1994 (7) TMI 26 - HC - Income Tax

Summary

Issues involved: The judgment addresses two main issues: (1) Whether interest under section 201 should be levied on the assessee for non-deduction of tax at source, and (2) Whether the amount of subsidy received from the Central/State Government should be deducted from the cost of plant and machinery for depreciation purposes.

Issue 1 - Interest under section 201: The Income-tax Appellate Tribunal considered whether interest under section 201 should be imposed on the assessee for not deducting tax at source. The Tribunal concluded that interest need not be levied as the Revenue authorities were satisfied that taxes had been paid by the recipients. The Tribunal's decision was based on the belief that there was no loss of revenue to the Department since taxes had been paid by the recipients. However, the High Court disagreed with this reasoning, emphasizing that the provisions of section 201 mandate the collection of tax and the levy of interest. The Court highlighted that interest is meant to compensate the Revenue for late tax payments, and it is mandatory and automatic. The Court found that the Tribunal's decision was not applicable to the present case, as it did not consider whether the tax amounts were deposited on time by the assessee. Therefore, the Court held in favor of the Revenue on this issue.

Issue 2 - Subsidy deduction: The second issue revolved around whether the subsidy received from the Government should be deducted from the cost of plant and machinery for depreciation calculations. The High Court referred to a previous decision where it was held that such subsidies cannot be deducted from the actual cost for depreciation and investment allowance purposes. Following this precedent, the Court agreed with the Tribunal's decision that the subsidy amount should not be deducted from the cost of assets for depreciation calculations.

Conclusion: The High Court ruled in favor of the Revenue regarding the levy of interest under section 201, stating that interest must be paid even if the tax has been paid by the recipient at a later stage. On the issue of deducting subsidies from the cost of assets for depreciation purposes, the Court sided with the assessee, affirming that the subsidy amount should not be subtracted. No costs were awarded in this judgment.