Clarification of “MONTH” For TDS Interest Calculation

Clarification of “MONTH” For TDS Interest Calculation

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Clarification of “MONTH” For TDS Interest Calculation

CASE LAW DETAILS

CASE NAME:  E.I. DuPont India P. Ltd., Vs.Dy. Commissioner of Income-tax,

DATE OF JUDGEMENT /ORDER: 24.01.2019

RELATED ASSESSEMENT YEAR: 2013-14

COURT: ITAT New Delhi

FACTS OF THE CASE:

  • Assessee made the deduction of tax on 31.03.2013 and made the actual remittance on 02.05.2013 whereas the due date of remittance was 31.4.2013.

The AO calculated the interest on late payment at Rs.9,80,607/- whereas the assessee calculated  the same at Rs.9,48,970/-, and the difference being Rs.31,637/-.

  • According to the assessee, the calculation of interest for three months by the ld. AO is

Incorrect.

  • For the sake of clarity, we tabulate the interest calculation by the AO and assesse as under-

Admitted Facts:

Date of deduction 31.3.2013
Due date of remittance 30.04.2013
Actual date of remittance 02.05.2013

Calculation made by the AO

31.3.2013 to 31.3.2013 One month
1.4.2013 to 30.4.2013 One month
01.05.2013 to 2.5.2013 One month
Total Three months

               Calculation made by the Assessee

31.3.2013 to 30.4.2013

 

One month
01.05.2013 to 2.5.2013 One month or  part of month

considered as full month as

per Rule 119A

Total Two months
  • It is, therefore, clear that the ld. AO had taken the month to be the British calendar month as defined in Section 3(35) of the General Clauses Act
  • Assessee, therefore, preferred stating that the method and manner of calculation of interest by the learned AO is incorrect in law.

HELD BY COURT:

  • In the present case, clause (ii) of S.201 (1A) read with Clause (b) of Rule 119A is applicable and it provides that where the interest is to be calculated for every month or part of a month comprised in a period, any fraction of a month shall be deemed to be a full month, and the interest shall be so calculated.
  • The dispute in this context as involved in the present case is whether the month for such calculation of interest is to be taken as a British calendar month or a period of 30 days.
  • In our opinion, the ratio of the decision of the Hon’ble Gujarat High Court in the case or CIT V/s. Arvind Mills Limited (supra) is squarely applicable in the present case, and there being no decision cited by the learned Departmental Representative of any High Court taking a contrary view, we respectfully follow the decision of the Hon’ble Gujarat High Court in the case of Arvind Mills Limited (supra) and direct the Assessing Officer to recompute the interest payable under S.201(1A) by taking a period of 30 days as a month instead of British calendar month.

Lets take an example for simple understanding

Date of deduction 28.10.2018
Due date of remittance 07.11.2018
Actual date of remittance 02.12.2018

 TDS interest payable by the assessee under S.201(1A), the provisions of which read as under-

  1. At one percent for every month or part of a month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is deducted; and
  2. At one and one-half per cent for every month or part of a month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid;
28.10.2018 to 27.11.2018 One month ( 30 DAYS)
28.11.2018 to 2.12.2018 One month or  part of month

considered as full month as

per Rule 119A

Total Two months

       To conclude, it should be noted that a period of 30 days and part thereof should be considered for interest calculation instead of considering British calendar month.

By

Maitri Badani

(Article Assistant)

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