TaxTMI 
TaxTMI 
2010 (4) TMI 722
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....nd 2007-08 respectively. 2. The grounds in both the appeals are identical and drafted in the same fashion by stating that the learned CIT (A) has erred in law, and on facts in deleting the demand raised by the AO u/s 201 and 201(1A) of the Income-tax Act for the two assessment years, namely, Asstt. Years 2006-07 and 2007-08. 3. In the grounds of appeal, the revenue has contended that learned CIT (A) has erred in holding as under: (i) The "Tax Deductor" is not liable to deduct tax on the amount of interest paid/credited in the account of the deductee. (ii) The "Tax Deductor" is maintaining its accounts on cash basis. So long as the interest is created to the account of the deductee, section 194A is clearly attra....
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....dd: Interest accrued on loan Rs, 1,30,00,000/- Total Rs.31,03,21,672/- Less Repayment on loan Rs. 1,60,00,000/- Balance Rs.29,43,21,672/- The AO was of the opinion that when interest accrued on loan was credited in the creditor's account, the assessee was supposed to deduct tax at source within the meaning of provisions contained in Section 194A of the Act. 5. Since assessee failed to deduct tax at source from the amount of interest credited in the creditor's account, the AO passed the order u/s 201(1) and 201(1A) in both the Asstt. Years as under: (a) Assessment Year 2006-07: Demand u/s 201 of the I.T. Act, 1961 As envisaged u/s 194-A of the I.T. Act, 1961 Rs.76,34,620/- On the payment of i....
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....p; (b) Assessment Year 2007-08: Demand u/s 201 of the I.T. Act, 1961 As envisaged u/s 194-A of the I.T. Act, 1961 Rs.50,03,923/- On the payment of interest amounting to Rs. 2,22,99,125/- Interest u/s 201(1A) of the I.T. Act, 1961 Rs.8,00,624/- For the period of delay from 1.4.2007 to 07/2008 ---....
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....ss to the revenue and even if the demand is raised that would turn out to be a redundant. (ii) The assessee credited merely a notional interest on loan taken from M/s Haryana State Agriculture Marketing Board, and in the books the assessee has made provision of accrued interest on loans though in fact no interest was actually paid to creditor, and, therefore, this notional entry would not result in income to the creditor whose income is exempt u/s 11 & 12 of the Act. Hence, the Department is in appeal. 7. We have heard both the parties and have carefully gone through the orders of the authorities below. 8. It is not in dispute that the assessee has made entry of interest accrued on loan taken from M/s Haryana State Agricult....
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....dustan Coca Cola Beverages (P) Ltd. vs CIT, (2007) 293 ITR 226 (SC) where it has been held that where the recipient has already discharged his tax liability and filed his return of income, the deductee could not be called upon to pay the amount u/s 201(1) if the tax has already been paid by the recipient on such income on which tax was deductible at source. However, when the tax is subsequently paid by the deductee, the liability to pay interest would not cease for the period for which revenue remained deprived of the amount, which was rightfully due to it and in that case the deductor would be liable to pay interest u/s 201(1A) of the Act. The CIT(A) has also followed this principle and then held that since Haryana State Agricu....