4 Months 15 days shall be Taken as 5 Months for Interest Calculation of Late Deposit of TDS: ITAT [Read Order]

The Jaipur bench of the Income Tax Appellate Tribunal (ITAT) held that term month not to be considered as per British calendar month.

The case are that the assessee company was engaged in business of trading and manufacturing of Bakery items. It filed its return on 12.03.2022 declaring total income of Rs. 14,22,15,640/-.

During the year under consideration, assessee has made payment of Rs. 15,22,68,970/- on 16.02.2021 to M/s Everfoods Asia Pvt. Ltd. on which TDS of Rs. 1,66,27,770/- was deducted but deposited on 01.07.2021. Accordingly, assessee paid interest @ 1.5% P.M. for delay of 5monghts in deposition of TDS of Rs. 12,47,085/-.

In course of assessment proceedings, the AO, TDS(CPC) in intimation dated 16.09.2021 calculated the interest for 6 months and thus worked out liability of interest at Rs. 14,96,493/- and raised demand of Rs. 2,47,843/-

Aggrieved by the order of the AO, the assessee carried the matter before the ld CIT(A) with the submission that the month for the purpose of calculation of interest is to be calculated by taking the period of 30 days in a month and not the British calendar month as defined under sec. 3(35) of the General Clauses Act. However, the CIT(A) upheld the action of AO, Aggrieved, the assessee appealed before the tribunal.

After hearing both the parties, the tribunal came to the conclusion that factual matrix of the case of the assessee was that during the year under consideration the assessee had made payment of Rs.15,22,68,970/- on 16-02-2021 to M/s. Everfoods Asia Pvt. Ltd. on which TDS of Rs.1,66,27,770/- was deducted but the amount was deposited on 01-07-2021.

Accordingly, the assessee paid interest @ 1.5% p.m. for delay of 05 months in deposition of TDS of Rs.12,47,085 i.e. (Rs.1,66,27,770*1.5%*5). However, the AO TDS calculated the interest for 06 months and thus worked out the liability at Rs.14,96,493/-.

The two bench member consisting of Rathod Kamlesh Jayantbhai (Accountant member) and Dr. S. Seethalakshmi (Judicial member) held that the fraction of 4 months 15 days should be taken as 05 months instead of 06 months as calculated by the AO which is not in consonance with the judicial precedence decided by the Gujarat High Court in the case of CIT Vs. Arvind Mills Ltd. (2012) Accordingly the AO CPC was directed to revise the levy of interest.

Thus the appeal was allowed.

To Read the full text of the Order CLICK HERE

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