Ernakulam District CoOperative Bank Ltd. v. Assistant Commission of Income Tax (Tds) & Anr.

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The Tax Publishers2005 TaxPub(DT) 0512 (Ker-HC) : (2005) 002 (I) ITCL 0244 : (2005) 272 ITR 0095 : (2005) 142 TAXMAN 0098 Ernakulam District Co-operative Bank v. Asstt. CIT () INCOME TAX --Tax deduction at source----INTEREST UNDER SECTION 201(1A)Non deduction of tax from salary paid in advance--During the previous years, the assessee deducted tax at source from the salary paid to the employees on regular basis. Subsequently, the AO (TDS) noted that no tax had been deducted or paid on the salary paid in advance to the employees. The AO (TDS), therefore levied interest under section 201(1A) after passing order under section 201(1). The assessee argued that it had deducted the amount from the salary of all employees, who were assessable to tax. It was under the bona fide belief that what was paid was only an advance. It was not necessary to deduct tax because that amount was given on condition that it will be recovered. The assessee submitted that sub-section (1A) of section 201 can be invoked only if it is found that the assessee had acted in a mala fide manner. In this case, the assessee acted bona fide manner and, hence, this section should not be invoked against it. Held: The assessee s argument that section 201(1A) can be invoked only if it is found that the assessee had acted in a mala fide manner, and as the assessee acted in a bona fide manner, the section could not be invoked, cannot be accepted due to the reason that interest under section 201(1A) is mandatory and automatic. Income Tax Act, 1961 s.201(1A) Income Tax Act, 1961 s.192 Income Tax Act, 1961 s.201(1) INCOME TAX --Tax deduction at source----INTEREST UNDER SECTION 201(1A)Non-deduction of tax at source on payment of advance salary to employees--Assessee-bank was deducting tax at source regularly on salary paid to employees. However, it had not deducted tax on salary advances paid to employees on bona fide ground that these advances were not adjustable and recoverable, therefore provisions of section 192 were not applicable. The AO levied interest under section 201(1A) which was confirmed by the Tribunal. Held: The levy of interest under section 201(IA) does not depend on consideration of 'reasonable cause', it is mandatory and, therefore, assessee was liable to pay penal interest. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2005 TaxPub(DT) 0512 (Ker-HC) : (2005) 002 (I) ITCL 0244 : (2005) 272 ITR 0095 : (2005) 142 TAXMAN 0098

Ernakulam District Co-operative Bank v. Asstt. CIT ()

INCOME TAX

--Tax deduction at source----INTEREST UNDER SECTION 201(1A)Non deduction of tax from salary paid in advance--During the previous years, the assessee deducted tax at source from the salary paid to the employees on regular basis. Subsequently, the AO (TDS) noted that no tax had been deducted or paid on the salary paid in advance to the employees. The AO (TDS), therefore levied interest under section 201(1A) after passing order under section 201(1). The assessee argued that it had deducted the amount from the salary of all employees, who were assessable to tax. It was under the bona fide belief that what was paid was only an advance. It was not necessary to deduct tax because that amount was given on condition that it will be recovered. The assessee submitted that sub-section (1A) of section 201 can be invoked only if it is found that the assessee had acted in a mala fide manner. In this case, the assessee acted bona fide manner and, hence, this section should not be invoked against it. Held: The assessee s argument that section 201(1A) can be invoked only if it is found that the assessee had acted in a mala fide manner, and as the assessee acted in a bona fide manner, the section could not be invoked, cannot be accepted due to the reason that interest under section 201(1A) is mandatory and automatic.

Income Tax Act, 1961 s.201(1A)

Income Tax Act, 1961 s.192

Income Tax Act, 1961 s.201(1)

INCOME TAX

--Tax deduction at source----INTEREST UNDER SECTION 201(1A)Non-deduction of tax at source on payment of advance salary to employees--Assessee-bank was deducting tax at source regularly on salary paid to employees. However, it had not deducted tax on salary advances paid to employees on bona fide ground that these advances were not adjustable and recoverable, therefore provisions of section 192 were not applicable. The AO levied interest under section 201(1A) which was confirmed by the Tribunal. Held: The levy of interest under section 201(IA) does not depend on consideration of 'reasonable cause', it is mandatory and, therefore, assessee was liable to pay penal interest.