|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2006 (7) TMI 248 - ITAT BOMBAY-HInterest On Securities - expression 'interest accrued but not due' - non-deduction of tax at source - Penalty imposed u/s 221 - HELD THAT:- In the case before us, the interest is to be paid to a 'registered bondholder' as on a future date, and there cannot be any method to find out as to who will be registered bondholder on a future date. It is indeed correct that Explanation to section 193 lays down that even when an income is credited to any account in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly, but the fact that the credit to any account is to be deemed to be credit to the payee's account also presupposes that payee can be ascertained. Therefore, this deeming fiction can only be activated when the identity of the payee can be ascertained. However, on the facts of the present case, this Explanation cannot be put into practice because the payee is not known at the stage of provision for 'interest accrued but not due' being made. It is not difficult to visualize that Explanation to section 193, which was introduced with effect from 1st June, 1989, was apparently to take care of a situation in which instead of crediting the account of the payee, some other proxy account was credited, to avoid the tax deduction at source liability being invoked. In our considered view, Explanation to section 193 cannot be invoked in a case where the person who is to receive the interest cannot be identified at the stage at which the provision for interest accrued but not due is made. This position is also accepted by the CBDT as evident from its letter dated 5th July, 1996 addressed to the Tata Iron & Steel Co. Ltd. [Letter No. 275/126/96 IT (B)]. Thus, we are of the considered view that the impugned penalty u/s 221 is unsustainable in law and on the facts of this case. We, therefore, set aside the impugned penalty order - The appeal is allowed.
|
