Interest charged on short deduction of TDS

[Arun Newalkar]

Kindly clarify whether Interest u/s 201(1A) of the Act is not chargable to the deductor in light of the following cases: Bennett Coleman & Co Ltd Vs 1TO [1984 (11) TMI 58 - BOMBAY High Court], ICICI Bank Limited vs. Dy. CIT [2014 (1) TMI 706 - ITAT LUCKNOW], Uttar Pradesh Financial Corporation Versus ITO. (TDS) -5(2), Kanpur etc.

In other words, is the company liable to pay interest charged on short deduction of TDS for earlier years without any evidence of the fact that the income on which TDS was deducted has not been taxed so far in the hands of the recipient. What stand should the deductor company take

[DR.MARIAPPAN GOVINDARAJAN]

If the recipient of income does not pay the tax the short amount of TDS then the company is liable to pay interest from the date of due to date of deduction as held in the case law cited by you.

[Ganeshan Kalyani]

I agree with Mariappan sir. Further it is better to confirm with the concerned employee whether the diffential tax has been paid by him. If it is paid then you can take the stand that the tax has been paid by the employee and therfore the interest be waived off. Mariappan sir hope I am clear in my view.

[DR.MARIAPPAN GOVINDARAJAN]

Yes. What Ganeshan Sir telling is correct.

AI Summary

Interest under section 201(1A) may be charged on short TDS deduction unless recipient has paid tax. Where the recipient has not paid the tax on income, the deductor is liable to pay interest under section 201(1A) from the date the tax was due to the date of deduction; if the recipient proves payment of the differential tax, the deductor may contend that interest should be waived.