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TMI Blog1989 (12) TMI 95X X X X Extracts X X X X X X X X Extracts X X X X ..... on. However, the Income-tax Officer found that the assessee had not deducted tax on the amount of interest credited on various dates in terms of section 194A of the Income-tax Act, 1961, the details thereof being as follows :------ Asst. Amount of loan due Amount of interest Year due on the said loan 1981-82 Rs. 19,67,333 Rs. 2,48,320 1982-83 Rs. 19,64,518 Rs. 2,17,610 1983-84 Rs. 19,59,023 Rs. 2,47,320 1984-85 Rs. 19,52,703 Rs. 2,63,480 What the assessee did for all these assessment years in question was that instead of crediting the amounts of interest mentioned in column No. 3 above to the account of the creditor M/s. Khacherumal Vishnu Swarup, credited the same to " Interest payable account " and showed these amounts as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver, the learned Appellate Asstt. Commissioner noticed that in its Income-tax return the creditor M/s. Khacherumal Vishnu Swarup had included the amounts of interest receivable from the assessee in its total income. He took the view that although at the time of the credit of the interest for the assessment years in question, the account of M/s. Khacherumal Vishnu Swarup was not credited but in its books of account the assessee firm had duly credited the amounts of interest payable to the said concern under the head " Interest payable account ". He took the view that the liability to deduct tax on the said amounts arose as soon the amounts had been credited to the " Interest payable account ". The learned Appellate Asstt. Commissioner also n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereof at the rates in force. Section 201(1A) provides that without prejudice to the provisions of sub-section (1), if any such person, as is referred to, in that sub-section, does not deduct or after deducting, fails to pay the tax as required by or under this Act, it shall be liable to pay simple interest at the rate specified therein. Section 201(1) refers only to section 194 and not to section 194A unlike section 202 (dealing with recovery) which refers to sections 192 to 194, 194A, 194B, 194BB, 194C, 194D, 195 and 196A. Therefore, the first point to be noticed is that section 201(1A) which is a penal provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w in order to ascertain the account and to have partition among the family members as it was felt that it was no longer possible to continue the entire business concern jointly. The matter has been pending in the court since then. The assessee had explained before the learned Appellate Asstt. Commissioner that following the filing of the said suit the payment of interest to M/s. Khacherumal Vishnu Swarup had been stopped, the interest which was payable to the erstwhile firm was an asset of the four brothers, which thereafter was retained by one of the brothers. The assessee had explained that the said firm also demanded interest not only on the principal amount but also on the amount of interest to be credited to the account of M/s. Khacher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 46/79-IT (B)] which not only refers to deduction when interest was credited but also that the burden to prove that there was a valid justification for crediting interest to any account other than the account of the payee would be on the person responsible for making the deduction, though the time for deduction would be only when the interest is actually credited to the account of the payee. In the case of Paterson Engg. Co. (I) Ltd. it was held by Bombay Bench ' A ' that where an assessee had neither paid interest nor credited in the account of the payee and had only made a provision for liability of interest, the interest under section 201(1A), for not deducting tax at source on such interest could not be levied. We are in respectful agre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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