9911796707
TMI Blog1987 (2) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... aid a total sum of Rs. 45,403 to the representative of General Engineering Co. (Radcliffe) Ltd., United Kingdom, for certain services which he rendered to the assessee in India. The assessee did not deduct income-tax on the said amount in terms of section 195(1) of the Income-tax Act, 1961. The Income-tax Officer computed the tax payable on the said sum at Rs. 35,973, by his order dated February 25, 1977, which was purportedly made under section 201. The assessee preferred an appeal against this order. The Appellate Assistant Commissioner, accepting the contention of the assessee, that no tax was liable to be deducted by it at source, allowed the appeal. On appeal by the Revenue, the Tribunal held that tax was deductible at source and that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the tax and/or payment of the same as required by the statute. Time for recovery, therefore, began to run, according to him, from the last day of the financial year in which the default occurred. Counsel for the Revenue, on the other hand, submits that no liability for recovery arises in respect of the tax deductible under section 195 and payable under section 200 until an order is made under section 201 treating the person responsible for the deduction to be an " assessee in default ". The order in question of the Income-tax Officer is, according to him, not an order of recovery, but an order treating the person responsible to be an assessee in default in terms of section 201, and time for recovery began to run only from the last day o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If any such person ...... does not deduct or after deducting fails to pay the tax as required by or under this Act, he............ shall, without prejudice to any other consequences which he......... 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....... unless the Income-tax Officer is satisfied that such person ...... 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 such person....... does not deduct or after deducting fails to pay the tax as required by or under this Act, he...... shall be liable to pay simple interest at fifteen per cent. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a proper assessment, remains merely ambulatory, and becomes fixed only upon the completion of the assessment and demand (see M..M. Parikh, ITO v. Navanagar Transport Industries Ltd. [1967] 63 ITR 663, 671 (SC) ). On the other hand, sections 195, 200 and 201 deal with a liability which is at no time ambulatory, but which is attracted immediately upon the happening of an event, namely, payment and failure to deduct under section 195 or failure to credit the sum deducted as required by section 200. As soon as such failure occurs, the liability arises once and for all, and there is no further requirement of computation or assessment. Once the liability is incurred, no further demand is necessary to recover the tax and the interest due the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecting such liability begins to run, not with reference to any notice of demand, but from the last day of the financial year in which the default has occurred by reason of the failure to deduct tax as warranted by section 195 or to pay the tax deducted as required by section 200. In this connection, we will refer to section 46(7) of the Indian Income-tax Act, 1922 (the "old Act"), which corresponds to section 231 of the present Act. That section, in so far as it is material, reads : " 46. (7) Save in accordance with the provisions of sub-section (1) of section 42, or of the proviso to section 45, no proceedings for the recovery of any sum payable under this Act shall be commenced after the expiration of one year from the last day of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urred. The order made by the Income.; tax. Officer on February 25, 1977, was, therefore, long after the expiry of the period of limitation. We are fortified in this conclusion by the view expressed on the point by the Calcutta High Court in CIT v. Dunlop Rubbey Co. (India) Ltd. [1980] 121 ITR 476 (Cal) and by the Delhi High Court in Bal Kishan Dass v. CIT [1976] 103 ITR 825, 831 (Delhi), and we respectfully agree with that view. With respect, we disagree with the contrary view expressed by the Madras High Court in Mettur Chemicals and Industrial Corporation Ltd. v. IAC [1984] 150 ITR 341 (Mad). In the circumstances, we answer the question in favour of the assessee and against the Revenue. We direct the parties to bear their respective c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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