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| The Tax Publishers2020 TaxPub(DT) 0132 (Pat-Trib) INCOME TAX ACT, 1961
Section 201(1A)
Where AO levied interest under section 201(1)/(1A) and assessee pleaded payee to have filed loss return and non-finalization of tax demand till conclusion of appellate proceedings, matter was remanded. If it was found that in the return of income filed for the concerned year assessee had included impugned amount in its receipts and there was loss as per return, no demand could be raised under section 201(1A) on concerned assessee.
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Tax deduction at source - Assessee-in-default - Leviability of interest under section 201(1)(1A) - Assessee pleading payee to have filed loss return and non-finalization of tax demand till conclusion of appellate proceedings
Assessee was a State owned corporation responsible for distribution of electricity to residential as well as commercial consumers. It had entered into contracts with certain contractors scope of which included survey, network, design, supply, manufacture's quality assurance, transportation, storage, erection including all civil/structural works, site testing commissioning of all items and supply of materials, including all associated activities though not exclusively specified and were required for completion of entire works. Assessee made payment to contractors after deducting tax under section 194C on all erection works but assessee had not deducted tax on supply of materials. AO took the view that supply of materials and equipments were closely associated with portion of erection works and hence, supply works could not be segregated from erection portion works and contract was composite in nature and was basically a works contract. Accordingly, AO treated the assessee as 'one-in-default' under section 201(1)/201(1A) for not deducting tax under section 194C. Assessee pleaded that assessee was not liable for interest under section 201(1A) as deductee has returned losses for relevant year and it would not make any difference if assessment of deductee was completed at positive income. The final demand position had to be seen on finality of appellate proceedings which ultimately becomes the taxes due from deductee and if deductee has not challenged the addition made by AO, then demand on assessed income becomes finally taxes due from deductee. Therefore, if finally assessed income of deductee is positive and tax demand is created on it, then deductor has to pay interest under section 201(1A) till the demand is not paid by deductee.Held: Matter was remanded. If it was found that in the return of income filed for the concerned year had included impugned amount in their receipts and there was loss as per return, no demand could be raised under section 201(1A) on the concerned assessee.
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