Since Appellant acted in a bona fide manner and made necessary adjustments by the end of the financial year, there is no liability of interest under section 201(1A): ITAT Mumbai

 

Mumbai Tribunal in the case of GE Shipping ITA 2771/Mum/2024 has held that since Appellant acted in a bona fide manner and made necessary adjustments by the end of the financial year, there is no liability of interest under section 201(1A).

Let us have a Short Overview of the case:

The key issues involved were as under:

1.  The primary issue was the levy of interest for the alleged delay in TDS on salaries paid to floating staff members. It has emerged due to the Residential status of floating staff – Determining the residential status of floating staff members who were deployed in foreign waters.

2.  Application of circular no. 586: Interpretation of Circular No. 586 dated November 28, 1990, regarding the adjustment of TDS within the financial year.

3.  Levy of interest under section 220(2): The appellant also challenged the levy of interest under Section 220(2) of the Act.

 

Tribunal’s findings

1.  Levy of interest under section 201(1A):
The Tribunal noted that the appellant is a shipping company with employees divided into onshore and floating staff.
For onshore staff, there was no issue with TDS deduction and deposit.
For floating staff, the appellant faced challenges in determining the residential status at the start of the financial year due to their deployment in foreign waters and contractual nature of employment.
The Tribunal referred to Section 192(3) of the Act, which allows for adjustments in TDS deductions within the financial year.

2.  The Tribunal also cited Circular No. 586, which permits adjustments for floating staff members who may become residents during the financial year.

3.  The Tribunal concluded that the appellant acted in a bona fide manner and made necessary adjustments by the end of the financial year, thus saving the employer from the liability of interest under section 201(1A).

4.  Levy of interest under section 220(2):
The Tribunal held that section 220(2) applies only when the amount specified in a notice of demand under Section 156 is not paid within the stipulated period.
Since no such notice was issued for the relevant assessment years, the levy of interest under Section 220(2) was not applicable.

The copy of the order is as under:

1732769441-dFNMP9-1-TO