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TMI Blog1984 (8) TMI 173X X X X Extracts X X X X X X X X Extracts X X X X ..... rest amounting to Rs. 636 under section 201 of the Act. The ITO also did not accept the plea of the assessee that in view of the circular of the Board, the assessee is justified in his action as he took the view that interest received should be credited when there was 'payee account' ; and, therefore, he held that what the assessee did was only to avoid the liability under section 194A. Therefore, on the facts and in the circumstances of the case, he held that the assessee was liable to deduct tax under section 194A, which amounted to Rs. 3,180. As the assessee had not deducted it and not paid to the Government of India account as on 31-10-1980, he held that an interest amounting to Rs. 636 is chargeable under section 201. He further observed that if the tax deducted at source was not deducted and paid immediately along with the interest as per challan, further interest would be charged until the tax deducted at source was paid. In appeal, the Commissioner (Appeals) upheld the action of the ITO as stated above. The assessee, being aggrieved, has preferred this appeal. 2. Shri N. Devanathan, the learned counsel for the assessee, contends that the Commissioner (Appeals) is unjustif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on the plea of the Board's circular. Hence, reliance can be placed on the decision of A.L.A. Firm v. CIT [1976] 102 ITR 622 (Mad.). We reject the stand of the assessee. Furthermore, the decision of the Madras Bench is also against the assessee supra, as there the Tribunal has held that the assessee's claim cannot be allowed if the assessee has not brought unavoidable circumstance on record to show that the assessee failed to pay the tax. In this case, the assessee has nowhere placed or pleaded rather it is the case of the assessee that the assessee is entitled to put interest amount in the suspense account in view of the Board's circular referred to above. The Board's circular cannot be followed in view of the decision of the Hon'ble Madras High Court in the case of A.L.A. Firm and there is no substance in the plea of the assessee that the decision of the Tribunal in Sivakami Finance (P.) Ltd.'s case is in its favour, as the case of the assessee is distinguishable. In that case, the Tribunal categorically held that such claim can be allowed if the assessee has proved the financial crisis for non-payment of tax. In this case, the assessee has failed to show or credit interest amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justified in levying interest of Rs. 636 under section 201 on the assessee ?" THIRD MEMBER ORDER Per Shri M.R. Sikka, Vice President -- There being difference of opinion between the learned Judicial Member and the learned Accountant Member the following question has been referred to me for decision as a Third Member : "Whether, on the facts and in the circumstances of the case, there was no liability on the assessee to deduct tax from the 'interest payable' of Rs. 15,510 under section 194A and, consequently, the Income-tax Officer was not justified in levying interest of Rs. 636 under section 201 on the assessee ?" 2. In the course of the assessment proceedings for the assessment year 1980-81, the ITO found that the assessee had borrowed certain loans from East India Corporation Ltd., but the interest of Rs. 15,510 relating thereto had been credited by the assessee to the 'Interest Payable Account' and not to the 'Payee's Account'. The ITO further found that the assessee had not deducted the tax of Rs. 3,180 from the amount of interest payable to the creditor, as required under section 194A. He, therefore, charged interest amounting to Rs. 636 under section 201. While doin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to the 'interest payable account'. It is, therefore, suggested that suitable instructions be issued to the authorities below not to insist deduction of tax at source at the time of crediting the interest to the interest payable account. All pending penal or prosecution proceedings may also be directed to be withdrawn immediately." 3.3 The CBDT Circular No. 288, dated 22-12-1980, reads as follows : "3. The material expression in section 194A(1) is 'at the time of credit of such income in the account of the payee . . . . .'. When interest is debited to 'Interest account' or any other nominal account, the debit is for a specific amount calculated with reference to the deductor's liability to a particular creditor in accordance with the terms and conditions of the loan. What is, therefore, important is that the interest payable to a creditor has constructively been credited to the account of the payee ; the apparent nomenclature of the particular account in which the credit is made is not conclusive in the matter. The nominal accounts like 'Interest Payable Account', 'Liability for Expense Account', 'Suspense Account', etc., are heads or captions meant to cover stray transactions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the 'Payee's Account', the assessee was not legally bound to deduct the tax under section 194A and so, the levy of interest of Rs. 636 by the ITO under section 201 was not justified. 5. It is in these circumstances that the matter has been referred to me for resolving the dispute as Third Member. 6. Before me, the learned representative of the department reiterated the arguments advanced by the learned Judicial Member. He also submitted that the second circular, dated 22-12-1980, should govern the present case and that since the assessee was not prevented by any financial difficulties from deducting the tax under section 194A, the charging of interest under section 201 was justified. According to him, the identity of the creditor being known and his account being there in the account books of the assessee, the method adopted by the assessee for crediting the interest to the 'Suspense Account' was merely a camouflage. According to him, the decision of the Tribunal in the case of Sivakami Finance (P.) Ltd., was not applicable to the facts of the present case, and so the impugned orders of the authorities below were correct. 7. The learned counsel for the assessee, on the other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, come to a diametrically opposite view on the same issue. In view of these authorities, I would hold that the circular letter, dated 25-1-1979, and not the circular, dated 22-12-1980, would govern the present case. 10. Now it is worthy of note that whereas the circular, dated 22-12-1980, mentions the circumstances under which the crediting of interest to the 'Suspense Account' would absolve an assessee from his obligation to deduct tax, the circular letter dated 25-1-1979, is absolutely silent in this behalf. The circular letter, dated 25-1-1979, merely states that when an assessee credits the interest to the 'Suspense Account' and not to the 'Payee's Account', there is no obligation on his part to deduct tax at the time of making provision in the accounts in respect of interest payable by him. Since it is the circular letter, dated 25-1-1979, which applies to the present case, the question of finding out any justification (like paucity of funds, etc.), for taking advantage of the concession under the circular letter, dated 25-1-1979, does not arise. In the case of Sivakami Finance (P.) Ltd., the Tribunal held that the assessee was entitled to succeed under both the circulars. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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