INCOME TAX ACT, 1961

Section 201(1A)

Tax deduction at source - Assessee-in-default - Computation of interest on late payment of TDS under section 201(1A) - Interpretation of the term 'month' for the purpose of clause (ii) of section 201(1A)--British calendar month or a period of 30 days

Assessee was saddled with interest on account of late payment of TDS for Quarter-3 of financial year 2016-17. e-TDS return for the said period was filed on 31-1-2017, for which an intimation was received on 10-2-2017 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 CIT-TDS calculated interest on late payment of TDS on the basis of each calendar month during which default was in existence. Assessee contended that CIT(TDS) has grossly erred in law in interpreting the term 'month' as calender month. Interest had to be calculated, based upon the concept of month starting from the date of commencement of default. Assessee submitted that where period of delay was more than 30/31 days interest had to be computed for two months but where it was less than 30/31 days, interest had to be computed for one month. Held: A reading of sub-section (1) of section 244A, which is analogous to clause (ii) of section 201(1A) read with rule 119A, would make it clear that the term 'month' must be given ordinary meaning of the term of 30 days period and not British calendar month as defined in section 3(35) of General Clauses Act. Definition given in General Clauses Act cannot be adopted for the purposes of clause (i) of section 201(1A) as such importation of definition would lead to anomalous situation. Accordingly, CIT (TDS) was directed to recompute the interest payable under section 201(1A) by taking a period of 30 days as a month, instead of British calendar month.

Followed:UTI Mutual Fund v. Dy. CIT ITA No.2295/Mum/2018 : 2019 TaxPub(DT) 4905 (Mum-Trib) for assessment year 2014-15 Order, dt. 1-7-2019.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2017-18

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