ITAT: Interest not Leviable if TDS is paid before Completion of Proceedings

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The Income Tax Appellate Tribunal (ITAT), Cuttack Bench before Shri Chandra Mohan Garg ruled that no interest is leviable if TDS is timely deducted and paid to the Government exchequer.

This appeal is filed by the assessee against the order of the CIT(A),1 Bhuvneshwar dated 5.9.2019 for the assessment year 2014-15.

The assessee, Srabani Constructions Pvt Ltd. was engaged in the real estate business and had paid a sum of Rs.41,84,879 to contractors on which TDS along with interest was deposited with the Government. In support of the deposit, a challan was also furnished before the authorities below.

The TDS amount was deposited much before the completion of the assessment. When the assessee has already deposited the TDS amount, the AO is not justified in making the entire amount as addition and CIT(A) is not justified in confirming the same.

The assessee has deposited Rs.73,437/- i.e. TDS under section 194C of Rs.62,230 and interest of Rs.11,201 against payment of Rs.41,84,879. On the other hand, the department submitted that when the assessee had not deducted the TDS under section 194C of the Act on the payments to the contractors of Rs.41,84,879, the AO had no option but to disallow the entire amount.

The receipt of payment was not furnished before the AO and CIT(A). He, therefore, supported the orders of lower authorities. Section 194C of the Income Tax Act provides that any individual making a fee to a residential individual, who carries out ‘work’ as a contract between the ‘specified individual’ and the ‘resident contractor,’ is obliged and required to deduct tax at source.

In this case, the assessee could not deposit the TDS within the stipulated period as specified in the Act and, therefore, the AO made disallowance by invoking the provisions of section 40(a)(ia) of the Act. The Coram of Chandra Mohan Garg observed that the assessee has already deposited the TDS along with interest before completion of the assessment.

The ITAT noted 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, the ITAT held that in this case, the assessee has already deposited the TDS along with interest to the Government exchequer, as is evident from the challan, placed before the Tribunal.


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