Interest u/s 201(1A) of IT Act cannot be levied if the Deductee has returned losses and a Subsequent Assessment shows Positive Income: Allahabad HC

Pre-GST Cases - Allahabad High Court- GST -taxscan

In a recent ruling, the Allahabad High Court confirmed the order of the ITAT that interest under Section 201(1A) of Income Tax Act, 1961 cannot be levied if the deductee has returned losses for relevant years and it will not make any difference if the assessment of the deductee was completed at positive income. The bench was hearing a bunch of appeals preferred by the Revenue against the orders of the Tribunal.

Dismissing the appeals, the bench comprising Justice Sudhir Agarwal and Justice Ravindra Nath Misra held that the issue is squrely covered by the decision of the High court in Ghaziabad Development Authority Vs. Union of India and others wherein it has been held that it is compensatory and if recipient-Assessee has already paid tax or not liable to pay any tax whatsoever, obviously no interest under Section 201(1A) of Act,1961 could have been recovered from alleged Assessee in default for the reason that interest could have been charged for the period when TDS fell due and actual amount of tax is paid by recipient-Assessee.

“If there is no liability of payment of tax by recipient Assessee, the question of deduction of tax by Assessee in default would not arise and the question of payment of tax by such recipient Assessee also would not arise. In such case interest also could not have been charged. Hence, on the question of liability of interest, Tribunal has rightly observed that this aspect shall be examined by Assessing Officer and thereafter he shall pass a fresh order.” The bench said.

Read the full text of the Judgment below.