TaxTMI 
TaxTMI 
2006 (6) TMI 104
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....tax liability of Rs. 3,41,46,984 was, on that basis, determined against the respondent. In addition, a sum of Rs. 2,13,89,341 towards interest was held payable by it under section 201(1A) of the Act. Aggrieved by the said order, the respondent appealed to the Commissioner of Income-tax and argued that the payments made to TFCI towards interest were immune from any deduction at source in terms of section 194A(3)(iii)(b) of the Act. It was alternatively argued that even if the deduction at source was in law necessary, the respondent could not be treated as "an assessee in default" as it was labouring under a bona fide belief that TFCI was covered under the provisions mentioned above and the payments made to it were exempt from any deduction at source. Reliance was also placed by the assessee upon a notification issued by the Central Government notifying TFCI for purposes of section 194A(3)(iii)(b) of the Act. The said notification, it was argued, was applicable retrospectively to grant immunity from deduction even in regard to the payments made to the corporation before the same was issued. The Commissioner of Income-tax repelled all these contentions. The Commissioner held that TFC....
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....y of tax till the payment by the deductee shall, therefore, be charged under section 201(1A) of the Act." Aggrieved by the common order passed by the Commissioner for all the financial years, the parties preferred cross appeals before the Tribunal. While the respondent-assessee assailed the finding recorded by the Commissioner that the assessee was in default under section 201(1) of the Act in relation to payments made to TFCI, the Revenue was in appeal before the Tribunal on the question of deletion of the amount of tax which, according to it, should have been deducted apart from levy of interest only up to date the payee had made the payment of tax. The Tribunal has, by the common order impugned in these appeals, dismissed the appeals filed by the Revenue while allowing those filed by the assessee. The Tribunal held that the payments made to TFCI were not exempt from TDS under section 194A(3)(iii)(b) of the Act. It further held that the assessee was under a bona fide belief that tax was not required to be deducted from the payment of interest to TFCI. On the question of limitation, the Tribunal was of the opinion that the Assessing Officer ought to have made an order within a p....
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....source was wholly irrelevant to the question whether it was in default within the meaning of section 201 of the Act. It was only for purposes of levy of a penalty as contemplated under section 201, read with section 221 of the Act that the sufficiency of reasons for the failure to deduct or to pay the tax assume importance. That is evident from the proviso to section 201(1) of the Act which reads as under: "201(1) If any such person referred to in section 200 and in the cases referred to in section 194, the principal officer and the company of which he is the principal officer does not deduct the whole or any part of the tax or after deducting fails to pay the tax as required by or under this Act, he or it shall, without prejudice to any other consequences which he or it may incur, be deemed to be an assessee in default in respect of the tax: Provided that no penalty shall be charged under section 221 from such person, principal officer or company unless the Assessing Officer is satisfied that such person or principal officer or company, as the case may be, has without good and sufficient reasons failed to deduct and pay the tax." Even under section 273B of the Act, the reasonab....
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....has verified whether the payee/deductee has paid taxes on the amounts received from the assessee and come to the conclusion that such payments had in fact been made by the deductee in the form of advance tax. The Assessing Officer had taking note of such payments determined a total amount of Rs. 67,110 towards interest for the financial years in question. That payment had, according to Mr. Vohra, been already made by the assessee leaving no other angle or issue to be examined by this court. It was submitted by Mr. Vohra that if this court came to the conclusion that interest was indeed payable up to date the deductee made the payments of tax, the payments already made pursuant to the order passed by the Assessing Officer, should satisfy the Revenue and the appeals disposed of without going into the question whether the assessment orders made by the Assessing Officer were within or beyond the period of limitation. In the light of what we have observed earlier there can be no dispute that the assessee was in default on account of its failure to make the deductions at source. That default would render it liable to pay the tax amount as also interest on the same after giving it credit....