TMI Blog2007 (1) TMI 215X X X X Extracts X X X X X X X X Extracts X X X X ..... nd circumstances of the case, the learned CIT(A) has erred in treating the discounting charges amounting to Rs. 45,96,349 as interest within the definition of s. 2(28A) and accordingly in attracting the provisions of s. 194A of the Act. 2. That assessee company prays for leave to add, alter, amend or vary on the grounds imposed either before or at the time of hearing." Grounds in assessee's TDSA No. 90/Del/2004: "1. That on the facts and circumstances of the case, the learned CIT(A) has erred in treating the discounting charges amounting to Rs. 49,40,717 as interest within the definition of s. 2(28A) and accordingly in attracting the provisions of s. 194A of the Act. 2. That assessee company prays for leave to add, alter, amend or vary on the grounds imposed either before or at the time of hearing." 2. Rival contentions have been heard and record perused. Brief facts of the case are that a survey operation was conducted on 24th Feb., 2003 at the assessee's premises wherein some trial balances were obtained and it was found that the assessee had debited discounting charges under the head financial charges for the financial years under consideration. The AO was of the vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 194A, whereas the Revenue is aggrieved for directing the AO to charge interest under s. 201(1A) of the Act from the date of deductibility of tax till the payment by the deductee. 5. It was argued by the learned Authorised Representative, Shri K. Sampath that discounting of bills was a common business practice wherein funds could be arranged against a particular bill before the due date, and the amount so paid is technically known as discounting charges. Such discounting charges is not interest within the definition of s. 2(28A) of the IT Act, 1961. He further submitted that all the payees of the discounting charges have already paid taxes on their respective incomes, after incorporating such discounting charges in their taxable incomes, therefore, deduction of tax at source from the assessee will amount to double taxation on the very same amount. He contended that even if tax was not deducted in view of s. 11 (sic-191), tax shall be payable by the payee and not by the payer. 6. It was stressed that if the Department was allowed to recover tax from the payer of income then an absurd situation of having collected tax twice on the very same income would arise as the parties to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est under s. 2(28A) of the Act. He further contended that CIT(A) was not justified in directing the AO for computing the interest under s. 201(1A) of the Act till the date of payment of taxes by the deductee. As per learned Departmental Representative, the interest should be computed till the date of actual payment of taxes which are liable to be deducted at source. 9. We have considered the rival contentions, carefully gone through the orders of the authorities below and also deliberated on the case laws referred to by the lower authorities in their respective orders, and the case laws cited at Bar, in the context of factual matrix of the case. From the record, we found that during the course of survey, the Department found that the assessee has debited discounting charges under the head "Financial charges" which was in respect of debts incurred by the assessee with regard to various parties and the amounts paid were covered within the definition of interest under s. 2(28A) of the IT Act, 1961. A categorical finding has been recorded by the lower authorities to the effect that these financiers were maintaining running account with the assessee and lent funds whenever there was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he lower authorities for treating these charges as interest and liable for TDS under s. 194A of the Act. The mere fact that the assessee did not choose to characterise such payment as interest, will not take such payment out of the ambit of the definition of "interest", insofar as payment made by the assessee was in respect of an obligation incurred under the terms of bill so discounted. The assessee has essentially taken a financial help against the bills and the amount of charges paid was with respect to the amount of bill and the period for which money was so utilized. 11. Let us now examine the case laws relied on by the learned Authorised Representative in case of DDA, wherein assessee, Government authorities constructed and sold houses to public on payment of instalments under certain terms and conditions. As there was delay in construction of the houses within the stipulated period, interest was paid. The Hon'ble Delhi Tribunal held that the interest was paid for delay in construction of the houses within the stipulated period and was not in the nature of interest within the meaning of s. 2(28A) of the Act and not liable for deduction of tax at source under s. 194A of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the amount deducted. Interest at the stipulated rate is inevitable and can be legitimately recovered from the assessee in default. Mr. Jolly's submission, that the expression date on which such tax was actually paid must relate to the date when tax is paid by the assessee, needs notice only to be rejected. If tax has been paid by the deductee as is the position in the instant case, there is no question of the assessee paying the same over again either in full or part. Tax could be recovered from the assessee only once. If that be so, interest must stop accruing, the moment, the amount of tax is paid to the Revenue. It is immaterial whether the tax is paid by the deductee or the assessee who had made the deduction. What is significant is that the interest which is compensatory in character is paid to the Revenue till the date the amount of tax is actually deposited. That is precisely what has been done in the instant case. The question framed earlier is answered accordingly." 16. In view of the above, we do not find any infirmity in the order of the CIT(A) for directing the AO to levy interest under s. 201(1A) of the Act from the date of deductibility of tax till the payment by ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
