If TDS is deducted on time and paid to the Govt. exchequer then no interest is leviable, this ruling came from the Income Tax Appellate Tribunal (ITAT), Cuttack Bench in a matter where Srabani Constructions Pvt Ltd. is the assessee.
The Assessee was involved in the real estate business and paid INR 41,84,879 to contractors, on which Tax Deducted at Source (TDS) was deposited with the government with interest. Concerning the same deposit, a challan was also presented to the authorities.
The TDS amount was deposited before the end of the assessment. Even when the assessee has deposited the TDS, the AO is not justified in making the entire amount addition and CIT (A) also not gets justified due to the same.
The assessee stated that the TDS amount was not deposited to the government due to financial difficulty but was finally deposited prior to the completion of the assessment. The applicant further said that they have deposited INR 73,437/- in total in two parts, TDS of INR 62,230 under section 194C of Act and ₹ 11,201 as interest against the payment amount of INR 41,84,879.
Department responded that When the assessee did not deduct TDS under section 194C of the Act on payment to contractors of INR 41,84,879, the AO had no option but to reject the entire amount. The receipt of payment was not presented to the AO and CIT (A). Therefore, supported the orders of the lower officers.
According to Section 194C of the Income Tax Act, if any individual generating fee to a residential individual, who carries out work as a contract between the specified individual and the resident contractor, is liable to deduct tax at source.
Here, the assessee failed to deposit the TDS within the specified period as defined in the Act and, hence, the AO disallowed the same as per the provisions of section 40(a)(ia) of the Act. The bench of Chandra Mohan Garg noted that the assessee has already deposited the TDS amount with interest before the end of the assessment.
Income-tax Appellate Tribunal (ITAT) released a ruling while stating that, “a person is liable to pay interest under section 201(1A) for failure to deduct tax at source or delay in payment of tax deducted at source and interest under section 206C(7) is levied for failure to collect tax at source or delay in payment of tax collected at source.”
However, ITAT stated that in this case, the assessee has already paid the TDS amount along with the payable interest to the Government Treasury, and there is challan as proof available in favour and also represented in-front of the Tribunal.
