2000 (10) TMI 181 - AT - Income Tax

Tribunal Upholds Interest Levy for TDS Non-deposit, Emphasizes Mandatory IT Act Provisions

Voltas Ltd. Versus Income-Tax Officer.

Voltas Ltd. Versus Income-Tax Officer. - TTJ 071, 054, Issues:Levy of interest under section 201(1A) of the IT Act, 1961.Analysis:The appeal was filed against the order confirming the action of the Assessing Officer (AO) in charging interest under section 201(1A) amounting to Rs. 11,43,433. The primary contention raised was regarding the levy of interest under section 201(1A) of the IT Act. The facts revealed that the assessee, a State Government undertaking, had deducted tax at source but failed to deposit it within the prescribed time due to heavy losses. The AO demanded the TDS amount and interest under section 201(1A). The assessee disputed the interest levy, citing reasons such as the existence of a certificate from the IT Department and completed assessments of the payee.The learned counsel for the assessee argued that the certificate issued under section 197 exempted them from deducting TDS, and even if deducted but not paid, it should not attract interest. They also contended that since assessments of the payee were completed and taxes paid, there was no need to deduct TDS. The Departmental Representative, however, argued that failure to deposit TDS within the prescribed time attracts interest under section 201(1A).The Tribunal analyzed the case, noting that the liability to deduct TDS existed when the tax was deducted, and the certificate issued later could not have a retrospective effect. The Tribunal held that the assessee was liable to deduct TDS and pay it within the prescribed time. Additionally, the Tribunal rejected the argument that completed assessments of the payee absolved the assessee from paying TDS. The Tribunal referred to precedents and held that interest under section 201(1A) was mandatory for compensating the withheld tax.The Tribunal directed the AO to charge interest on the TDS amounts from the date of default to the date of assessment of the payee for the respective assessment years. The decision was supported by a previous Tribunal ruling. Ultimately, the appeal was allowed in part, with interest to be charged up to the date of the payee's assessments.In conclusion, the Tribunal upheld the levy of interest under section 201(1A) due to the assessee's failure to deposit TDS within the prescribed time, rejecting arguments based on certificates and completed payee assessments. The Tribunal's decision was guided by the compensatory nature of the interest levy and the mandatory provisions of the IT Act.