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2016 (5) TMI 154 - ITAT VISAKHAPATNAM

2016 (5) TMI 154 - ITAT VISAKHAPATNAM - TMI - Levy of interest under sec. 201(1A) - non deduction of tds u/s 192 - period of computation of interest - Held that:- A simple reading of sec. 192(1) makes it clear that it specified the manner and rates at which tax shall be deducted. Sub sec. (3) of sec. 192 provides for adjustment of excess or deficiency within the financial year, not only in the cases of short deduction and also for failure to deduct during the financial year. The object and purpo .....

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clear that liability to interest arises only, when such tax was deductible as per sub sec. (3) of section 192 and not as per sub sec. (1) of sec. 192 of the Act. Therefore, we are of the opinion that, interest u/s 201(1A) is payable from the 1st day of April of subsequent year. - Decided against the revenue. - I.T.A.Nos.155&156/Vizag/2014, C.O. Nos.36&37/Vizag/2014 - Dated:- 31-3-2016 - SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER For The Appellant : Smt. D. Koma .....

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hat the assessee, Andhra University is established under an act of state legislature. A survey operation under sec. 133A of the Income Tax Act, 1961 was conducted on 19-11-2011 to examine the assessee s compliance to TDS provisions. During the course of survey, it was noticed that the assessee has not deducted TDS on pension payment to its pensioner s. Thereafter, the Assessing Officer passed order under sec. 201(1) and 201(1A) on 6-1- 2012 and raised demand of tax and interest of ₹ 62,36, .....

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interest. The assessee also filed details of pensioner s who had filed the return on their own and paid the taxes and requested to give credit for the taxes already paid by the pensioner s. The Assessing officer, after considering the representation and also details filed by the assessee, passed order under sec. 154 and determined demand of ₹ 12,47,485/- under sec. 201(1) and ₹ 8,48,585/- under sec. 201(1A) of the Act. 3. Aggrieved by the order, the assessee preferred an appeal befor .....

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e held assessee in default under sec. 201(1), in view of Explanation to section 191 of the Act and relied upon CBDT circular No. 7 of 2003. If at all interest can be levied, it can be levied only from the first day of April to the date of payment of taxes by the pensioner s. It was further submitted that in respect of both categories, the A.O. levied interest by dividing the total taxes by 12 and calculated the interest, which is not in accordance with the provisions of sec. 192(3) of the Act. T .....

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ssion of assessee held that interest is leviable, even in the cases where the deductee has paid the taxes and filed return of income. While doing so, the CIT(A) relied upon the judgment of Hon ble Supreme Court, in the case of Hindustan Coca Cola Beverages (P) Ltd vs CIT, 293 ITR 226 and Board Circular No. 275/201/95-IT(B) dt. 29-1-1997. As regards period of computation of interest under sec. 201(1A), the CIT(A) held that the liability to deduct TDS arises only when there was tax liability for t .....

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red in holding that the TDS liability would arise only when amount of income exceeds the basic exemption limit and so, the liability to interest under sec. 201(1A) is to be calculated only from the month when the income exceeds the basic exemption limit is contrary to the provisions of sec. 192 of the Act. The Ld. D.R. further submitted that, the CIT(A) ought not have accepted the plea of the assessee that computation made by the A.O. evenly for 12 months by dividing the TDS by 12 is not in acco .....

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191 of the Act and relied upon CBDT circular No. 7 of 2003. The Ld. A.R. further submitted that the CIT(A) was justified in holding that the TDS liability cannot be divided by 12 and distributed evenly over the year for the purpose of computation of interest under sec. 201(1A) of the Act. The A.R. further submitted that sub sec. (3) of sec. 192 provides for adjustment of TDS liability in a cases, where any excess or deficiency arising out of any previous deduction or failure to deduct during the .....

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of interest. The A.O. has classified the defaults in to two parts - (i) pensioner s who had filed the return and paid the taxes. (ii) Others (Pensioner s on whose pension the assessee has not deducted TDS). In respect of first category, the A.O. levied interest up to the date of payment of taxes by the deductee. In respect of others, the A.O. levied interest up to the date of order under sec. 201(1) of the Act. The A.O. has levied the interest under sec. 201(1A) by dividing the TDS liability by .....

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he Act. Before, we go in to the facts of the case, let us understand the provisions of law enumerated by sec. 201(1) and 201(1A) of the Act, which reads as follows. Section 201(1): Where any person, including the principal officer of a company,- (a) Who is required to deduct any sum in accordance with the provisions of this Act; or (b) Referred to in sub-section (1A) of section 192, being an employer, does not deduct, or does not pay, or after so deducting fails to pay, the whole or any part of .....

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month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is deducted; and (ii) At one and one-half per cent for every month or part of a month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid. A Plain reading of section 201(1) of the Act makes it clear that if a person fails to deduct tax, or after so deduction fails to pay the tax as required under this Act, then, such person .....

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t from an accountant in such form as may be prescribed. Therefore, before insertion of proviso to section 201(1) w.e.f. 1-7-2012, if any person fails to deduct or after such deduction fails to pay such tax, then, such person shall be deemed to be an assessee in default in respect of such tax. In the present case on hand, on perusal of the facts, we find that the period involved in this appeal is before insertion of proviso to sec. 201(1) of the Act. Therefore, we are of the opinion that there is .....

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- 1997, wherein it was clarified that no demand visualized under sec. 201(1) of the Act, should be enforced after the tax detector has satisfied the officer-in-charge of TDS, that taxes due have been paid by the deductee-assessee. However, this will not alter the liability to charge interest under sec. 201(1A) of the Act. Therefore, we are of the opinion that the assessee is liable to pay interest under sec. 201(1A) of the Act. 9. Having said that, let us examine the period of computation of int .....

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d relevant provisions of sec. 192(1) and 192(3) of the Income Tax Act, 1961 which reads as follows. Section 192(1) of the Act: Any person responsible for paying any income chargeable under the head Salaries shall, at the time of payment, deduct income-tax on the amount payable at the average rate of income-tax computed on the basis of the [rates in force] for the financial year in which the payment is made, on the estimated income of the assessee under this head for that financial year. Section .....

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ying any income chargeable under the head Salaries shall, at the time of payment, deduct income tax on the amount at the average rate of income tax, computed on the basis of the rates in force, for the financial year on the estimated income of the assessee under this head. Sub sec. (3) of sec. 192 provides for adjustment of excess or deficiency arising out of any previous deduction or failure to deduct any TDS during the financial year. Similarly, sec. 201(1A) provides for liability to pay inter .....

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t specified the manner and rates at which tax shall be deducted. Sub sec. (3) of sec. 192 provides for adjustment of excess or deficiency within the financial year, not only in the cases of short deduction and also for failure to deduct during the financial year. The object and purpose of Sub section (3) is to permit the deductor to adjust the short or excess deduction in the financial year. Therefore, sub sec. (3) abundantly makes it clear that if failure to deduct tax, the same can be deducted .....

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01(1A) is payable from the 1st day of April of assessment year. 11. Now it is pertinent to discuss the case laws relied upon by the assessee. The assessee relied upon Hon ble High Court of Uttarakhand decision, in the case of CIT vs. Enron Expat Services (2011) 330 ITR 496, wherein the Hon ble High Court, held that short fall in deduction of TDS and failure to deduct TDS can be deducted by way of adjustment during the financial year. The relevant portion is reproduced hereunder. It is true that .....

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of excess or deficient deduction, but also authorizes adjustment in case of total failure to deduct during the financial year. Sub-s. (3), therefore, makes it abundantly clear that if there is a failure to deduct in a financial year, the same can be deducted by way of adjustment during the financial year. In those circumstances, the obligation to deduct at the time of payment, which is the mandate of subs. (1) of s. 192, stands extended upto the end of the financial year by virtue of the provis .....

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