TDS Payment: 2 month interest cannot be charged for delay of less than a month

Bank of Baroda Vs. DCIT (ITAT Ahemdabad)-

Levy of interest u/s. 201(1A) for the second month can arise only if the period of time between the date on which tax was deducted and the date on which tax was paid to the Government exceeds one month.

Time limit for depositing the tax deducted at source under section 194A, as set out in rule 30(2)(b) – which applies in the present context, is “on or before seven days from the end of the month in which the deduction is made”. In the case before us, the TDS is deposited on 8^th of October 2014. There is thus clearly delay in depositing tax at source. Learned counsel does not even dispute All that he prays for is that the levy of interest should be reduced to actual period of delay in depositing the tax at source, i.e. from the date on which tax was deducted and till the date on which tax was deposited. It is only if such a period exceeds one month, then the question of levy of interest will arise. However, what has been done in the present case is that the interest has been charged for two calendar months, i.e. September and October. This plea of the assessee indeed meets our approval in the sense that the question of levy of interest for the second month can arise only if the period of time between the date on which tax was deducted and the date on which tax was paid to the Government exceeds one month.

Author Info

Name: CA Sandeep Kanoi

Qualification: CA in Job / Business

Company: Taxguru Consultancy

Location: Mumbai, Maharashtra

Articles Published: 19,704

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