1995 (2) TMI 117 - AT - Income Tax

Summary

Issues:
- Imposition of tax under section 201(1) and interest under section 201(1A) on interest debited to the income and expenditure statement during financial years 1990-91 and 1991-92.

Analysis:
1. The appeals related to the assessment years 1990-91 and 1991-92 of the Delhi Development Authority, focusing on the imposition of tax and interest under sections 201(1) and 201(1A) on the interest debited to the income and expenditure statement during the said financial years.

2. The Assessing Officer contended that the provisions of section 194A were attracted, requiring the deduction of tax in respect of interest adjusted, paid, or credited to depositors. The Assessing Officer issued a show-cause notice to the DDA regarding the same.

3. The assessee argued that section 194A was not applicable as the interest paid was on a capital account and did not exceed Rs. 2,500 per annum. However, the Assessing Officer rejected these claims, leading to a demand for short deduction and interest.

4. The CIT(A) dismissed the appeals of the assessee, prompting the matter to be brought before the Tribunal. The Tribunal considered the previous decision in the assessee's case for assessment years 1987-88 to 1989-90, highlighting the difference in the nature of payments made.

5. After hearing both sides, the Tribunal examined the system of accounting adopted by the DDA and concluded that the provisions of section 194A were not applicable. The Tribunal noted that the interest credited annually did not exceed Rs. 2,500 per annum for each depositor, thus negating the need for tax deduction under section 194A.

6. The Tribunal emphasized that the crucial stage for the application of section 194A is the crediting of interest each year to the payees' accounts. As the interest was credited to a consolidated account annually and did not exceed Rs. 2,500 per annum for each payee, the provisions of section 194A were not triggered.

7. Consequently, the Tribunal allowed the appeals, set aside the decisions of the CIT(A) and Assessing Officer, and directed the Assessing Officer to grant a refund to the assessee if any demand had been collected.