Vaayu Infrastructure LLP Vs DCIT (ITAT Mumbai)
Summary: The Mumbai ITAT allowed Vaayu Infrastructure LLP’s appeal for AY 2018-19 for statistical purposes and directed factual verification of TDS payments underlying an aggregate demand of Rs.6,67,258. The AO had treated the assessee as in default under Section 201(1) for Rs.3,51,134 of TDS stated to have been deducted but not deposited and Rs.3,123 allegedly not deducted on Renewable Energy Certificate (REC) registration charges of Rs.31,231, besides levying interest under Section 201(1A). The assessee produced challans claiming that the deducted tax had subsequently been deposited. The ITAT held that once deducted tax is deposited into the Government Treasury, the same amount cannot continue as principal liability under Section 201(1); however, interest under Section 201(1A) survives for the period of statutory default and must be recomputed up to the actual date of deposit. The jurisdictional TDS AO was therefore directed to verify each challan against the corresponding payment, deductee, applicable TDS section, amount and financial year and give credit for established remittances. The discrepancy concerning Talati & Talati was also remitted for verification from primary records. Regarding REC registration charges of Rs.31,231, the Tribunal did not finally hold them outside TDS; it restored the issue for verification of the nature of payment, recipient and supporting documents. If found to be statutory or registration fees not liable to TDS, the Rs.3,123 demand and Rs.2,248 interest must be deleted.
The Mumbai ITAT held that once tax deducted at source has been deposited into the Government Treasury, the same amount cannot continue to be recovered as the principal liability under Section 201(1). However, payment of the TDS does not erase the liability to interest under Section 201(1A) for the period of delay.
The AO had raised an aggregate demand of Rs.6,67,258, comprising TDS allegedly deducted but not deposited, non-deduction on REC registration charges and interest. The assessee contended that the deducted tax had subsequently been deposited and produced challans before the CIT(A).
The Tribunal directed the TDS AO to verify every challan and correlate it with the relevant payment, deductee, TDS provision, financial year and date of deposit. The principal demand must be deleted to the extent payment is established, while interest must be recomputed only up to the actual date of remittance. The discrepancy concerning the payment to Talati & Talati was also directed to be verified from primary records.
Regarding Rs.31,231 paid as Renewable Energy Certificate registration charges, the Tribunal restored the issue for examining whether it constituted statutory or registration fees not liable to TDS. If so, the corresponding Rs.3,123 TDS demand and Rs.2,248 interest must be deleted.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal by the assessee is directed against the order dated 06.01.2026 passed by the learned Additional/Joint Commissioner of Income-tax (Appeals)-2, Hyderabad, under section 250 of the Income-tax Act, 1961, for Assessment Year 2018-19, arising from the order dated 29.03.2023 passed by the Income-tax Officer, TDS Ward-2(3)(3), Mumbai, under sections 201(1) and 201(1A) of the Act.
2. The assessee has raised the following grounds of appeal:
1. On the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) erred on facts and in law in confirming the demand of TDS amount of Rs.3,123/- u/s 201(1) of the Income Tax Act, 1961 and interest of Rs.2,248/- u/s 201(1A) of the Income Tax Act, 1961, when the same is clearly outside the sanction of law, illegal, unjust, invalid, bad-in-law and therefore liable to be quashed.
2. Without prejudice, on the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) erred on facts and in law in confirming the addition of TDS amount of Rs 3,123/- u/s 201(1) of the Income Tax Act, 1961 without appreciating the fact that the underlying amount of Rs.31,231/- represented REC Registration charges and the same being in the nature of statutory/registration fees, does not attract the provisions of TDS under the Act.
3. Without prejudice, on the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) erred in upholding the levy of interest of Rs. 3,10,753/- u/s 201(1A) without appreciating that the tax deducted at source had already been remitted to Government account and therefore the appellant cannot be treated as an assessee in default.
4. The appellant craves leave to add to, alter, amend, modify and /or delete all or any of the foregoing grounds of appeal.
3. The relevant facts are that a spot verification under section 133B(2) of the Act was conducted at the office premises of the assessee on 06.08.2018. Pursuant thereto, notices under sections 201(1) and 201(1A) of the Act were issued to the assessee. On examination of the Tax Audit Report in Form No.3CD and the head-wise details of expenses, the Assessing Officer observed that tax aggregating to Rs.3,51,134/- had been deducted at source from various payments but had not been deposited into the Government Treasury. The Assessing Officer further observed that the assessee had not deducted tax at source of Rs.3,123/- from REC registration charges of Rs.31,231/-.
4. The Assessing Officer, therefore, treated the assessee as an assessee in default and determined a liability of Rs.3,54,257/- under section 201(1) of the Act, comprising tax of Rs.3,51,134/- stated to have been deducted but not deposited and tax of Rs.3,123/- stated to have not been deducted from the REC registration charges. The Assessing Officer also computed interest of Rs.3,13,001/- under section 201(1A), comprising interest of Rs.3,10,753/- on the tax deducted but not deposited and interest of Rs.2,248/- in respect of the REC registration charges. The aggregate demand was thus determined at Rs.6,67,258/-.
5. Before the learned CIT(A), the assessee contended that the tax deducted at source had already been deposited into the Government Treasury and that no outstanding TDS liability remained. The assessee furnished copies of challans and submitted that tax of Rs.14,523/- deducted under section 194H had been paid on 01.04.2024 through challan No.21231 and tax of Rs.1,04,810/- deducted under section 194C had been paid on 01.04.2024 through challan No.21311. In respect of the payment to Talati & Talati, the assessee disputed the amount of Rs.2,31,801/- adopted by the Assessing Officer and contended that the relevant payment was Rs.2,10,000/-, on which tax of Rs.21,000/- had been deducted and deposited on 03.03.2021 through challan No.01805.
6. The learned CIT(A), after considering the written submissions and the challans furnished by the assessee, directed the jurisdictional TDS Assessing Officer to verify the challans and delete the liability under section 201(1) to the extent of the remittances found to have been made. The learned CIT(A), however, held that the assessee remained liable to pay interest under section 201(1A) for the period of delay and directed the jurisdictional TDS Assessing Officer to recompute such interest after verification of the remittances. In respect of the REC registration charges, the learned CIT(A) observed that the assessee had not furnished supporting details or documents and, therefore, confirmed the liability of Rs.3,123/- under section 201(1) and the corresponding interest of Rs.2,248/- under section 201(1A). The appeal was accordingly partly allowed.
7. When the appeal was called for hearing before us, none appeared on behalf of the assessee. We have, therefore, proceeded to dispose of the appeal after hearing the learned Departmental Representative (DR) and on the basis of the material available on record. The learned DR relied upon the orders of the authorities below.
8. We have considered the submissions of the learned Departmental Representative and perused the material available on record. The controversy before us concerns the subsistence of the principal liability under section 201(1), the period for which interest under section 201(1A) is chargeable, and the applicability of the TDS provisions to the REC registration charges of Rs.31,231/-.
9. The record shows that the assessee furnished challans before the learned CIT(A) in support of its contention that the tax deducted at source had been deposited into the Government Treasury. The learned CIT(A) also took cognizance of the challans and directed the jurisdictional TDS Assessing Officer to verify them and delete the liability under section 201(1) to the extent of the remittances. There is, however, a material difference between the amount of tax of Rs.2,31,801/- adopted by the Assessing Officer in respect of the payment to Talati & Talati and the assessee’s contention that the relevant tax deducted was only Rs.21,000/-. The correctness of the amount, the date of deduction, the date of deposit and its correlation with the relevant payment require factual verification from the Tax Audit Report, the underlying ledger account, the TDS return and the challan.
10. Once the tax deducted at source has been deposited into the Government Treasury, the same amount cannot continue to remain recoverable as principal liability under section 201(1).
However, payment of the principal amount does not, by itself, extinguish the liability to interest under section 201(1A) for the period during which the statutory default continued. Such interest is required to be computed only up to the actual date on which the tax deducted at source was deposited into the Government Treasury. The computation made in the order under sections 201(1) and 201(1A), therefore, cannot be sustained without verification of the challans and the actual dates of remittance.
11. We accordingly direct the jurisdictional TDS Assessing Officer to verify each challan furnished by the assessee and correlate it with the corresponding payment, deductee, section under which tax was deducted, amount of tax deducted and the relevant financial year. To the extent that the tax deducted at source is found to have been deposited into the Government Treasury, the corresponding principal liability under section 201(1) shall be deleted. Interest under section 201(1A) shall thereafter be recomputed, in accordance with law, only for the period commencing from the relevant statutory date and ending on the actual date of deposit of the tax into the Government Treasury. Credit shall be given for every remittance found to pertain to the transactions under consideration. The Assessing Officer shall also verify the assessee’s contention regarding the payment to Talati & Talati and determine the correct amount of tax deductible and deposited on the basis of the primary records.
12. As regards the REC registration charges of Rs.31,231/-, the assessee’s specific contention is that the payment represented statutory or registration fees for registration of its Renewable Energy Certificate units for trading with the concerned Authority and, therefore, did not attract deduction of tax at source. The learned CIT(A) confirmed the liability only because supporting details and documents had not been furnished. In the interest of justice, this issue is also restored to the jurisdictional TDS Assessing Officer for the limited purpose of verifying the nature of the payment, the identity and legal character of the recipient, the relevant invoice or demand, and the provision under which the registration charges were collected. If, upon verification, the payment is found to be in the nature of statutory or registration fees not liable to deduction of tax at source, the demand of Rs.3,123/- under section 201(1) and the consequential interest of Rs.2,248/- under section 201(1A) shall be deleted. If the payment is found to attract deduction of tax at source, the liability shall be determined in accordance with law after giving due credit for any tax subsequently paid and interest shall be computed only for the applicable period.
13. The assessee shall furnish the challans, TDS returns, ledger accounts, invoices and other supporting documents required for the aforesaid verification. The jurisdictional TDS Assessing Officer shall afford a reasonable opportunity of hearing to the assessee and pass a speaking order confined to the verifications and directions set out above.
14. Grounds Nos.1 to 3 are accordingly allowed for statistical purposes, subject to verification in the terms indicated above. Ground No.4 is general in nature and does not require separate adjudication.
15. In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 21.08.2026.
