Revival of NIL Rate Certificate Eliminates Interest Levy

The ITAT allowed the appeal, directing the Assessing Officer to delete the interest levied under section 201(1A) of the Act. The Bombay High Court's decision to quash the withdrawal of the exemption certificate resulted in the revival of the NIL rate certificate, eliminating any delay in TDS deduction. The ITAT considered the issuance of a fresh certificate for the relevant period, leading to the conclusion that no interest was payable for the delay in tax deduction. The order was pronounced in July 2020, taking into account delays caused by the COVID-19 pandemic.

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Issues:
Levy of interest u/s. 201(1A) for delay in deduction of tax at source.

Analysis:
The appeal was filed against the order of the Learned Commissioner of Income Tax (Appeals) regarding the levy of interest u/s. 201(1A) for delay in tax deduction. The assessee company received a Nil rate certificate from TTML but did not deduct tax at source as per the certificate. The TDS Officer later canceled the certificate, leading to the assessee realizing the cancellation only in December 2017. The company then recovered tax at source and paid it to the Government in January 2018. The Bombay High Court held the cancellation order as bad and quashed it. The Assessing Officer levied interest for the delay, which the Ld.CIT(A) upheld.

The assessee argued that a new TDS exemption certificate was issued for the entire period, and the demand arose due to payments made in November 2017, while TDS was deducted and paid in January 2018. The counsel contended that there was no "late deduction" as the certificate was valid for the financial year 2017-18. Therefore, no interest was payable for any delay.

The ITAT noted that the Bombay High Court quashed the withdrawal of the exemption certificate, reviving the NIL rate certificate issued to the assessee. With a fresh certificate applicable for the relevant period, the question of TDS deduction did not arise, eliminating any delay. Consequently, the ITAT directed the Assessing Officer to delete the interest levied under section 201(1A) of the Act.

The appeal of the assessee was allowed, and the ITAT pronounced the order in July 2020 due to delays caused by the COVID-19 pandemic, following the guidelines of the ITAT Rules and the decisions of the Bombay High Court.

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