2018 (8) TMI 2110 - AT - Income Tax

Demand u/s 201(1) and 201(1A) - assessee s had not remitted the tax deducted at source on certain payments made - Assessee argued recipient of the income has filed loss returns of income and no taxes were payable to the government - HELD THAT - As fairly agreed to by the counsel of both the assessee and Revenue that the issue before us i.e whether the assessee s are liable to pay interest u/s 201(1A) of the Act has been considered at length and held against the assessee by the decision of the co-ordinate bench of this Tribunal in the case of power and control systems in holding there is a difference between case where the amount paid is chargeable to tax but the payee has suffered loss or does not have positive income and a case where the payments made are not chargeable to tax at all. The argument made on behalf of the assesee can be considered only where the payment in question is not chargeable to tax at all. But in a case where payment in question is chargeable to tax but the payee has suffered loss or does not have positive income then the person making the payment is obliged to deduct tax at source. The fact that the payee does not have positive income will absolve the person making payment from being treated as an assessee in default for not deducting tax at source but cannot absolve the payee from paying interest u/s 201(1A) Respectfully following the aforesaid decision Research Enterprises 1998 (12) TMI 18 - MADRAS HIGH COURT and CIT Vs. CIT Vs. Chennai Metropolitan Water Supply and Sewerage Board 2011 (9) TMI 224 - MADRAS HIGH COURT and Hon ble Punjab Haryana High Court in Punjab and Infrastructure Development 2017 (8) TMI 78 - PUNJAB AND HARYANA HIGH COURT we concur with and uphold the view of the ld CIT(A). Consequently all four appeals of these two assessee s are dismissed.

Summary

Issues Involved:
1. Whether the assessee companies are liable to pay interest under Section 201(1A) of the Income-tax Act, 1961 for non-remittance of tax deducted at source (TDS).

Issue-wise Detailed Analysis:

1. Liability to Pay Interest under Section 201(1A):
The primary issue in these appeals is whether the assessee companies are liable to pay interest under Section 201(1A) of the Income-tax Act, 1961 for failing to remit TDS on certain payments.

Facts of the Case:
The assessee companies, engaged in bio-sciences research, were subjected to a survey under Section 133A of the Income-tax Act on 26/7/2013. It was discovered that they had not remitted TDS on certain payments. The Assessing Officer (AO) treated them as 'assessee in default' under Section 201(1) and determined the tax liability, charging interest under Section 201(1A) through orders dated 30/6/2014. The Commissioner of Income Tax (Appeals) [CIT(A)] provided partial relief but upheld the charging of interest under Section 201(1A).

Contentions of the Assessee:
The assessee companies contended that:
- Interest under Section 201(1A) is compensatory.
- Since the recipients of the income had filed loss returns and no taxes were payable, the question of delay in recovery of taxes and interest for delay does not arise.
- The authorities erred in charging interest without proper appreciation of law and judicial pronouncements.
- The calculation of interest was erroneous and excessive.

Tribunal's Analysis:
The Tribunal noted that the issue of liability to pay interest under Section 201(1A) had been considered and held against the assessee by a co-ordinate bench in the case of Power and Control Systems (ITA Nos. 883 to 887/Bang/2018 dated 4/6/2018). The Tribunal referred to several judicial precedents, including:
- The proviso to Section 201(1A) inserted by the Finance Act, 2012, which states that interest is payable from the date tax was deductible to the date of furnishing of the return of income by the deductee.
- The Supreme Court's decision in Hindustan Coca Cola Beverages Pvt. Ltd., which clarified that no demand under Section 201(1) should be enforced if taxes due have been paid by the deductee, but interest under Section 201(1A) is still chargeable.
- The Punjab & Haryana High Court's decision in CIT(TDS) Chandigarh vs. Punjab Infrastructure Development Board, which held that interest under Section 201(1A) is payable even if the deductee has filed a loss return.

Conclusion:
The Tribunal concluded that:
- Even if the recipient of income had no tax liability due to losses, the payer is still liable to pay interest under Section 201(1A) from the date tax was deductible to the date the deductee filed their return.
- The levy of interest is automatic and compensatory, irrespective of the tax liability of the deductee.
- The decisions of the High Courts and the Supreme Court support the view that interest under Section 201(1A) is chargeable in such cases.

Final Judgment:
The Tribunal upheld the CIT(A)'s decision and dismissed all four appeals of the assessee companies, confirming the liability to pay interest under Section 201(1A).

Order Pronouncement:
The order was pronounced in the open court on 1st August 2018.