunal dismissed the appeal, stating that the assessee failed to demonstrate any errors in the interest calculation or justify interference.5. The Tribunal upheld the interest levy under section 201(1A) and dismissed the assessee's appeal, concluding that no grounds for interference were established, and the appeal lacked merit. The Tribunal affirmed the charging of interest for failure to deduct TDS on interest payments, as mandated by the I.T. Act, 1961.In conclusion, the Tribunal upheld the levy of interest under section 201(1A) against the assessee for not deducting TDS on interest payments, emphasizing the mandatory nature of TDS provisions and the compensatory purpose of interest charges for delayed tax deposits.
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