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TMI Blog1990 (12) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... the bank on short-term deposit, interest due from Tata Finlay Ltd. and dividends received from Tata Finlay Ltd. It was further contended that tax was required to be deducted at source from interest and dividends. It is further pointed out that tax calculated on the estimated income would be reduced by the amount of tax deductible at source and, therefore, the tax deductible at source was not required to be paid as advance tax whether or not, such tax had actually been deducted by the payer. In the circumstances, it was under the impression that no estimate was required to be filed by it. The Income-tax Officer was of the view that the explanation offered by the assessee was not tenable in view of the fact that since there was no deduction of tax at source from bank interest, the assessee had the onus to furnish an estimate of advance tax and liability to pay advance tax on such income during the relevant accounting year which it failed to do. The Income-tax Officer computed the shortfall at Rs. 44,390 and imposed minimum penalty of Rs. 4,439 under section 273(2)(c) being 10% of the shortfall. Being aggrieved, the assessee filed an appeal before the Commissioner of Income-tax ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Officer to recompute the quantum of minimum penalty imposable under section 273(1)(b) of the Income-tax Act, 1961, by first determining the tax on the basis of the regular assessment and then reducing the tax by the amount of tax deductible in accordance with the provisions of sections 194 and 195 of the said Act in respect of interest and dividend income from Tata Finlay Ltd. ?" At the hearing before us, it has been contended by the Revenue that, in determining the assessed tax under section 215(5) of the Act, the tax deductible at source under sections 194 and 195 cannot be taken into consideration. It is only the tax which has been deducted at source under sections 194 and 195 that can be taken into account in arriving at the assessed tax. On the other hand, the contention of counsel for the assessee is that the Tribunal has properly construed the word "deductible" as appearing in section 215(5) of the Act as well as in section 273(1)(b) of the Act and that there is no infirmity in the order. To appreciate the contentions, it is necessary to set out the relevant provisions of the Act. Section 273(1)(b) provides that where an assessee has, without reasonable cause, failed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct to advance tax at the rates applicable for the assessment year has to be calculated. Then comes the question of deduction from the amount of such tax the amount of tax deductible in accordance with the provisions of sections 192 to 194, 194A, 194C, 194D and 195. In computing the advance tax payable, the tax deductible at source on the gross amount of income which is subject to such deduction and which has been taken into account in computing the total income will be set off against the tax calculated on the income subject to advance tax and the balance will be advance tax payable. If, for example, Rs. 50,000 is the gross amount of interest, in that event, although the net amount of interest will be includible in the total income, the tax deductible at source on the entire gross amount of interest which has been taken into account in computing the total income will be deductible. The reason why the word "deductible" is used in section 209A or section 215(5) is that there are special rates of deduction for the purpose of sections 192 to 195 in Part 11 of the First Schedule to the Finance Act. As such, the gross income under the head "Interests and dividends" included in the said t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see, if he is entitled to any dividend on his shareholding in a company, the company is bound to deduct tax from the dividend payable to him at the rates in force. The assessee shall get credit for the amount so deducted. Similarly, section 195 imposes a statutory obligation on any person responsible for paying to a non-resident any interest (not being interest on securities) or any other sum (not being dividends) chargeable under the provisions of the Income-tax Act to deduct income-tax at the rates in force. It is, therefore, clear that the person paying has to deduct income-tax at the time of payment of interest to a non-resident. The obligation of the payer is to deduct the tax, whether it is dividend income or interest, and the assessee, the recipient, can only take the benefit of such deduction in his own assessment inasmuch as the tax so deducted will be to the credit of the recipient. It cannot be the intention of the Legislature that an assessee who receives dividend income without deduction of income-tax therefrom will still be entitled to the benefit of tax deductible on such income, although neither the payer nor the assessee as the recipient has paid any tax thereon. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account while computing the assessed tax as defined under section 215(5) for the purpose of determining the quantum of minimum penalty imposable for the default falling under section 273 (1) (b). Had the Tribunal examined the records, the matter would not have been remanded to the Income-tax Officer for recomputation of the penalty under section 273 of the Act, as the Income-tax Officer proceeded to levy penalty after giving credit for the tax which was not only deductible but which in fact was deducted within the financial year and the certificate of such deduction had also been filed before the Income-tax Officer. It is on record that although the assessee received interest of Rs. 75,094 from the banks, no tax was deducted on such interest and, accordingly, the question of any benefit of tax deductible under sections 194 and 195, so far as the interest income from the bank is concerned, could not arise. The Tribunal rightly did not accept the assessee's contention in that behalf. For the reasons aforesaid, the first question in this reference is answered by saying that tax deductible at source and deducted within the financial year under sections 194 and 195 has to be taken ..... X X X X Extracts X X X X X X X X Extracts X X X X
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