By TIOL News Service

AHMEDABAD, DEC 18, 2017: THE issue is - Whether demand of interest for two months u/s 201(1A) even if the delay in depositing TDS is one day, warrants recomputation to meet the two ends of justice. YES is the answer.

Facts of the case

The assessee is a nationalised bank. It deposited taxes deducted u/s 194A for the month of September 2014 on October 8, 2014. While processing the TDS return u/s 200A, interest for delay in depositing the tax at source, for a period of two months, i.e. September and October 2014, was charged. The interest amount of Rs.2,78,607/- was sought to be recovered by the Assessing Officer. The CIT(A) confirmed the action of the Assessing Officer.

On appeal, the Tribunal held that,

++ the 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 8th of October 2014. There is thus clearly delay in depositing tax at source. The counsel does not even dispute that. 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. We, therefore, direct the Assessing Officer to recompute the levy of interest under section 201(1A) accordingly;

++ as per the counsel’s plea that it is too strong a punishment to levy interest for a delay of first one day, such a plea is only to be noted and rejected. Who would know the time value of money better than a banker that the assessee is, and the interest is nothing more than a compensatory levy for the time during which tax deductor enjoyed the Government money. That is not at all penal in nature and we do not have any authority to relax this compensatory levy.

(See 2017-TIOL-1758-ITAT-AHM)