9911796707
TMI Blog1989 (7) TMI 342X X X X Extracts X X X X X X X X Extracts X X X X ..... 1961, was not deductible in computing the business income of the assessee for the assessment year 1977-78 ? Shortly stated, the facts are during the assessment year under reference the assessee-company claimed deduction of a sum of ₹ 35,769 being the expenditure incurred for the payment of interest under section 201(1A) of the Act on the amount of tax which was not deposited within the time after deducting from salary paid to its employees. The IAC disallowed the said sum of ₹ 35,769 being the interest claimed by the assessee-company as deduction on account of interest paid under section 201(1A) for delay in payment of income-tax deducted under section 192 of the Act holding, inter alia, that the income-tax being disallowabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able expenditure, the interest payable thereon for delayed deposit with the Government should be allowed. On behalf of the revenue it was argued that the liability under section 201(1A) was in the nature of income-tax liability since the assessee was to be treated as an assessee-in-default and, therefore, any interest payable thereon was in no way different from interest paid under any other provision of the Act. In support of the said contentions the decision of the Calcutta High Court in National Engg. Industries Ltd. v. CIT [1978] 113 ITR 252 was cited. The assessee also relied on a decision of the Calcutta High Court in Balrampur Sugar Co. Ltd. v. CIT [1982] 135 ITR 227 . The Tribunal rejected the contentions made on behalf of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lt in respect of the tax. Section 201(1A) provides that such defaulter, i.e., a person who either does not deduct or after deducting fails to pay tax as required by or under the Act, shall be liable to pay simple interest at the prescribed rate on the amount of the tax from the date on which such tax was deductible to the date on which such tax is actually paid to the credit of the Central Government. 6. Admittedly, the assessee deducted tax from the salary of the employees and thereafter failed to deposit the tax so deducted within the time prescribed by statute and the rules made thereunder. Because of this infraction of law the assessee was treated as an assessee-in-default and the procedure for recovery contemplated under the Act was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been deducted and specifying the amount so deducted, and the rate at which tax has been deducted at source. Therefore what has been deducted is tax and it does not retain the character of salary although such deduction has been made from the salary. 8. In our view the character and quality of interest payable for non- compliance with the provisions of the Act would be the same, whether it is levied for non-submission of return in time or non-payment of tax within the prescribed time or for any other reason. In National Engg. Industries Ltd. 's case (supra) this Court held that interest paid under section 220(2) of the Act for delayed payment of taxes was not allowable as deduction in computation of the total income. 9. Mr. Roy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot allowable as a deduction, any payment by way of interest on such tax, whether compensatory or not, cannot be allowed as deduction. 10. Our attention has been drawn to the decision of this Court in Union Drug Co. Ltd v. CIT [1985] 156 ITR 197 (Cal.). In that case, the question was whether interest payable under the Bengal Public Demands Recovery Act, 1913 for failure to make contribution under the Employees Provident Fund Act was allowable as deduction. It was held that interest payable under section 16 of the said Act was due to delay in making payment of certificated debt. It was not a penalty. This case has also no application to the facts of the instant case. 11. In our view whenever interest is charged under the Act, whether fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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