1983 (2) TMI 30 - HC - Income Tax

Summary

Issues Involved:
1. Whether the charging of interest u/s 201(1A) of the Income-tax Act, 1961, is justified.
2. Interpretation of "payment" and "credit" in the context of s. 194A of the Act.
3. Applicability of precedents cited by the assessee.

Summary:

Issue 1: Charging of Interest u/s 201(1A)
The court addressed whether the charging of interest of Rs. 12,818 u/s 201(1A) of the Income-tax Act, 1961, was justified. The assessee had not deducted tax on the interest credited to its managing agents on various dates, as required by s. 194A of the Act. The ITO charged interest from the date the tax was deductible to the date it was actually paid. The court upheld the ITO's decision, rejecting the assessee's contention that the financial difficulties and the mere accounting credit without actual payment should exempt them from this liability.

Issue 2: Interpretation of "Payment" and "Credit" in s. 194A
The court examined the interpretation of "payment" and "credit" under s. 194A of the Act. It held that the liability to deduct tax arises at the time of crediting the interest to the account of the payee or at the time of actual payment, whichever is earlier. The court disagreed with the assessee's argument that the liability to deduct tax arises only upon actual payment, emphasizing that the credit entry itself triggers the obligation to deduct tax.

Issue 3: Applicability of Precedents
The court reviewed several precedents cited by the assessee, including:
- Ramesh R. Saraiya v. CIT: The court found this case inapplicable as it dealt with dividend credits under different circumstances.
- CIT v. Nagaria Oil Mills: The court distinguished this case, noting that s. 194A explicitly includes credit entries as a mode of payment, unlike the provisions in the cited case.
- CIT v. Chamanlal Mangaldas & Co. and H. V. Kashiparekh & Co. Ltd. v. CIT: The court found these cases irrelevant as they dealt with different factual scenarios and principles.
- CIT v. Shoorji Vallabhdas and Co.: The court noted that this case involved a difference between credited and actually received amounts, which was not the situation in the present case.

The court concluded that the Tribunal was correct in holding that interest is payable u/s 201(1A) of the Act. The question referred was answered in the affirmative and against the assessee. The assessee's request for leave to appeal to the Supreme Court was rejected as the decision was based on factual grounds.