Supreme Court affirms interest payment obligation under Income Tax Act, 1961

The Supreme Court upheld the rejection of the petitioner's application for waiver of interest under Section 220(2A) of the Income Tax Act, 1961. The Court emphasized that raising a dispute does not automatically exempt an assessee from interest payment, stating that the levy of simple interest on non-payment of tax is mandatory. The Court dismissed the Special Leave Petition, affirming the importance of adhering to statutory provisions and clarifying that ongoing disputes do not absolve the obligation to pay interest as mandated by the Act.

---

---

Issues:
Waiver of interest under Section 220(2A) of the Income Tax Act, 1961.

Analysis:
The Supreme Court heard a case concerning the waiver of interest under Section 220(2A) of the Income Tax Act, 1961. The petitioner's application for waiver of interest was rejected by the competent authority and upheld by the High Court. The petitioner argued that since the dispute was pending for Mutual Agreement Procedure (MAP) resolution until 2012, the liability to pay tax arose thereafter, entitling them to interest waiver under Section 220(2)(A)(ii) of the Act. However, the Court found this argument lacking merit, stating that merely raising a dispute does not automatically exempt an assessee from interest payment or waiver under Section 220(2A) of the Act. The Court emphasized that the levy of simple interest on non-payment of tax at 1% per annum is mandatory under Section 220(2) of the Act, regardless of ongoing disputes or litigation.

The Court agreed with the High Court's decision and dismissed the Special Leave Petition. The judgment underscores the importance of adhering to the statutory provisions of the Income Tax Act, particularly regarding the levy of interest on unpaid taxes. It clarifies that the mere existence of a dispute or ongoing litigation does not absolve an assessee from the obligation to pay interest as mandated by the Act. The decision reaffirms the principle that statutory provisions must be strictly followed, and attempts to evade interest payments through prolonged disputes are not permissible under the law.

---