Law:

Section:

Section 215, read with section 194a, of the income-tax act, 1961-advance tax - interest payable by assessee-whether, where assesses derived income from interest on deposits, on which tax was deductible at source under section 194a but no such tax, in fact, was deducted at source by banks which paid aforesaid interest to assessee, interest could be levied on assessee under section 215-held, no. Words and phrases-words 'assessed tax' occurring in section 215(1) and 'deductible' occurring in section 215(5) of the income-tax act, 1961. Facts In the relevant accounting year, the assessee-company received certain income by way of interest on short-term deposits. Although income-tax was deductible at source under section 194A on such interest, no such tax had, in fact, been deducted by the banks which paid the interest to the assessee and, consequently, there had been no payment to the revenue towards the tax due on the interest income. Therefore, at the time of assessment, the ITO levied interest under section 215 on the assessee. On appeal, the AAC upheld the said levy of interest. On further appeal, the Tribunal, however, held that the levy of interest under section 215 was not in order as the tax was deductible at source under section 194A in respect of the aforesaid income from interest and, therefore, there was no deficit in terms of section 215(5). On reference, it was contended by the revenue that though section 215(5) used the expression 'deductible', that expression had to be understood as 'deducted' and that since no tax had been deducted factually, at source, from the aforesaid interest income, the interest was payable, as per the provisions of section 215, by the assessee. Held The expression 'assessed tax' used in section 215(1) has to be understood as the tax finally assessed as reduced by the amount of tax deductible in accordance with the provisions of section 194A. So long as section 215 permits the levy of interest only on the difference between the assessed tax and the advance tax actually paid, the amount of tax deductible at source under section 194A will have to be taken note of and this has been specifically provided in section 215(5).…

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