Economic Laws Practice Vs CIT (Appeals) (ITAT Mumbai)
ITAT held that for the purpose of Computation of interest on late payment of TDS under section 201(1A), the expression month is to be interpreted as period of 30 days and not British calendar.
Gujarat High Court in the case of Arvind Textile Mills, considered the definition of month in the context of Section 201(1A) of the Act and held that Section 244A(1) is analogous to provisions of Section 201(1A)(ii) read with Rule 119A of the Act and a month must be given ordinary meaning of the term by taking period of 30 days and not British calendar month as defined u/s 3(35) of the General Clauses Act.
It was held that the definition given in General Clauses Act cannot be adopted for the purposes of subsection (1) of S.244A as such importation of the definition would lead to anomalous situation.
FULL TEXT OF THE ITAT JUDGEMENT
1. Aforesaid appeal by assessee for Assessment Year [in short referred to as ‘AY’] 2017-18 contest the order of Ld. Commissioner of Income-Tax (Appeals)-59, Mumbai [in short referred to as ‘CIT(A)’], Appeal No.CIT(A)-59/IT-143/2017-18, dated 12/10/2018 on following grounds of appeal: –
“1. The Order of the learned Commissioner is contrary to law, facts and circumstances of the case;
2. The learned Commissioner has erred in law in concluding that interest on late payment of TDS under section 201(1A) of the Act is to be computed based on calendar months without having regard to the fact that the provisions of section 201(1A) of the Act does not specifically prescribe the term ‘calendar month’.
3. In the facts and circumstances of the case, the learned Commissioner has grossly erred in law in interpreting the term ‘month’ as ‘calendar month’ without appreciating the settled law which provides that the interpretation of the provisions of the Act cannot be extended beyond the scope of the provisions under the Act.
4. In the facts and circumstances of the case, the learned Commissioner has erred in law in applying the provisions of section 3(35) of the General Clauses Act, 1897 to interpret the meaning of the term ‘month’ as ‘calendar month’.
5. In the facts and circumstances of the case, by interpreting the term ‘month’ as ‘calendar month’, the learned Commissioner has failed appreciate that such an interpretation is analogous and shall result into undue hardship to the appellant.
6. The learned Commissioner has erred in rejecting the favorable decisions of the Hon’ble Gujrat High Court in the case of CIT vs Arvind Mills Limited (Appeal No. 2486 of 2009, dated 13/09/2011) and the Hon’ble Income-tax Appellate Tribunal, Hyderabad, the case of Navayuga Quazigund Expressway (P.) Ltd (Appeal No. 1651 of 2014, dated 13/03/2015) which are similar to the facts and circumstances of the case.
7. The learned Commissioner has grossly erred in rejecting the decisions of the higher appellate authorities which are similar to the facts and circumstances of the case without regard to the fact that a higher appellate authority’s decision is binding on the lower appellate authorities.
8. In the facts and circumstances of the case, the learned Commissioner has erred in law in not appreciating the fact that the provisions of section 201(1A) of the Act ought to be read with the provisions of Rule 119A of the Income-tax Rules, 1962 (“the Rules”).
9. In the facts and circumstances of the case, the learned Commissioner has erred in law in rejecting the application of Rule 119A of the Rules by concluding that the provisions of Rule 119A of the Rules are to be read only with the provisions of section 244A(1) of the Act without appreciating the fact that the language used by law under the provisions of section 201(1A) of the Act is identical to the language used under the provisions of section 244A(1)of the Act.
The Appellant submits that each of the above grounds/ sub-grounds are in the alternative and without prejudice to one another.
The Appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before or at, the time of hearing, of the appeal, so as to enable the Hon’ble Tribunal to decide the appeals according to law. The Appellant also craves leave to submit additional documents and facts as may be necessary for the purpose of disposal of this appeal.
2. The learned Authorized Representative for Assessee, Ms. Vidushi Maheshwari, at the outset, submitted that the sole issue under the appeal is squarely covered by recent decision of co-ordinate bench of this Tribunal rendered in ITA No.2295/Mum/2018 for AY 2014-15 order dated 01/07/2019 titled as UTI Mutual Fund Vs. DCIT. The copy of the order has been placed on record. The Ld. DR relied upon impugned order but could not place on record any contrary decision.
3.1 Facts in brief are that the assessee was saddled with interest on account of late payment of TDS for Quarter-3 of financial year 2016-17. The e-TDS return for the said period was filed on 31/01/2017, for which an intimation was received on 10/02/2017 raising demand of Rs.1,13,270/- on account of interest on late payment of TDS. Upon perusal of justification report showing computation of interest, it was noted that CPC-TDS calculated interest on late payment of TDS on the basis of each calendar month during which the default was in existence. The plea of the assessee was that interest should be calculated, based upon the concept of month starting from the date of commencement of the default. In other words, the assessee submitted that where the period of delay was more than 30 / 31 days, the interest was to be computed for two months but where it was less than 30 / 31 days, the interest was to be computed for one month. Reliance was placed on the decision of Hon’ble Gujarat High Court in the case of CIT V/s Arvind Mills Limited (ITA No.2486 of 2009, dt.13-09-2011) and also on the decision of Coordinate Bench of Hyderabad Tribunal in Navayuga Quazigund Expressway Vs. DCIT (2015 64 Taxmann.com 212).
3.2 However, not convinced, Ld. CIT(A), upon perusal of the statutory provisions of Section 201(1A) of the Act held that interest on late deposit of TDS was to be calculated for demands of October, 2016 and November, 2016 since it was due across both these part months. The findings given by Ld. CIT(A) are as under: –
“2.5 In the instant case, interest for late deposit of TDS will be calculated for the months of October, 2016 and November, 2016, since it was due across both these part months. The governing section, i.e., section 201(1A) of the Act is explicit that interest on late deposit of TDS is to be calculated from the date of deduction to the date of deposit at the rate of 1.5 percent per month or part of the month. The appellant deposited the tax it deducted after the applicable due dale for doing so. That is to say, the due date for depositing the tax deducted by it was 07.11.2016, whereas, it actually and admittedly, deposited the same on the succeeding date. Accordingly, the appellant would be liable to pay interest for two months, viz. for October, 2016 and November, 2016. Both the parts of the months involved will be reckoned and included as full months since “part of a month” is also considered as a full month as per the clear stipulation of section 201(1A) of the Act.
2.6 When the said section of the statute itself mandates that any fraction of a month is to be deemed a full month, then there is little scope for reading it down or importing interpretational issues based on extraneous considerations such as equity or comparisons with other sections of the statute. For instance, there is no mention of the calculation of a “period” which has been specified in clause (a) and clause (b) of rule 119A of the Income-tax Rules, 1962, wherein it has been stated that where interest is to be calculated for every month or a part of the month comprised in a “period”, any fraction of a month, shall be deemed to be a full month. Section 201(1A) of the Act has to be taken as a self-contained procedure where the modalities for calculation of interest payable has been laid out. It is well-settled that where the words of a statute are clear, plain and unambiguous, then the effect to that meaning has to be given irrespective of the consequences.
2.7 Adverting to the two judicial authorities pressed into service by the appellant, it is seen that the decision rendered in the case of CIT vs Arvind Mills Limited (supra) was in the context of section 244A and not in the context of 201(1A) of the Act which applies to the case under consideration. It deserves consideration that section 244A(l) refers to month or part of the month ‘comprised in a the period’ for all refund scenarios covered by sub-clauses (a), (aa) and (b) thereof. This corresponds to reference to the determination of a ‘period’ in rule U9A of the Income-tax Rules, 1962, as discussed above. On the other hand, there is no reference to the computation of ‘period’ in section 201(1A) of the Act. The other decision, i.e., the one rendered by the td. Appellate Tribunal, Hyderabad, in Navayuga Quazigund Expressway vs DCIT, Circle 15(1), Hyderabad (supra) though on the computation of interest under section 201(1A) of the Act, is completely based on the aforecited decision of the Hon’ble Gujarat High Court. No decision of a binding jurisdictional authority was cited by the appellant.
2.8 It may also he perhaps worthwhile to mention that interest levied need not wholly be compensatory in nature in all cases. Such a levy may also he penal-deterrent in nature, which is best exemplified by the differential rates of ink-rest provided for in section 201(1A)(i) and section 201(1A)(ii) of the Act. It also perhaps deserves consideration that there was no bar on the statute itself in providing for a period in ‘days’ rather than ‘month’. For example, the words ‘thirty days’ and ‘sixty days’ appear in section 249(2) and section 153 of the Act.
2.9 In view of the discussion as foregoing, no infirmity is found in the levying of interest in the impugned intimation of the CPC-TDS. The same requires no interference and is upheld. Consequently, the ground of appeal fails and is, therefore, dismissed.3.0 In result, the appeal is dismissed. Order passed under section 250 read with section 251 of the Act”.
Aggrieved, the assessee is under further appeal before us.
4. We have carefully heard the rival submissions and perused relevant material placed on record including decision cited by Ld. AR. Upon due consideration, we concur with the submissions of Ld. AR that the issue stood squarely covered in assessee’s favor by the cited decision of this Tribunal rendered in ITA No.2295/Mum/2018 for AY 2014-15 order dated 01/07/2019 titled as UTI Mutual Fund Vs. DCIT wherein both the decisions as cited before learned first appellate authority has been considered by the co-ordinate bench. The findings, for ease of reference, could be extracted in the following manner: –
7. We have considered rival contentions and perused the material on record including cited laws. We have observed that the assessee has deducted Income-tax at source under Chapter XVII-B of the 1961 Act on various dates of the month of October 2013 which was required to be deposited to the credit of Central Government on 7th November 2013 but was deposited late to the credit of Central Government on 11.11.2013, which led to raising of additional demand towards interest payable by assessee for late deposit of TDS to the credit of Central Government, by Income Tax Department , TDS CPC, Ghaziabad, UP vide intimation dated 30.03.2014 u/s. 200A of the 1961 Act, wherein further interest demand of Rs. 4,19,060/- were raised against the assessee in addition to suo motu voluntary deposit of interest for late deposit of TDS to the tune of Rs.5,73,046/- paid by assessee while filing 3rd quarter TDS return in form no 26Q for Financial Year 2013-14. The delay in deposit of TDS to the credit of Central Government ranged for the period from 15 days to 35 days. The asessee has submitted a chart to make its contention as to how the interest for late deposit of TDS is to be computed u/s 201(1A), as detailed here under:-
