COMMISSIONER OF INCOME TAX CHENNAI Vs. M/S CHENNAI METROPOLITAN WATER SUPPLY AND SEWERAGE BOARD CHENNAI

JUDGEMENT

(1.) The Revenue has filed these Tax Case (Appeals) as against the order of the Income Tax Appellate Tribunal raising the following substantial questions of law:

(2.) The assessee herein is Chennai Metropolitan Water Supply and Sewerage Board, who had engaged the services of a Malaysian Company to carry out certain works. The assessee deducted tax at source at the rate of 2% while making payment to the Malaysian Company. As the rate at which tax was to be deducted was 40%, the Assessing Officer raised a demand on account of shortfall in TDS under Section 201 of the Income Tax Act as well as consequential demand of interest under Section 201(1A) of the Income Tax Act. Aggrieved by the same, the assessee filed an appeal before the Commissioner of Income-Tax (Appeals), who allowed the appeal holding that the demand under Section 201(1) of the Income Tax Act was not sustainable, as the recipient had no taxable income from this transaction who had also filed a return showing 'nil' income. However, he held that the interest under Section 201(1A) of the Income Tax Act was correctly levied.

(3.) As against the order of the Commissioner of Income-Tax (Appeals), the assessee as well as the Revenue went on appeal before the Income Tax Appellate Tribunal. Following the decision of the Gujarat High Court (CIT V. Rishikesh Apartments Co-operative Housing Society Ltd., 2002 253 ITR 310), the Tribunal held that interest was not leviable under Section 201(1A) of the Income Tax Act. Thus the Tribunal allowed the assessee's appeal. Consequently, it dismissed the Revenue's appeal. Aggrieved by the same, the Revenue has come before this Court.