1981 (9) TMI 159 - AT - Income Tax

Summary

Issues Involved:
1. Interpretation of the timing for tax deduction under Section 195 of the Income-tax Act, 1961.
2. Applicability of Section 195 versus Section 163.
3. Time-barred recovery under Section 231.
4. Calculation of interest under Section 201(1A).

Detailed Analysis:

1. Interpretation of the Timing for Tax Deduction under Section 195:
The primary issue was whether the liability to deduct tax under Section 195 arose at the time of payment or at the time of credit of interest to non-resident accounts. The assessee argued that the obligation to deduct tax arose only at the time of actual payment. The Tribunal examined various sections of the Income-tax Act, including Sections 192, 193, 194, 194A, 194B, 194BB, 194C, 194D, and 195, noting the specific language used in each. It was observed that while other sections mention "at the time of payment or credit," Section 195 specifically uses "at the time of payment," indicating actual payment. The Tribunal concluded that the liability under Section 195 arises from the actual dates of payment to non-residents, not from the dates of credit.

2. Applicability of Section 195 versus Section 163:
The assessee contended that Section 195 was not applicable because it should be treated as an agent under Section 163, thus liable to pay income-tax on interest credited to non-resident accounts. The Tribunal rejected this argument, clarifying that being within the ambit of Section 163 does not automatically make one an agent. The discretion to treat any person as an agent lies with the ITO, and the mere fact that the assessee falls within the scope of Section 163 does not mean it must be treated as an agent. The Tribunal emphasized that the duty to deduct tax under Section 195 is part of the scheme for the collection and recovery of taxes and is applicable regardless of the agent status under Section 163.

3. Time-barred Recovery under Section 231:
The assessee argued that the recovery of the tax was time-barred under Section 231, which states that no proceedings for recovery shall commence after one year from the last day of the financial year in which the demand is made. The Tribunal noted that Section 231 only bars the remedy of recovery and does not extinguish the right. It highlighted that Section 232 allows for other modes of recovery, including the institution of a suit for recovery of arrears. The Tribunal also pointed out that the interest under Section 201(1A) is calculated from the date the tax was deductible to the date it is actually paid, and this liability exists regardless of the time-barred status of the original tax recovery.

4. Calculation of Interest under Section 201(1A):
The Tribunal addressed the calculation of interest for delayed payment under Section 201(1A). It noted that the ITO had computed interest based on the dates of credit, as the assessee failed to provide the actual dates of payment. The Tribunal directed that the assessee should be allowed to provide the actual dates of payment to potentially reduce the interest liability. It reiterated that the responsibility to prove the difference between the date of credit and the date of actual payment lies with the assessee.

Conclusion:
The Tribunal dismissed the appeal, upholding the ITO's order but allowing the assessee the opportunity to furnish actual payment dates to potentially reduce the interest liability. The judgment clarified the interpretation of Section 195 regarding the timing of tax deduction, the applicability of Section 195 versus Section 163, the implications of time-barred recovery under Section 231, and the calculation of interest under Section 201(1A).