Interest under sec 201

This query is : Resolved

PC George (Querist)
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13 July 2011 We have been dealing with a government organisation which is a monopoly.They have insisted that we deduct TDS only @ 2% where as a part of the payments is for rent which attracts TDS@10%.Since we had no other option we deducted TDS only @ 2%.

Now TDS officer has raised a demand for interest on short deduction and threatned to initiate penalty procedings under 271(c)
Can any body help me in giving a reply?If any case law can be cited it would be of much help

C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)
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13 July 2011 Ask the Govt. Deptt. to procure a lower deduction certificate from the concerned ITO TDS and accordingly you can deduct lower rate of tax.

The Interest and Penalty can be charged on the difference of deduct-able and deducted. Moreover you take a certificate from the Government Department that they had insisted for lower deduction of tax and the tax on their income has already been paid by them (Govt. Deptt) and manage with the ITO TDS

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