9911796707
TMI Blog1953 (7) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... in detail:- Jienat Bhai Rangabhumi, Katiawar 5,530-12-9 Jamila Bhai " " 5,485-10-6 Jubeda Bhai " " 5,485-10-6 Memuna Bhai " " 5,466-14-0 Total O.S. ₹ 21,968-15-9 No deduction of tax was made from the interest at the time of payment. I, therefore, direct that the assessee should pay the income-tax at the maximum rate on the above amount under Section 24(12) of the Hyderabad Income-tax Act. Total amount: ₹ 21,96900 Income-tax thereon at the maximum rate of ₹ 0-3-0 in the rupee ₹ 4,119-0-0 Less: Exchange ₹ 588-7-0 Amount of tax payable in I.G. ₹ 3,530-9-0 This amount should be paid on or before 15th April, 1951. A challan is enclosed for this sum." It also appears from the statement of the case that while assessing the firm, the Income-tax Officer allowed the interest paid to the nonresidents as a revenue deduction under Section 12(2)(iii) of the Hyderabad Income-tax Act. The assessee firm appealed to the Appellate Assistant Commissioner objecting to the demand of a tax amounting to ₹ 3,530-9-0 on the ground that it had not in fact paid any interest to the non-resident ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t at Petlad. They had merely accrued or arisen to it......" It is clear from the decision of the Supreme Court that in a mercantile system of accounts monies credited or debited to the account of any particular person cannot be deemed to have been either actually received or paid but only that the person in whose favour such credit or debit is made is deemed to have acquired a right to receive the monies, or had his right to receive the moneys extinguished by the debit. The question that arises in this case is when accounts are maintained on a mercantile system does the crediting of interest amounts to the accounts of the lenders be deemed to be a payment within the meaning of sub-section (4) of section 24 (corresponding to Section 18 (3A) of the Indian Income-tax Act) so as to attract the provisions of Section 24(12) of the Hyderabad Income-tax Act (corresponding to Section 18(7) of the Indian Income-tax Act). The learned Advocate for the department has urged on the analogy of the definition of the word "paid" in Section 12(5) that where an assessee maintains a mercantile system of accounts, any interest amounts credited would be deemed to be paid for purposes of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction of income-tax payable by a non-resident upon interest credited to him, is, however, quite different to the case where deduction of interest has been allowed under Section 12. The answer to this question will depend upon the provisions of Section 24(4). Section 24(4) which corresponds to Section 18(3A) of the Indian Income-tax Act in so far as it is relevant is as follows:- "Any person responsible for paying to a person not resident in H.E.H. the Nizam's Dominions any interest not being 'interest on securities' or any other sum chargeable under the provisions of this Act shall, at the time of payment, unless he is himself liable to pay income- tax thereon as an agent, deduct income-tax at the maximum rate." The opening words of the sub-section, viz., "any person responsible for paying to a person non-resident" would indicate the liability of the person to pay a certain sum to a non-resident, whether as interest or otherwise which will also include the liability to pay amounts accrue due according to the mercantile system of accounts. But the latter words of the sub-section restrict that meaning when it is said that such amounts as are pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... added the amount of the unpaid interest to the debtor's principal indebtedness. In my opinion interest which is so dealt with cannot be interest 'paid to the bank'." This case was approved in the case of Inland Revenue Commissioners v. Oswald [1945] A.C. 360; 13 I.T.R. (Suppl.) 39. There the question was whether the interest capitalised was deemed to have been paid for purposes of rule 21 of the General Rules applicable to Schedules A, B, C and E of the Income Tax Act, 1918, which is in the following words: "Upon payment of any interest of money, annuity or other annual payment charged with tax under Schedule D, or of any royalty or other sum paid in respect of the user of a patent, not payable, or not wholly payable out of profits or gains brought into charge, the person by or through whom any such payment is made shall deduct thereout a sum representing the amount of the tax thereon at the rate of tax in force at the time of the payment." Lord Thankerton observed at page 369, dealing with and distinguishing the observations of Romer, L.J., in Inland Revenue Commissioners v. Lawrence, Graham & Co. [1937] 2 K.B. 179; 6 I.T.R. 691:- "It is clear ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
