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TMI Blog2007 (5) TMI 141X X X X Extracts X X X X X X X X Extracts X X X X ..... are distinguishable." 2 The assessee in his cross-objections has taken the following grounds : "1. On the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) has erred in upholding the demand of Rs. 6,72,949 on account of TDS. 2. On the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) has failed to appreciate that having regard to the facts of the case, the decision in the case of CIT v. Vijay Ship Breaking Corporation [2003] 261 ITR 113 (Guj) would not be applicable to the assessee's case." 3 The brief facts of the case are that the assessee-company has paid the usance interest during the year which consists of the usance interest paid to the foreign banker as well as to the foreign branches of the Indian banker. The assessee was of the view that no income-tax at source is deductible in view of the only decision available at that time in the case of Visakhapatnam Port Trust [1983] 144 ITR 146 (AP). Subsequently, on March 20, 2003, the Gujarat High Court in the case of Vijay Ship Breaking Corporation [2003] 261 ITR 113 took, the view, contrary to the view taken by the An ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal High Court has decided the issue reversing the decision of the Andhra Pradesh High Court and stated that the TDS provisions are applicable in respect of usance interest, as decided in the case of Vijay Ship Breaking Corporation [2003] 261 ITR 113 (Guj). Thus, the liability of the appellant to deduct the tax and also to pay the interest starts from the day the decision has been delivered by the hon'ble Gujarat High Court. Since the Gujarat High Court has decided the issue after the decision by the Andhra Pradesh High Court, the assessee was under the genuine impression that no TDS provisions are applicable to usance interest. Thus, in the natural course the appellant has not deducted the TDS amount and also not paid the interest. The issue of levy of TDS amount has been decided, but the decision of the Supreme Court in respect of interest is clearly stating that one cannot accept the payment of liability retrospectively in case of payment of interest. Therefore, owing to the decision of the Supreme Court, the Assessing Officer is directed to delete the interest levied under section 201(1A) of Ps 1,70,817." 5 The learned Departmental representative contended that the lev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that this interest is liable to deduction at source. The hon'ble High Court while deciding so, did not agree with the decision of the hon'ble Andhra Pradesh High Court in the case of Visakhapatnam Port Trust [1983] 144 ITR 146. This decision was delivered on March 20, 2003. Prior to this decision the assessee was since not liable to deduct the tax at source, the question of imposition of the interest does not arise. The assessee since was under the bona fide belief that no TDS is to be deducted on the usance interest paid by him, it cannot be said that the assessee has committed the default. At the most it was pointed out that the default could have been committed only from the date when the judgment of the hon'ble Gujarat High Court has become publicly known. The liability to deduct the tax has also arisen on the date due to the judgment of the hon'ble Gujarat High Court. Reliance was heavily placed on the Third Member decision of the Delhi Bench of the Tribunal in the case of Haryana Warehousing Corporation v. Deputy CIT [2001] 252 ITR (AT) 34. 7 It was pointed out that in this case also the assessee was granted exemption in respect of certain income in prior year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome-tax Appellate Tribunal (TM) in the case of Haryana Warehousing Corporation v. Deputy CIT [2001] 252 ITR (AT) 34 (Delhi) in which we find that at page 55 on the question of charging of the interest under section 234B when certain incomes in the prior year were exempt under section 10(29) of the Income-tax Act in view of the only decision of one High Court and subsequently the exemption to the said income was not avail able due to the decision of the hon'ble Rajasthan High Court (see CIT v. Rajasthan State Warehousing Corporation [1994] 210 ITR 906) delivered on December 1, 1993, and confirmed by the Supreme Court, it was held: "The learned Departmental representative submitted that the provision of section 10(29) was unambiguous. The assessee was not entitled to get benefit in respect of section 10(29) on the incomes which it claimed. There was no decision of jurisdictional High Court or of the apex court at the relevant point of time dealing with this issue. As such, the assessee ought to have paid the due tax. It was further argued that the levy of interest under section 234B is mandatory. Interest charged under section 234B is compensatory in nature. As such, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 201(1A). This section stipulates as under : "S. 201.(1A) Without prejudice to the provisions of sub-section (1), if any such person, principal officer or company as is referred to in that sub-section does not deduct the whole or any part of the tax or after deducting fails to pay the tax as required by or under this Act, he or it shall be liable to pay simple interest at twelve per cent. per annum on the amount of such tax from the date on which such tax was deductible to the date on which such tax is actually paid." 11 On the plain reading of the aforesaid section, (1) it is apparent that the liability to pay simple interest arises if any person does not deduct the whole or any part of the tax; (2) if any person after deducting tax failed to pay the tax as required by or under this Act; (3) the interest is payable on the amount of such tax from the date on which such tax was deductible to the date on which the tax is actually paid. 12 Now, the question before us arises when the tax was deducted in the case of the assessee. This is an admitted fact that the usance interest was not chargeable to tax prior to the decision of the Gujarat High Court in the case of Vijay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Ship Breaking Corporation [2003] 261 ITR 113 was pronounced till the date the tax was actually paid by the assessee. Thus, the appeal of the Revenue is partly allowed. 14 Coming to the cross-objections filed by the assessee the learned authorised representative was fair enough to concede that in view of the decision of the Gujarat High Court in the case of Vijay Ship Breaking Corporation [2003] 261 ITR 113, the assessee was liable to deduct the tax at source on the usance interest with effect from March 20, 2003. Accordingly, we, do not find any merit in the cross-objections taken by the assessee as, in our opinion, the Commissioner of Income-tax (Appeals) was correct in law in sustaining the demand of Rs. 11,55,060 raised on the assessee in respect of failure to deduct the tax at source under section 195(1) read with section 201(1). Thus, the cross-objections filed by the assessee stands dismissed. 15 In the result, the appeal of the Revenue is partly allowed while the cross-objections filed by the assessee are dismissed. 16 I. P. BANSAL ( Judicial Member ).—I have carefully gone through the order proposed by learned Accountant Member. I have discussed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT v. Visakhapatnam Port Trust [1983] 144 ITR 146 (AP). For this purpose, reliance mainly has been placed on the decision in the case of Haryana Warehousing Corporation v. Deputy CIT [2001] 252 ITR (AT) 34 (Delhi) wherein it has been held that the assessee being allowed exemption under section 10(29) on the basis of a the High Court decision, interest under section 234B, cannot be charged on subsequent reversal of the High Court decision by the hon'ble Supreme Court. 19 To decide the controversy it will be relevant to understand the nature of the levy of interest under section 201(1A). Reference in this regard can be made to the following decisions 1. Pentagon Engineering P. Ltd. v. CIT [1995] 212 ITR 92 (Bom) (page 94) : "The use of the word 'shall' in section 201(1A) makes the liability to pay interest in circumstances mentioned mandatory and there is no pre-condition of consideration of 'reasonable cause' for non-payment in time of tax deducted under section 192 of the Act. We hold that section 201 (1A) of the Act is mandatory and the Tribunal was right in law in taking the view that the Income-tax Officer was not required to take into consideration the 'rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Rules, 1962, was not introduced till long after. Rule 119A can have, therefore, no bearing on the computation of such interest. Section 201(1A) of the Income-tax Act, 1961, makes the payment of simple interest mandatory. The payment of interest thereunder is not a penal provision. There is, therefore, no question of the waiver of such payment on the basis that the default was not intentional or on any other basis." 24 Thus, it was held that section 201(1A) makes payment of interest mandatory and, therefore, it could not be waived on the basis that default was not intentional. 3. CIT v. Dhanalakshmy Weaving Works [2000] 245 ITR 13 (Ker) [2000] 160 CTR 374 (Ker) "Levy of interest is of a compensatory measure for withholding tax which ought to have gone to the exchequer. Provision makes it clear that the levy is mandatory. It is true that use of the expression 'shall' is not always determinative of the fact whether a provision is directory or mandatory in nature. But the context in which the expression 'shall' is used in section 201(1A) makes it unambiguously clear that levy is mandatory. The purpose of levy is to claim compensation on the amount which ough ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pression 'shall' is not always determinative of the fact whether a provision is directory or mandatory in nature. But the context in which the expression 'shall' is used in section 201(1A) makes it unambiguously clear that the levy is mandatory. The purpose of the levy is to claim compensation on the amount ion which ought to have been deducted and deposited and has not been done. The use of the word 'shall' raises a presumption that the particular provision is imperative. But this prima facie inference may be regarded by other considerations such as the object and scope of the enactment and con sequences flowing from such construction. Liability to pay interest arises by operation of law, being automatic. Looking at the nature of levy, it is clear that it is compensatory in character and not in the nature of penalty. It is seen that there are he several provisions where the Legislature has made a distinction of between interest payable and penalty imposable. The ultimate liability ay for tax being not there does not dilute the requirements for the non compliance with which interest is levied under section 201(1A). Judged in that background, the levy of interest was justified and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on non-compliance with any of the provision requiring deduction at source if noticed by him. It may be for failure to deduct or for failure to pay after deduction. The expression 'actually paid' is the outer limit for the purpose of calculation of interest. If it is not paid within the period prescribed under section 200, then the liability accrues and continues until the amount is actually paid voluntarily or non-voluntarily pursuant to or through recovery proceedings. The actual payment of tax is relevant only for the purpose of determining the period up to which a defaulting person would be liable to pay interest under that section. Therefore, this case does not involve any substantial question of law for admission. The appeal is, therefore, dismissed.— CIT v. Darshan Treading and Finance P. Ltd. [1995] Tax LR 1203 (Guj), Grindlays Bank Ltd. v. CIT [1992] 193 ITR 457 (Cal) ; [1991] 94 CTR (Cal) 46 and Grindlays Bank Ltd. v. CIT [1992] 101 CTR (Cal) 164; [1992] 200 ITR 441 (Cal) relied on." 27 Therefore, it was concluded that section 201(1A) postulates mandatory liability to pay interest at the rate provided on the amount deductible as tax from the date on which su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... constitutionality is to be preferred than what exposes it to unconstitutionality. Having regard to the above principle, failure to give opportunity while passing the order in respect of the assessment year 1985-86 has affected the right of the assessee. Order having been passed admittedly without giving an opportunity cannot be sustained and as such should be determined afresh after giving opportunity to the assessee by the officer presently having jurisdiction in relation to Chapter XVII-B. Therefore, in respect of the assessment year 1985-86, the order is set aside and the appropriate authority currently having jurisdiction is directed to decide the matter after giving opportunity of hearing to the assessee in accordance with law.— A. K. Kraipak v. Union of India, AIR 1970 SC 150. C. B. Gautam v. Union of India [1992] 108 CTR (SC) 304 read with [1993] 110 CTR (SC) 179: [1993] 199 ITR 530 (SC) and Assistant Collector of Customs and Superintendent, Preventive Service Customs v. Charan Das Maihotra, AIR 1972 SC 689 applied. 28 Thus, it was held that interest payable under section 201(1A) is mandatory and it can neither be waived nor reduced; however, an opportunity of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levy of interest under section 201(1A) it is irrelevant to take into consideration the existence of reasonable cause as reasonable cause has nothing to do with the liability of interest under section 201(1A) (c) levy of interest under section 201 (1A) is compensatory measure for withholding tax and such levy is mandatory and automatic and in case of non-deduction and payment of tax at source assessee is liable to pay interest under section 201(1A) until TDS is actually paid and liability continues until the amount is actually paid voluntarily or non-voluntarily; and (d) interest payable under section 201(1A) can neither be waived nor reduced. 30 The learned authorised representative also admitted that the liability to pay interest under section 201(1A) is mandatory but his only objection raised is that prior to the pronouncement of the decision in the case of CIT v. Vijay Ship Breaking Corporation [2003] 261 ITR 113 (Guj) there was no liability to deduct tax at source of the assessee in view of the decision of the Andhra Pradesh High Court in the case of CIT v. Visakhapatnam Port Trust [1983] 144 ITR 146. Therefore, it is his contention that the interest f shou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax on the basis of the DTAA and the case of the German company was that it had no 'permanent establishment' in India and, therefore, since section 9(1) (i) of the said Act was subject to the DTAA, it was not taxable in India, but in the other contracting State. The assessments in that case related to the years prior to the introduction of section 9(1)(v) in the Act with effect from June 1, 1976, under which by a deeming fiction interest, such as usance interest payable by a resident, would be deemed to accrue and arise in India. Therefore, the said decision of the Andhra Pradesh High Court can not assist the assessees. It will be noticed that article VIII concerning taxation on interest in the DTAA with Germany existing at that rime was worded differently from the article concerning taxation of interest of the revised Model Convention 77 and the DTAAs relevant to the present cases followed that Model Convention which included the expression 'debt claim of every kind' in the article concerning taxation of interest which expression was absent in the said article VIII of the agreement with Germany. The decision of the Andhra Pradesh High Court was, therefore, rendered in a differe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 201 (1A) was from the date of payment of usance interest as the tax was not deducted and paid on usance interest. Such liability was creation of the statute and is not dependent on the pronouncement of the decision. The proposition of law that the decision of the High Court is "statement of law which law had always been and must always be understood to have been" is supported by the following decision : Parshuram Pottery Works Co. Ltd. v. Trivedi (D. R.), WTO [1975] 100 ITR 651 (Guj) "We are of .the opinion that the submission is not well-founded. It is true that the Wealth-tax Officer did not have before him the decision of this court in Raipur Manufacturing Company's case [1964] 52 ITR 482 or that of the Supreme Court in Kesoram Industries and Cotton Mills Ltd.'s case [1966] 59 ITR 767 when he passed the assessment orders in the petitioner's cases and that both the decisions were given after the assessment orders were made. But these decisions did not enact or make the law in any sense but merely interpreted the expression 'debt owed' occurring in section 2(m) of the Act which was undoubtedly on the statute book at the time when the assessment orders were made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R) : 'What the law had always been and must always be understood to have been.' ….If the capital gains were liable to payment of tax as has been e held by this court in Hasanali Khanbhai's case [1987] 165 ITR 195, the only conclusion possible is that the assessment order in solar as it failed to determine the tax payable on capital gains proceeded on a wrong view of law and was bad from its very inception, i.e.,from the date on which it was made. "emphasis mine) 37 In my view, reliance is also misplaced on the decision in the case of Haryana Warehousing Corporation v. Deputy CIT [2001] 252 ITR (AT) 34 (Delhi) for the following reasons (i) The said decision was rendered for the liability of interest under section 234 which relates to the liability of interest regarding failure of the assessee to pay appropriate advance tax on the basis of estimate during the financial year relevant to the assessment year for which the assessee is liable to pay advance tax. If income is not arising to the assessee up to a particular date when instalment of advance tax did not fall due, it was held that the assessee could not visualize such accrual of income up to a particula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reaking Corporation [2003] 261 ITR 113 (Guj) ?" ORDER OF THIRD MEMBER 42 R. P. GARG ( Vice-President ).—The facts and circumstances in both these appeals are identical excepting the quantum of disputed amount. These are, therefore, taken together for the sake of convenience and disposed of by a common order by discussing the fact and figures as are appearing in the case of Adani Exports Ltd. On a difference of opinion between the Accountant Member and the Judicial Member, the following common point of difference is referred to me as Third Member by the President, Income-tax Appellate Tribunal under section 255(4) of the Act: "Whether, on facts and in the circumstances of the case, interest under section 201(1A) of the Income-tax Act, 1961, is chargeable from the date of payment of 'usance interest' or from the date of pronouncement of the decision in the case of Vijay Ship Breaking Corporation [2003] 261 ITR 113 (Guj) ?" 43 In a survey action carried out in cases of certain foreign banks, it was found that the assessee had remitted usance interest through these banks. This was paid in respect of outstanding amount of purchase price of equipments. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 195, came subsequently. The Commissioner of Income-tax (Appeals) held that though the assessee was under genuine impression after the decision of the Andhra Pradesh High Court, but since the matter has been decided by the Gujarat High Court, he had no option but to confirm the liability of the assessee to deduct TDS amount of Rs. 11,89,718. He, however, deleted the levy of interest under section 201(1A) of Rs. 3,68,632 by stating that the liability of the assessee to deduct the tax as also to pay the interest starts from the day the decision has been delivered by the Gujarat High Court and it being after the decision of the Andhra Pradesh High Court, the assessee was under the genuine impression that no TDS provisions were applicable to usance interest, and thus, in the natural course the assessee has not deducted the TDS amount and also not paid the interest thereon. According to him, though the issue of levy of TDS amount has been decided against the assessee, the decision of the Supreme Court in respect of interest is clear in stating that one cannot accept the payment of liability retrospectively in case of payment of interest. That decision of the Supreme Court is in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the provision; that TDS was to be made as per the statute and, therefore, taking shelter of the decision of the Andhra Pradesh High Court in CIT v. Visakhapatnam Port Trust [1983] 144 ITR 146 by the assessee is not warranted ; that to compensate the Revenue for the intervening period, the assessee should pay interest and face the consequence as it took the risk in following the solitary decision which was otherwise not in its favour ; that the TDS liability is a creation of the statute and it is not dependent on the decision of a court and as the Gujarat High Court in Vijay Ship Breaking Corporation [2003] 261 ITR 113 has held that the decision of the Andhra Pradesh High Court was rendered in a different context, the said decision cannot assist the assessee; and that in any case it was not an authority to hold that tax was not deductible on such interest. He then referred to the decisions is on the issue law declared by court whence effective and submitted that the decisions are in favour of the submission that interest should be charged from the date of inception of the provision and not from the date of court decision. These are (a) CIT v. Assam Oil Co. Ltd. [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... declaration of the true and correct position of law becomes applicable to all transactions and proceedings which have not become final and concluded. As a necessary corollary, the true and correct position of law declared by the apex court applies not only to transactions and proceedings subsequent to the decision, but also to transactions and proceedings prior to the decision, but, of course, subject to the rule of finality of proceedings. Since there was no finality arrived at on the application filed by the petitioners, the Commission is bound by the law declared by the apex court in Express Newspapers Ltd.'s case [1994] 206 ITR 443. In this context useful reference could be made to the observation in Salmond on Jurisprudence (twelfth edition) which reads thus 'As we have seen, the theory of case law is that a judge does not make law; he merely declares it ; and the overruling of a previous decision is a declaration that the supposed rule never was law. Hence, any intermediate transactions made on the strength of the supposed rule are governed by the law established in the overruling decision. The overruling is retrospective, except as regards matters that are res judi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT v. Vijay Ship Breaking Corporation [2003] 261 ITR 113 on March 20, 2003, the law was required to be understood as pronounced therein; that the substantive aspect of that law should be understood to have been that way right from the beginning; that the existence of understanding of law before March 20, 2003, was relevant, particularly for understanding and judging the conduct of an assessee; that the Andhra Pradesh High Court decision in Visakhapatnam Port Trust [1983] 144 ITR 146 held the field for almost twenty long years and more so after the rejection of the Department's SLP by the Supreme Court thereagainst ; and that there are quite a few reported decisions, which are rendered on the footing that the position prevailing during the intervening period has got a bearing on the issue. He cited a few as follows (i) CIT v. Assam Oil Co. Ltd. [1982] 133 ITR 204 (Cal) Reassessment under section 147(b)—Information—Decision of High Court—Notice under section 148 was issued prior to decision of Supreme Court reversing the decision of Rajasthan High Court order for reassessment was valid—Section 147(b) of Income-tax Act, 1961. (ii) Export Enterprises P. Ltd. v. ITO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... absolutely clear that the amount to be paid would be chargeable to tax. In other words, if at the time of payment of relevant amount it was abundantly clear to the assessee that the amount was not chargeable to tax, he could not have been expected to perform the overt act of deducting TDS. According to him, ultimately it boils down to this that whether the assessee was justified in understanding at the time of payment of usance interest that it was not chargeable to tax. He submitted that based on the Andhra Pradesh High Court decision which held the field for almost twenty long years most of the people connected with the aspect of payment of usance interest thought and understood that usance interest was not chargeable to tax. Even the Tribunal (Rajkot Bench) in the matter of that very assessee, viz., Vijay Ship Breaking Ltd. also took the same view that payments of usance interest was not liable to TDS and hence the provisions of section 201(1A) were not attracted. He further submitted that presumably even the Ion Government of India and Parliament thought that usance interest was not 3m chargeable to tax, which is obvious from the fact that the Gujarat High :an Court decision i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certain circumstances levy of interest may not be wholly compensatory and would be in the nature of quasi-punishment. In that case, consequent upon the amendment of law when the liability was fastened for interest, it was held that the same was not justified. In the assessee's case it is not the amendment of law but it is the reversal of prevailing understanding by a High Court decision. It is submitted that the said principle applies here as well. 51 Without prejudice, Mr. Soparkar placed reliance on the Supreme Court decision in Gopaldas Udhavdas Ahuja v. Union of India [2004] 268 ITR 273. In this case, under the Gold (Control) Act, a large quantity of primary gold was found and seized. On adjudication it was confiscated also. On evidence, it was proved that the persons concerned were not in the know of the existence of that gold, as it had been bought and kept by a person who had died long before Gold (Control) Act, 1968, came into force. It was, therefore, held that the confiscation was not justified because the possession was not conscious possession. He submitted that point that if there is some contravention of law, the person concerned should be in the know of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earlier, deduct income-tax thereon at the rates in force." 54 Section 201 provides for the consequences of failure to deduct tax and it reads as under "201.(1) If any such person (referred to in section 200) and in the of cases referred to in section 194, the principal officer and the company of which he is the principal officer does not deduct the whole or any part of the tax or after deducting fails to pay the tax as required by or under this Act, he or it shall, without prejudice to any other consequences which he or it may incur, be deemed to be an assessee in default in respect of the tax : Provided that no penalty shall be charged under section 221 from such person, principal officer or company unless the Assessing Officer is satisfied that such person or principal officer or company, as the case may be, has without good and sufficient reasons failed to deduct and pay the tax. (1A) Without prejudice to the provisions of sub-section (1), if any e such person, principal officer or company as is referred to in that sub S section does not deduct the whole or any part of the tax or after deducting fails to pay the tax as required by or under this Act, he or it shall be l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these decisions, in so far as they declared that the amounts claimed by an assessee in respect of provision for the taxation are deductible in computing the net wealth of the assessee since they represent "debt owed" by the assessee within the meaning of section 2(m) of the Act, merely stated what the law had always been and must always be understood to have been. The fact that these decisions were not before the Wealth-tax Officer when he made the orders of assessment in the petitioner's cases are held to have no material bearing on the question whether the said orders disclose any mistake apparent from the record. If that be the correct legal position, the court held that the only conclusion possible was that the assessment orders, in so far as they disallowed the claim for deduction in respect of the amount of provision for taxation, proceeded on a wrong view of the law and the said orders were bad at their very inception, on the date on which they were made. 58 In the other case of Standard Radiators [1987] 165 ITR 178 the Gujarat High Court held that the fact that its decision in Hasanali Khanbhai's case [1987] 165 ITR 195 was not before the Income-tax Officer when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will justify a rectification of the orderbased on that decision . . ." 61 The two contrary decisions of the Calcutta High Court and the decision of the Madhya Pradesh High Court referred to by learned counsel would be of no help in view of the majority decisions of the High Courts and the decisions of the jurisdictional High Court on the issue. Even otherwise the Calcutta High Court held that for purposes of section 147(b) the earlier decision of the High Court was taken an "information" and that did not cease to be so, if that decision was reversed by the Supreme Court later. In the Madhya Pradesh High Court decision the judgment of the High Court on the date of rectification was not in force as it was pending in appeal before the Supreme Court, 62 If the effect of the judgment of Vijay Ship Breaking Corporation [2003] 261 ITR 113 (Guj) is seen and understood in the light of the aforesaid decisions of the Gujarat High Court and the decision of the Bombay High Court, then the liability of the assessee cannot be said to be arising only from the date of the judgment of the High Court; it has to be right from the inception as per the provisions of the Act, which were there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnment was utilized by the assessee until paid. Theassessee's contention that it was not wholly compensatory but quasi-punishment if viewed in the light of Star India P. Ltd. [2006] 280 ITR 321(SC) has no force. The decision of the Supreme Court was rendered in thecontext of retrospective amendment, on account of which the liability topay the service tax has arisen and in that context the Supreme Court heldthat the interest cannot be charged retrospectively. Here the provisionswere already in existence, therefore, its interpretation has to be effectivefrom the insertion of law. Similarly, the decision of the Third Member inthe case of Haryana Warehousing Corporation v. Deputy CIT [2001] 252ITR (AT) 34 (Delhi) was a case where the liability to pay interest wasfastened retrospectively by the statute and it was held to be a case wherethe assessee could not anticipate the same in the absence of the provisionsof law existing at the relevant time. The case of Gopaldas Udhavdas Ahuja v. Union of India [2004] 268 ITR 273 (SC) was a case of confiscation of goods which was held to be not warranted as the assessee was not in knowof possession of primary gold. For charging interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e liable to pay tax under section 201(1) and also interest under section 201 (1A) of the Act. 68 The contention that circumstances must show that the assessee was reasonably sure that the payment of usance interest was chargeable to tax on the date of its payment has no force. It is not the understanding of the assessee or the businessman about the chargeability of a particular payment including usance interest that matters, but it is the legal effect thereof which has a bearing on the issue. The jurisdictional High Court having held in the case of Vijay Ship Breaking Corporation [2003] 261 ITR 113 (Guj) that usance interest payment was chargeable to tax, the assessee is to be held liable to deduct tax from the date of payment of such interest as per the law so pronounced by the jurisdictional High Court. If the assessee had not deducted the tax at source in accordance with the law, there was a failure on the part of the assessee and nothing more is to be established for charging interest on such non-deduction. He then would be liable to interest for such failure. A minute reading of section 201(1A) would further reveal that it charges interest in two situations (i) if an a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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