2023 (3) TMI 604 - AT - Income Tax

ITAT Cochin allows TDS credit adjustment, rejects interest exemption plea

The ITAT Cochin allowed the appeal in part, directing the AO to allow credit/adjustment for TDS deducted at a later point in time. The tribunal rejected ... TDS u/s 194A - interest was credited to the depositor's account only on the date of maturity of the deposit - orders under Sections 201(1) & 201(1A) of the Act making the assessee as an assessee in default - CIT(A) concluded that the assessee ought to have deducted tax at source on credit to the account of interest income instead of making deduction of tax at source when interest is paid on maturity - HELD THAT:- Assessee’s contention that a part of the interest charged to the P&L Account has neither been paid nor credited to the customers account, rather credited to the interest payable account and thereore the same is not liable to TDS under Section 194A is devoid of any merit. Section 194A of the Act mandates that any persosn responsbile for paying to a resident any income by way of interest (other than interest on security) shall at the time of credit of such income to the account of the payee or payment thereon in any mode shall deduct TDS thereon at the rate in force. The Explanation below sub-section (1) of Section 194A of the Act clarifies that where any income by way of interest is credited to any account, whether called “interest payable account” or “suspense account” or any other name in the books of account of the payer, such credit shall be deemed to be credit for the purpose of Secton 194A of the Act. Therefore the above contention raised by the assessee is rejected. Assessee contends that it had deducted tax at source on a later point of time, i.e. at the time of maturity of deposit and to such kind of deduction of tax at source, the assessee ought to be granted credit/adjustment for treating the assessee as an assessee in default - When the assessee has already deducted tax at source (though at a latter point of time) to the same extent assessee cannot be made an assessee in default under Section 201(1) of the Act, as this would amount to collection of tax at source under Section 194A of the Act twice. However, we make it clear that the assessee would be liable for interest under Section 201(1A) of the Act in respect of the said amount. Therefore, it is for the assessee to prove the above contention raised. Hence, we restore grounds C & D to the files of the AO. The assessee shall provide necessary details/ proof for the amount of tax that is deducted at source under Section 194A of the Act at a later point of time for claiming credit/adjustment against the orders passed under Section 201(1) of the Act. Once again we make it clear that the assessee shall be liable for interest as per the provisions of Section 201(1A) of the Act in respect of the tax deducted at source at a later point of time. Appeals filed by the assessee are partly allowed for statistical purposes Issues:Appeal against CIT(A) orders under Sections 201(1) & 201(1A) of the Income Tax Act, 1961 for assessment years 2016-17 to 2019-20.Analysis:1. Condonation of Delay: The delay of 65 days in filing the appeals was condoned by ITAT Cochin based on the reasons provided by the assessee in the affidavit. The tribunal found sufficient cause for condonation and proceeded to dispose of the appeals on merits.2. Common Issues Raised: The appeals raised common issues related to the legality and factual accuracy of the CIT(A) orders. The grounds raised by the assessee included challenges to the assessment of TDS shortfall and the demand for interest on delayed payment of TDS.3. Facts of the Case: The assessee, a district Co-Operative Bank, was found liable to deduct tax at source under Section 194A of the Act on interest payments. The AO passed orders under Sections 201(1) & 201(1A) of the Act, making the assessee an assessee in default for multiple assessment years and levying interest on the tax demand.4. First Appellate Authority's Decision: The CIT(A) held that crediting interest to the interest payable account constituted a deemed credit of interest income to the payees' account for TDS deduction under Section 194A. Consequently, the CIT(A) upheld the AO's view and confirmed the orders passed under Sections 201(1) & 201(1A) of the Act.5. Arguments Before the Tribunal: The assessee contended that TDS was deducted at the time of maturity/interest payment to depositors, seeking credit/adjustment for the same. The tribunal considered these arguments along with the submissions made by the Revenue.6. Tribunal's Decision: The tribunal rejected the assessee's contention that interest credited to the interest payable account was not liable for TDS under Section 194A. However, it accepted the plea that TDS was deducted at a later point in time and directed the AO to allow credit/adjustment for the same. The assessee was held liable for interest under Section 201(1A) for the delayed TDS payment.7. Stay Petitions: The tribunal dismissed the stay petitions filed by the assessee as the appeals were disposed of on merits. Consequently, the appeals were partly allowed for statistical purposes, and the stay petitions were dismissed.This comprehensive analysis of the judgment highlights the key issues, arguments, and decisions made by the ITAT Cochin in the appeal against the CIT(A) orders under the Income Tax Act, 1961.