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TMI Blog2001 (2) TMI 110X X X X Extracts X X X X X X X X Extracts X X X X ..... n the circumstances of the case, is the decision reported in CIT v. Kannan Devon Hill Produce Co. Ltd. [1986] 161 ITR 477 (Ker), applicable to the facts of the case ?" The facts of the case are as follows : The assessee is a contractor and it sub-contracted the work to one C. V. P. and Co., for a sum of Rs. 56,09,233. The tax deducted at source was only Rs. 26,890 as against the deductible amount of Rs. 56,092. The Assessing Officer issued show-cause notice as to why interest should not be charged for the short deduction. The assessee pleaded that the sub-contractor was short of working capital and on the completion of the assessment in the case of C. V. P. and Co.--- the sub-contractor, it was found that tax was excess paid by it resulti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ractor, the sub-contractor had paid the taxes in full, then there was no scope for levy of interest. On the other hand, if the advance tax paid by the sub-contractor fell short of 75 percent. of the taxes payable by him, the levy of interest is justified on the amount of shortfall. The Tribunal held that "as details were not available before us, we set aside the order of the Commissioner of Income-tax (Appeals) with a direction to the Assessing Officer to either cancel or otherwise modify the quantum of interest charged under section 201(1A) of the Act". Even though notice was served on the respondent, nobody appeared before us. Sri George K. George, appearing for the Revenue, submitted that the order of the Tribunal is wrong. He submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 245 ITR 13 (Ker), it was held as follows : "The levy of interest is a compensatory measure for withholding tax which ought to have gone to the exchequer. Section 201(1A) of the Income-tax Act makes it clear that the levy of interest is mandatory. It is true that the 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 clear that the levy is mandatory. The purpose of the levy is to claim compensation on the amount which ought to have been deducted and deposited and has not been done." The Division Bench of this court also took note of the judgment in Kannan Devon Hill Produce Co. L ..... X X X X Extracts X X X X X X X X Extracts X X X X
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