ABC Pvt Ltd, a domestic company is engaged in a software development business at Techno Park, which employed 700 employees, deducted tax at source…

Issue Involved: The issue under consideration is whether penalty u/s 271C and interest u/s 201(1A) both are leviable on late deposit of TDS. Provisions applicable: Section 271C (1) (a) provides that if any person fails to deduct the whole or any part of the tax as required by or under the provisions of Chapter XVII-B, then, such person is liable to pay, by way of penalty, a sum equal to the amount of tax which such person failed to deduct. Section 201(1A) provides that in case a tax has been deducted at source but is subsequently remitted belatedly, such a person is liable to pay interest as provided under section 201(1A). Analysis and Conclusion: On a plain reading of section 271C (1) (a), no penalty would be leviable on belated remittance of TDS after it is deducted by the assessee. Similarly, section 276B speaks about prosecution for failure to pay the tax deducted at source to the credit of the Central Government within the prescribed time. The words "fails to deduct" in section 271C (1) (a) cannot be read as "failure to deposit/pay the tax deducted". Accordingly, no penalty would be leviable under section 271C on delay in remittance of the tax deducted at source after deducting it on time. However, interest u/s 201(1A) for late deposit of TDS is leviable. Note – The facts given in the question are similar to the facts in US Technologies International Pvt. Ltd. v. CIT [2023] 453 ITR 644 wherein the issue came up before the Supreme Court. The above answer is based on the rationale of the Supreme Court in the said case.