9911796707
TMI Blog1984 (10) TMI 116X X X X Extracts X X X X X X X X Extracts X X X X ..... akami Finance (P.) Ltd. 1,508 4. Madurai Tara Traders (P.) Ltd. 11,996 Thus, he issued notice on the assessee vide letter dated 3-12-1981 as to show cause, if any, for charging interest under section 201(1A) of the Act for non-deduction and non-payment of tax to the Government account. In reply to it, it was stated that the interest was neither credited to the account of the payee nor paid in cash/cheque, but was only credited to the interest payable account and that the method was not the same as to paying or crediting to the account of the payee. 3. The ITO did not accept this explanation of the assessee and thereby observed that whatever be the nomenclature, the amount was very well quantified on the particular date and was credited to the interest payable account on behalf of the particular party and it amounted to crediting to the account of the payee. Therefore, in the circumstances of the case, he held that the provisions of section 201(1A) were clearly attracted and charged interest amounting to Rs. 2,690 under section 194A. 4. In appeal, the Commissioner (Appeals) confirmed the action of the ITO and thereby dismissed the appeal of the assessee, observing as under : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment on two creditors, viz., Sivakami Finance (P.) Ltd. and Pudukottai Corporation (P.) Ltd., resulted in nil demand as their ultimate total incomes were below the taxable limit according to the assessment made by the ITO on these two parties. 9. Even this argument would not apply in the case of the remaining two creditors, viz., Keyam Knitting Co. and Madurai Tara Traders (P.) Ltd. The ITO determined a total income of Rs. 29,024 and total tax of Rs. 1,286 in the case of Keyam Knitting Co. for the assessment year 1979-80. In the case of Madurai Tara Traders (P.) Ltd., the ITO determined the total income at Rs. 1,24,770 and the tax thereon as Rs. 12,497. 10. But whether the final assessment results in a total income above taxable limit or below taxable limit, the machinery provision contained in section 194A has got to be implemented by every person responsible for paying interest to creditors. While enforcing the provisions contained in section 194A and section 201, the ITO is not at all concerned with the fate of the final assessments in the cases of the creditors. In some instances, a person may make interest payments to hundreds or thousands of creditors and the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of section 201(1A), read with section 194. Reliance is placed on the decision of the Tribunal. In this case the facts found by the Tribunal was that no interest was credited in the account of the creditor as there was financial crisis with the assessee-debtor. In the case under consideration, the assessee has actually paid the aforesaid amount of interest to its creditors in the previous year relevant for the assessment year under consideration and there is no plea on the part of the assessee that the assessee is victim of financial crisis. When this is so, then the case relied upon by the learned counsel for the assessee of the Tribunal supra is not applicable, to the facts of the case. Furthermore, the onus is upon the assessee to prove that the non-deduction of income-tax at source was on account of non-payment of the interest and the same was on account of financial crisis. with the assessee. In this case nowhere this situation is there, rather it has been proved beyond doubt that the interest has been actually paid to the aforesaid parties above Rs. 1,000 in each case and the assessee has nowhere pleaded that the assessee was ever victim of financial crisis. Furthermore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd as such the decision of the Tribunal or that of its Special Bench in such situation cannot be followed by its Benches. 7. Apart from it, the system of accounting of the assessee is mercantile. The creditors are identified, the interest is quantified, the financial position is not poor so much so that the interest is actually paid. Thus, the non-deduction of the income-tax at source by the assessee is wilful violation of the provisions of sections 194A and 201(1A) ; hence, the authorities below are justified in arriving at the respective conclusion, holding therein that the assessee has knowingly and intentionally failed to deduct income-tax at source and as such has violated the provisions of section 194A, read with section 201(1A), which is based upon sound reasons and material on record to substantiate these ; hence, we agree with these and also adopt in our order. 8. There is no force in the contention of the learned counsel for the assessee that the Board's circular on law allows the assessee not to deduct tax on the facts of the case and the assessee is within its rights to show it in the suspense account as he showed it or he is not bound to account in the accounts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case is fully supported by the order of the Bench ' C ' of this Tribunal in the case of Sivakami Finance (P.) Ltd. for the assessment years 1976-77 to 1980-81, etc. The Tribunal in this order has elaborately dealt with the same issue, also referring, inter alia, to the Board's circulars and held for the various reasons given by it that when the interest was credited to the interest payable account, it did not amount to crediting the interest to the account of the payees and, consequently, no liability for deducting the tax on the interest amount was incurred. On the point regarding the binding nature of the Board's circulars granting administrative relief to the assessee, the Supreme Court's decision in K.P. Varghese v. ITO [1981] 131 ITR 597 may be seen. Following the ratio of the above order, I would hold that the assessee was not liable to deduct tax from the interest payable in question under section 194A. Consequently, the levy of interest of Rs. 2,690 by the ITO under section 201(1A) is not justified. I would, hence, allow the assessee's appeal. ORDER UNDER SECTION 255(4) OF THE INCOME-TAX ACT, 1961 -- Whereas we are unable to agree on the point set out below for the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Member observed as under : (i) that the assessee had paid interest exceeding Rs. 1,000 to the parties concerned ; (ii) that the creditors were identified and the interest was quantified and so, the ITO was justified in charging interest under section 201(1A) for violation of the provisions of section 194A, despite the Board's Circular letter No. 276/72/77/IT(B), dated 25-1-1979, which had been replaced by the Board's Circular No. 288, dated 22-12-1980 ; and (iii) that the decision of the Tribunal in the case of Sivakami Finance (P.) Ltd., which was relied upon by the assessee in support of its case, was distinguishable inasmuch as the assessee was not prevented by any financial difficulties from paying the interest to the parties concerned. 5. The learned Accountant Member, on the other hand, observed that no interest was actually paid to the creditors, as stated by the learned Judicial Member. He was of the view that the Tribunal had clearly held in, the case of Sivakami Finance (P.) Ltd., after discussing the circulars in question, that when the interest was credited to the ' interest payable account, and not to the ' payee's account ', there was no obligation on the par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid interest to the creditors concerned. This observation is not correct. Before me, it is stated by the learned representative of the assessee at the Bar that no interest has been paid to the parties concerned during the relevant accounting period or even thereafter. This statement is acceptable in view of the observation of the Commissioner (Appeals) in paragraph 5 of his order to the effect that ' the assessee did not credit any interest income to the ledger account of any payee ; nor did it pay interest in cash '. That apart, if the assessee had actually paid interest in cash or otherwise to the creditors concerned, the present dispute would not have arisen at all. In fact, both the ITO and the Commissioner (Appeals) had proceeded on the premises that since the interest had been credited to the ' interest payable account ' and not to the ' payee's account ' or not paid by cash or cheque, the assessee was liable to pay interest under section 201(1A) for infringing the provisions of section 194A. In these circumstances, I accept the statement of the learned counsel for the assessee that no interest was actually paid by the assessee to the creditors. 9. In view of the above di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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