INCOME TAX ACT, 1961

Section 201(1) Section 195

Tax deduction at source - Under section 195 - No interest credited to payee's account and no expenditure claimed towards interest payable -

While issuing debentures to the non-resident company, 'A', assessee had agreed to pay interest. Debentures were issued on 31-3-2010 and assessee was required to pay interest from financial year 2010-11 (first year). However, even before payment of interest for the first year became due, debenture holder waived of interest. AO passed order under section 201(1)/(1A) treating assessee as one-in-default for non-withholding of tax under section 195 from the interest. Held: In terms of section 195, liability to withhold tax arose at the time of payment/credit of any interest (or any other sum) which is chargeable under provisions of the Act. The payment/credit was not made till 31-3-2010 and also in terms of the Agreement, interest was due on 30-4-2011, i.e., in financial year 2011-12 relevant to assessment year 2012-13. No such interest expenditure was claimed by assessee. The interest payable was eventually waived of, therefore, assessee had not paid any interest. Since no interest was paid or claimed as expenditure, TDS provisions of section 195 could not be applied and, therefore, assessee was not one-in-default under section 201(1)/(1A).

Relied:Karnataka Power Transmission Corporation Ltd. v. Dy. CIT(TDS) (ITA No. 750 & 758-759/2009 : 2016 TaxPub(DT) 1106 (Karn-HC), National Organic Chemical Industry v. Dy. CIT (2005) 5 SOT 317 (Mum) : 2005 TaxPub(DT) 1155 (Mum-Trib) and CIT v. Kalyani Steels Ltd. 2018 TaxPub(DT) 1664 (Karn-HC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2011-12

INCOME TAX ACT, 1961

Section 201(1)/(1A)

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