TaxTMI 
TaxTMI 
2014 (11) TMI 281
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.... 201(1A) on the ground that the assessee has not deducted tax and the surcharge while making payment to the firms. On appeal by the assessee, the CIT(A) found that the decision of this Tribunal in the assessee's own case dated 12-10-2012 is not applicable. According to the ld.representative, this Tribunal in assessee's own case in ITA 383 to 384 & 386/Coch/2011 order dated 11-01-2013 found that it is to be verified whether the recipient of the income is liable to pay tax on the interest income. According to the ld.representative, in view of the decision of this Tribunal in assessee's own case, the Commissioner (Appeals) is not justified in confirming the order of interest u/s 201(1) & 201(1A) of the Act. The ld.representative further submitted that there was a reasonable cause for non deduction of tax. The ld.representative also submitted that the recipient of the income has already paid the tax and surcharge, therefore, the assessee cannot be treated as assessee in default. Moreover, the income of the recipient has not exceeded Rs. 1 crore, therefore, assessee need not deduct tax on surcharge. 4. On the contrary, Smt. Latha V Kumar, the ld.DR submitted that admittedly, the assess....
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....ot being an individual or a Hindu undivided family" clearly exempts individuals and HUFs. Therefore, the assessee being an individual is not expected to deduct tax while making interest payment to any person including the firm in which he is a partner. However, the proviso to section 194A(1) of the Income-tax Act makes an exception in respect of individual whose the gross receipts exceeds the limit prescribed u/s 44AB of the Act. In this case, the gross receipt of the assessee has exceeded the prescribed limit u/s 44AB, therefore, the assessee has to deduct tax u/s 194A(1) at the time of making payment. 7. Now coming to the contention of the assessee that there was a reasonable cause for non deduction of tax on surcharge, this Tribunal is of the opinion that the question of reasonable cause has to be considered in the light of the provisions of section 273B at the time of levy of penalty. There is no question of reasonable cause for non deduction of tax. Therefore, this Tribunal is of the considered opinion that the contention of the assessee has no merit. 8. It is well settled principles of law that tax includes surcharge. Therefore, the CIT(A) is not correct in saying that the ....
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.... partner is excluded from section 194A(3)(iv) of the Act. Therefore, the assesees were under the bona fide impression that the payment by the partners to the firm is also exempted. This Tribunal accepted the contention of the assessees and found that there was a reasonable cause u/s 273B of the Act. Therefore, the penalty was deleted under identical circumstances. 11. On the contrary, Smt. Latha V Kumar, the ld.DR submitted that admittedly, the assessees paid interest on the overdrawings / loan and tax was not deducted. What was exempted under the Income-tax Act is payment by the firm to the partner and not by the partner to the firm. There was no reasonable cause for not deducting tax. Therefore, the CIT(A) rightly confirmed addition. 12. We have considered the rival submissions on either side and also perused the material available on record. This Tribunal considered an identical issue in the assessee's own case in ITA No.385/Coch/2011 for assessment year 2006-07. The Tribunal observed as follows: "6. We have heard the rival contentions and carefully perused the record. The penalty u/s 271C of the Act shall be levied if there is failure on the part of a person to deduct ....
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.... source from the interest so paid by them. 9. However, in the instant cases, the fact remains that the assesees herein, being individuals, have paid interest to the partnership firm, in which they are partners. In view of the legal position that the partner and firms re not two legal entities and further in view of the exemption provided in sec.Rs. 194A in respect of interest credited or paid by a partnership firm to its partners, the assessees herein were under the belief that they are not liable to deduct tax at source. Hence, in our view, the said view entertained by the assessees herein cannot be altogether be discounted with as untenable, since the issue that the TDS provisions shall not apply to the payment made by a partner to the partnership firm is a debatable one. Hence the facts prevailing in the case of M/s Muthoot Bankers and M/s Muthoot Financiers being different, it cannot be said that the assessees were aware of the TDS liability, in the context of facts prevailing in the instant case. 10. The full bench of Hon'ble Andhra Pradesh High Court had an occasion to interpret the term "reasonable cause" in the context of the then existing provisions of sec.271 in the cas....