Prashant Maharishi, A.M.:— These are the two appeals preferred by the assessee against the order of the ld CIT (A)-43, New Delhi dated 23.12.2015 for the Assessment year 2011-12 against charging of interest u/s 201(1A) of the Income Tax Act of Rs. 185467/- in case of ITA No 179/CHD/2016 and Rs. 423125/- in case of ITA no 180/CHD/2016 and challenging applicability of provision of section 195 of the Act. The facts and issues involved in both these appeal are similar and therefore they are disposed off by this common order.

2. In ITA NO 179/CHD/2016 assessee has raised the following grounds of appeal:—

“1. That the Learned Commissioner of Income Tax (Appeals)-43, New Delhi (hereinafter referred to as ‘Ld CIT(A)’) has erred, on the facts and in the circumstances of the case and in law, in confirming the order passed by Assistant Director of Income Tax, International Taxation, Chandigarh (hereinafter referred to as Ld AO’) levying interest under Section 201(1 A) of the Income Tax Act, 1961 at Rs. 1,85,467/-.

2. That the Ld CIT(A) has erred on the facts and in the circumstances of the case and in law in holding that provisions of Section 195 of the Act are applicable because the benefit of Article 26 of Double Taxation Avoidance Agreement between India and United States of America is available in the present case.

2.1. That the Ld CIT(A) has erred on the facts and in circumstances of the case and in law in holding that provisions of Section 195 of the Act requiring tax deduction at source while making payment for purchase of immovable property to non-residents are not discriminatory for the purposes of Article 26 of Double Taxation Avoidance Agreement between India and United States of America.

2.2. That the Ld CIT(A) has erred on the facts and in circumstances of the case and in law in holding that the benefit of Article 26 of Double Taxation Avoidance Agreement between India and United States of America is available only when recipient of money is ‘enterprise’ and not in case of payment made to ‘individuals’.

3. That the Ld CIT(A) has erred on the facts and in the circumstances of the case and in law in confirming the levy of interest under Section 201(1 A) of the Act, also for the period for which interest under Section 234B & C of the Act has already been paid by the payees, hence, resulting in levy of double interest on the same transaction.”

3. At the commencement of the hearing the ld AR of the appellant submitted that it does not want to press ground No. 2 of the appeal regarding applicability of the section 195 of the Act. Therefore, in view of this only the only issue remains before us is whether interest u/s 201(1A) of the Act of Rs. 185467/- has been rightly levied on the issue or not when interest u/s 234B and 234C of the Act has already been paid by the payee resulting into double interest on the same transactions. However, for the purpose of computation of the interest the claim of the assessee is not “month or part of month” shall be considered as plant month and therefore alternatively excess interest charged may be deleted.

4. The brief facts of the case are that the assessee has purchased land from non resident of Rs. 35761719/- on which no tax u/s 195 was deducted. The ld AO applying the provision of section 195 held that tax was deductible on payment made to those parties on sum of Rs. 34003905/- and consequently interest u/s 201(1A) of Rs. 185467/- was charged. The assessee carried the matter before the ld CIT(A), who confirmed the applicability of provision of section 195 as well as also confirmed the interest u/s 201(1A) of the Act of Rs. 185467/- therefore the assessee is in appeal before us.

5. The ld AR submitted that:

a. when taxes have been paid by the payees then no interest u/s 201(1A) of Rs. 185467/- of the Act should be levied. He relied on the decision of Hon Supreme court in CIT v. Bharati Cellular Ltd., 234 CTR 146. He stated that though TDS has not been deducted but the tax has been paid by the recipient as there is no loss of revenue. He further relied on the decision of Hon'ble Gujrat High Court in case of Commissioner Of Income-Tax v. Rishikesh Apartments Co-Operative Housing Society Ltd., 253 ITR 310.

b. that meaning of the month or part of the month has been considered by the AO as British Calendar month instead of plain month of 30 or 31 days should have been considered and for this he relied on the decision of the coordinate Bench in case reported in 39 ITD 612.

c. that when the interest u/s 234B and 234C have been paid by the recipient and also due to advance tax have also paid then no interest can be levied u/s 201(1A). he relied on the decision of the Hon'ble Supreme Court in case of CIT v. Dr. Pranoy Roy, 309 ITR 231.

6. Against this the ld DR submitted that when the tax has not been deducted u/s 195 of the Act the payment of interest u/s 201(1A) is mandatory in nature and further it does not depend on the payment of interest of the recipient. These are two separate liabilities prescribed by the statute on different assessees. He therefore submitted that order of the ld AO charging of interest may be upheld.

7. We have carefully considered the rival contentions. The brief facts have already been enumerated above. The plea of the assessee is that the recipient sale consideration have filed their return of income has also paid advance tax thereon therefore there is no interest chargeable u/s 234B and 234C except in case of one of the parties where such interest has been paid u/s 234B of Rs. 156192/- and interest u/s 234C of Rs. 39048/- totaling to Rs. 195240/-. Therefore, it was contended that department is not entitled to levy interest u/s 201(1A) as there is no loss of revenue and interest has already been paid by the recipient of income, i.e. payees. The assessee has relied upon the decision of the Hon'ble Supreme Court in case of CIT v. Bharati Cellular Ltd., 234 CTR 146. We have carefully perused the decision of the Hon'ble Supreme Court in para 11 wherein it has been held as under:—

“11. Before concluding, we are directing CBDT to issue directions to all its officers, that in such cases, the Department need not proceed only by the contracts placed before the officers. With the emergence of our country as one of the BRIC countries and with the technological advancement matters such as present one will keep on recurring and hence time has come when Department should examine technical experts so that the matters could be disposed of expeditiously and further it would enable the Appellate Forums, including this Court, to decide legal issues based on the factual foundation. We do not know the constraints of the Department but time has come when the Department should understand that when the case involves revenue running into crores, technical evidence would help the Tribunals and Courts to decide matters expeditiously based on factual foundation. The learned Attorney General, who is present in Court, has assured us that our directions to CBDT would be carried out at the earliest.

The next question which arises in this batch of cases is whether the Department is entitled to levy interest under section 201(1A) of the Act or impose penalty for non-deduction of TDS. We are of the view, that in the facts and circumstances of the case, it would not be justified for the following reasons: Firstly, there is no loss of revenue. It is no doubt true that TDS has not been deducted by the payee but the tax has been paid by the recipient. Secondly, the question involved in the present cases is the moot question of law, which is yet to be decided. Basically, we would have closed the file because these cases are only with regard to levy of interest but we are remitting these cases, as stated above, to the Assessing Officer (TDS) only because we are of the view that this issue is a live issue and it needs to be settled at the earliest. Once the issue gets settled, the Department would be entitled to levy both penalty and interest but, as far as the facts and circumstances of the present cases are concerned, we are of the view that the interest is not justified at this stage. Consequently, there will be no levy of penal interest prior to the date of fresh adjudication order.’

[emphasis supplied by us]

8. In view of the above finding the Hon'ble Supreme Court where in it has been held that once the issue gets settled the department would be entitled to levy both penalty and interest and interest is not justified at this stage. In the case of the assessee the issue has attained finality and not contested before us also about deductibility of tax therefore reliance on the decision of the Hon'ble Supreme Court by the assessee is misplaced.

9. Further reliance on the decision on the decision of Hon'ble Supreme Court in case of CIT v. Dr. Pranoy Roy (supra) is also misplaced because same was rendered with respect to the provision of section 234A of the Act.

10. Further reliance placed by the assessee on the decision of CIT v. Emilo Ruiz, 320 ITR 190 is also misplaced. In that decision the issue was that when the employer has already discharged tax liability along with interest u/s 201(1A) where tax was required to be deducted under provision of section 192 of the Act in case of a non-resident assessee, it was held that no interest can be charged u/s 234B and 234C of the Act on the interpretation of section 207 and section 209 of the Act. Therefore, the ratio laid down by that decision does not apply to the facts of the case of the assessee.

11. The provision of section 201(1A) creates a liability on the payee of the income for failing to perform his obligation under chapter XVIII of the Income Tax Act of deducting tax at source, whereas for payment of the advance tax the interest liability cast upon the recipient of the income for payment of tax. The interest liability u/s 201(1A) arises in chapter XVIIB of the Income Tax Act, whereas the provision of payment of advance tax and interest thereon arises under Chapter XVIIC and F of the Act. Both the liabilities crystallize on different assessees for their different obligations to be performed under the Act. The ld AR could not show us any provision in income tax act which provides that the liability cast upon one person, if not fulfilled by him, resulting into some burden on that person can be offset by the fulfillment of obligation cast up on another person and the first person gets the relief from that burden on account of fulfillment of that obligation by another person.

12. We also do not agree with the argument of the assessee that there is no loss to revenue. This fallacy in the argument can be proved by the following table

Name of the recipient Date of tax deduction Date of deposit of tax by the recipient Interest charged under section 201(1A) Interest paid by the recipient under section 234B and 234C of the act Avtar singh Gill 24.12.2010 12.01.2011 47496/- Nil Gurubuchan singh Gill 24.12.2011 24.02.2011 111363/- Nil Tarlok singh Gill 24.12.2011 24.12.2010 26608 195240

From the above chart it is apparent that according to the Act interest is chargeable from assessee on account of the first two parties. Therefore if the interest is not held to be chargeable in case of the assessee for non deduction of tax, definitely there is a loss to revenue of interest that is chargeable with respect to these two parties under section 201(1A) of the act. Hence the obligation of payee and payer cannot be looked in to collectively and argue about the loss of exchequer. Such an argument is not in consonance with the scheme of the Income Tax Act too.

13. Regarding the argument of the assessee that the ‘month or part of the month’ for the purpose of charging interest should be given ordinary sense of term i.e. 30 days. We note that hon. Gujarat High court in CIT v. Arvind Mills Limited [204 Taxman 38] has held with reference to provision of section 244 of the income tax act that term ‘month’ must be given ordinary sense of term, i.e., 30 days of period, and not British calendar month as defined under section 3(35) of General Clauses Act as under:—

“29. So much is clearly emerging from the plain language used in the statutory provisions noticed by us. The case of the assessee however is that the word ‘month’ should be considered as per British Calender as defined in Section 3(35) of the General Clauses Act and accordingly if there is a fraction of a month on either side of the events i.e. payment of tax or refund thereof, both fractions should be considered as full months and for both months the assessee must be held entitled to receive interest.

30. First and foremost it is not in dispute that term month has not been defined in the Act. Ordinarily, therefore, the definition of term month contained in General Clause Act would be a useful guide in the present case also. However, Section 3 of the General Clauses Act which is a definition section itself starts with rider i.e. “In this Act, in all Central Acts and Regulations made after the commencement of this Act, unless there is anything repugnant in the subject or context…………” Therefore if there is anything repugnant in Section 244A of the Act, the definition contained in Section 3(35) of the General Clauses Act would not be useful. We may also note that the decisions sought to be relied on by learned counsel for the respondents with respect to applicability or otherwise of the definition of the term ‘month’ contained in Section 3(35) of the General Clause Act was examined in the background of the provisions contained in Section 271(1)(a) of the Act.

31. Word ‘month’ is described in Webster's Third New International Dictionary (unabridged) as a measure of time corresponding or nearly corresponding to the period of time moon's revolution or as one of the twelve portions into which the year is divided in the Gregorian calender as also a period of time about the length of a lunar month but not necessarily coinciding with a calender month. The same dictionary also explains term ‘calender month’ as one of the months as named in the ‘calender’ or the period from a day of one month to the corresponding day of the next month if such exists or if not to the last day of the next month.

32. In ‘Judicial Officer's Law Lexicon’ by Justice C.K. Thakker term calender month is explained as under:

“A period of time consisting of 30 days in April, June, September and November; of 31 days in the remainder of the months, except February, which consists of 28 days, except in leap-year, when the intercalary day is added, making 29 days.

33. In Judicial Dictionary by Aiyar's, the term ‘calender month’ is described as a legal and technical term in computation the time by calender months, the time must be reckoned by looking at calender and by not computing test.

34. Black's Law Dictionary describes the term ‘month’ as one of the twelve periods of time in which the calender is divided, any time period approximating 30 days.

35. In Law Lexicon by T.P. Mukherjee [5th Edition], it is stated “the word ‘month’ would in its ordinary acceptance, mean a ‘calender month’ and not a ‘lunar month’.

36. What is to be ascertained in the present case is as to which definition of term ‘month’ shall have to be adopted for Section 244A(1) of the Act. In other words the question is, should the definition of term “month” be adopted from General Clauses Act, or not. This exercise shall have to be done on the basis of relevant statutory provisions and the intention of the legislature to provide interest to the assessee whose tax paid is found refundable at a later date.

37. To our mind the words appearing in sub-section (1) of Section 244A “comprised in a period” are significant. In clause (b) of section 244A(1) it is provided that the interest shall be calculated at the prescribed rate for every month or of part of a month comprised in the period from the date the tax is paid to the date on which refund is granted. Similarly, in Rule 119(A) of the Rules, in clause-b thereof, it is provided that every month or part of a month comprised in a period, fraction of a month shall be deemed to be a full month. Therefore, in order to ascertain for how many months assessee would be entitled to receive interest, the number of months comprised in the period shall have to be found out. In this context, the term ‘month’ in our opinion, must be given the ordinary sense of the term i.e. 30 days of period and not the British calender month as defined under Section 3(35) of the General Clauses Act.

38. We are of the opinion that the definition contained in Section 3(35) of the General Clauses Act defining the term ‘month’ cannot be adopted for the purpose of sub-section (1) of Section 244A of the Act. Such importation of the definition would lead to anomalous situation. For example, the assessee who pays tax on 1st January of a particular year and is granted refund on 28th of February of the same year, would be entitled to receive interest for two months. If the contention of the assessee in the present case is accepted, in a case where the assessee pays tax on 31st January and is granted refund on 1st February of the same year, shall also be entitled to interest for two full months. This would be so because the assessee contends that for the purpose of sub-section (1) of Section 244A the term ‘month’ should be understood as British Calender month and since Rule 119(A) of the Rules provides for ignoring a fraction of month and granting interest for the full month instead, the assessee in the second example given above should receive interest for month of January as well as for the month of February. To our mind such interpretation would only lead to anomalous situation and should therefore be avoided.

39. As already noted earlier, various decisions cited before us adopting the definition of term month contained in section 3(35) of the Act were rendered in the background of penal provisions contained in Section 271(1)(a) of the Act. The said provision prescribes penalty for non-filing or late filing of returns and the penalty is to be calculated on every month of such default. Under this background various Courts were of the opinion that the term ‘month’ must be understood as defined under Section 3(35) of the General Clauses Act. The Courts were of the opinion that there is nothing repugnant in Section 271(1)(a) of the Act so as to reject the applicability thereof. In the present case, however, we find that there are inbuilt indications why the term month must not be understood as British calender month. Any other interpretation as already observed would lead to anomalous situation.

40. Before closing we may also notice the decision of the Bombay High Court in the case of Asian Paints Ltd.(supra) which was arising in the background of controversy whether the tax calculated by an authorized agent of the Central Government would be sufficient to complete the tax payment or whether any delay on the part of such authorized agent to credit such amount to the account of Central Government would be relevant factor for calculating interest under Section 244A of the Act. It was the case wherein the assessee deposited a cheque for the amount of tax demanded with authorized agent of Central Government on 29th December, 2003 and account of assessee was debited to that extent on 30th December, 2003 but credited to the Central Government account only on 1st January, 2004. The question was can the tax be said to have been paid on 30th December or on 1st January. Of course after holding that the tax was paid on 31st December 2003, the High Court further went out to observe that as per the Rule 119(A)(b) of the said Rules, upon refund, the assessee had to be granted interest for the entire period of December, 2003. We cannot, however, read such observation as the ratio of the decision of the Court. What was the controversy and what was decided by the Court was the actual date of payment of the tax i.e. 30th December, 2003 when the assessee's account was debited and not 1st January, 2004 when such amount was credited to the account of the Central Government. Any further observation regarding the eligibility of the assessee to receive interest for full month of December, 2003 must, therefore, be understood as passing remarks. This issue was not be debated before the Bench and the observations made hereinabove cannot be understood as ratio of the decision.”

In view of the above decision of honorable Gujarat high court we hold that interest under section 201(1A) shall be chargeable on the interpretation of the word ‘month’ should be given ordinary sense of term, i.e., 30 days of period, and not British calendar month and ld. Assessing Officer is directed to charge interest accordingly.

14. In view of this we confirm chargeability of interest under section 201(1A) of the act however the issue is restored back to the file of the ld. Assessing Officer for the purpose of computation of such interest on day basis.

15. In the result apple of the assessee in ITA NO 179/CHD/2016 is partly allowed ITA No 180/CHD/2016

16. The above appeal of the assessee has identical grounds and only issue contested is chargeability of interest under section 201(1A) of the Income tax act.

17. In view of our decision in ITA no 179/CHD/2016, we confirm the chargeability of interest under section 201(1A) of the act and for the purpose of computation of the interest we set it aside to the file of the assessing officer as per our decision in ITA no 179/CHD/2016.

18. In the result, appeal of the assessee in ITA NO 179/CHD/2016 is partly allowed.