TMI Blog2001 (10) TMI 258X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1989, income-tax deductible from interest was to be increased by surcharge levied at specified rate. Thus, the assessee was liable to deduct 21.5 per cent of the interest towards income-tax which was to be increased by surcharge levied at the following rates on the income-tax: Asst. yr. Rate applied 1990-91 8 % 1991-92 15 % 1992-93 15 % 3. The assessee deducted tax at source from the interest paid on Bonds but failed to deduct surcharge at the prescribed rates. This came to the notice of the Revenue authorities somewhere in March, 1993 and first notice was issued to the assessee on 16th March, 1993, for financial year 1991-92 under s. 206 of the IT Act. It was regarding tax deductible at source from interest paid on securities. 4. The assessee pleaded that surcharge could not be deducted as the assessee was unaware of its statutory obligation to deduct surcharge. The assessee further contended that payees, banks and other institutions were directly paying tax on interest including surcharge and, therefore, no loss of revenue was caused to the Department. The mistake in non-deduction of surcharge was claimed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ering the relevant material available on record, did not find force in the contention of the assessee-Board that it was a limb of the State Government and, therefore, provisions of s. 201(1A) were not applicable in its case. The Board was a regular income-tax assessee under the IT Act and was being assessed in the status of a "company". The assessee may be a wholly owned Government undertaking but it could not be equated with Government itself so long as it is assessable to income-tax. It had all the liabilities cast on an assessee under the IT Act. It has to fulfil its statutory obligations. The mere fact that Bonds were guaranteed by State Government would not become Government securities. The assessee was liable to deduct tax at source as per rates prescribed by the Finance Acts, from year to year. The surcharge was also to be deducted at the rates prescribed. Accordingly, it was held that provisions of s. 193/201(1A) were mandatory in nature and were applicable to the assessee. Accordingly it was held that the assessee was liable to pay interest for its failure to deduct and pay surcharge in time. The CIT(A) however, allowed relief to the assessee on account of payment made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the date of payment and even levied interest on the balance amount of Rs. 34.28 lacs which was not even deposited by the appellant. This is apparently wrong. There is no question of interest being levied on the amount of surcharge which itself has not been collected for reasons discussed in the order of the AO. As decided in respect of financial years 1991-92 and 1992-93 interest on non-payment of surcharge should be re-calculated upto the end of the financial year i.e., 31st March,1991, after verification of the fact that all the payees had duly paid their taxes either by way of advance-tax or by way of TDS." 7. The question of penalty imposed was separately considered by the CIT(A) vide his order dt. 6th Sept., 1994. Here again, it was pleaded that surcharge was not deducted by the assessee under a bona fide belief that it was not part of income-tax. The other contentions advanced regarding interest charged were also advanced against the orders imposing penalties. The learned CIT(A) during the course of hearing of the appeals obtained the comments from the AO on the submissions made on behalf of the assessee. The AO vide his letter dt. 8th Aug., 1994, justified the impositio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation, is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute." 7. The Dy. CIT has highlighted the fact about the loss of revenue and has relied upon the decision of Tribunal Amritsar Bench in the case of Canara Bank and the decision of Calcutta High Court in Grindlays Bank Ltd. vs. CIT (1992) 101 CTR (Cal) 164 : (1993) 200 ITR 441 (Cal). It is, however, seen that the above quoted cases as well as observations therein relate to levy of interest under s. 201(1A) and are not relevant for the imposition of penalty. Insofar as loss of revenue is concerned, the same has duly been compensated by levy of interest in the appellant's case u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s deductible till the date the tax was actually paid. The provisions for payment of interest are mandatory and automatic and interest has to be paid from the date on which the tax was deductible till the date on which the tax is actually paid. If the tax has already been paid by the recipient on such income the IT Department may not be justified to recover the said amount of tax, but so far as the liability of interest is concerned, that cannot be considered to be non-existent on account of deposit of tax by the recipient at a subsequent or later stage." (ii) Pentagone Engineering (P) Ltd. vs. CIT (1996) 131 CTR (Bom) 78 : (1995) 212 ITR 92 (Bom) wherein the Bombay High Court has observed as under: "that the use of the word "shall" in s. 201(1A) made the liability to pay interest, in the circumstances mentioned, mandatory and there was no precondition of consideration of "reasonable cause" for non-payment in time of tax deducted under s. 192. Therefore, the ITO was not required to take into consideration the "reasonable cause" for non-payment of taxes deducted under s. 192." [Bennet Coleman Co. Ltd. vs. V.P. Damle, ITO (1985) 47 CTR (Bom) 342 : (1986) 157 ITR 812 (Bom) f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was justified in these cases. She prayed that the orders of the AO be restored. 12. The learned counsel for the assessee, on the other hand, submitted that surcharge for asst. yr. 1990-91 was imposed at 8 per cent but the AO recovered the same at the rate of 15 per cent the rate which was applicable only from asst. yr. 1991-92 onwards. Thus even the AO committed an error and collected 7 per cent in excess of what was leviable as per the statutory provisions. The AO also imposed interest and penalty taking surcharge imposable at 15 per cent in asst. yr. 1990-91. Thus, even the AO committed a mistake and imposed and recovered huge amount of interest, surcharge and penalty in excess of what was legally due. 13. Shri Jain further submitted that the assessee had all along been cooperative with the Department. It paid tax in advance to accommodate the Revenue although no tax was due from it. He invited our attention to advance-tax paid in past six years on which the assessee lost interest to the tune of Rs. 17.17 lacs. It was submitted that payments were made as and when called upon by the AO even on telephone. The above circumstances clearly showed that non-deduction of surcharge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon'ble Supreme Court in the case of Central Provinces Manganese Ore Co. Ltd. vs. CIT (1986) 58 CTR (SC) 112 : (1986) 160 ITR 961 (SC). It was explained that the assessee was to deduct tax on half-yearly basis on interest paid and credited, the payees were to pay tax in advance on 15th Sept., 15th Dec., and 15th March, of each financial year. Thus by 15th of September, tax was paid by payees including surcharge on interest receivable from assessee in the first quarter. By 15th March of next year, similar payment was made by the payees on interest payable in the second quarter. Therefore, no loss of revenue was caused on account of non-deduction of surcharge at source. The payment of surcharge was in fact made by the payees much in advance. 15. For the proposition that where the payees have already paid the taxes, no tax is deductible from the payer and, therefore, no interest should be levied under s. 201(1A), the learned counsel for the assessee relied on the following authorities: (i) CIT vs. Divisional Manager, New India Assurance Co. Ltd. (1983) 33 CTR (MP) 248 : (1983) 140 ITR 818 (MP); (ii) CIT vs. Life Insurance Corporation (1986) 52 CTR (MP) 278 : (1987) 166 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01) 168 CTR (Del) 394 : (2001) 118 Taxman 433 (Del) wherein their Lordships emphasised that s. 273B starts with a non obstante clause and provides that notwithstanding conditions in several provisions enumerated therein including s. 271C, no penalty shall be imposed if there is a reasonable cause for the failure. The levy of penalty is not obligatory. 19. In reply to argument of the Revenue that levy of interest under s. 201(1A) and that of penalty under s. 271C was mandatory and automatic, even if taxes have been collected from the payees, Shri Jain submitted that decisions relied on by the Revenue were not applicable to the facts of the case. The case of Sri Jagdish Prasad Choudhary related to late filing of return where no cause for delay was shown. Likewise other case of Bennett Colleman vs. V.P. Damle, related to levy of interest under s. 201(1A) and is to the effect that interest levied cannot be waived. In that case, tax at source was deducted but not deposited under prescribed r. 30. In the present case, the tax has already been collected and deposited by the payees/recipients. Hence this judgment is not applicable to the facts of the case. Likewise, in the case of Rathi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est payable." "200.—Any person deducting any sum in accordance with the provisions of ss. 192 to 194, s. 194A, s. 194B, s. 194BB, s. 194C, s. 194D, s. 194E, s. 194EE, s.194F, s. 194G, s. 194H, s. 194-I, s. 194J, s. 194K, s. 194L, s. 195, s. 196A, s. 196B, s. 196C and s. 196D, shall pay within the prescribed time, the sum so deducted to the credit of the Central Government or as the Board directs. 201.—(1) If any such person and in the cases referred to in s. 194, the principal officer and the company of which he is the principal officer does not deduct or after deducting fails to pay the tax as required by or under this Act, he or it shall, without prejudice to any other consequences which he or it may incur, be deemed to be an assessee in default in respect of the tax: Provided that no penalty shall be charged under s. 221 from such person, principal officer or company unless the AO is satisfied that such person or principal officer or company, as the case may be, has without good and sufficient reasons failed to deduct and pay the tax. (1A)—Without prejudice to the provisions of sub-s. (1), if any such person, principal officer or company as is referred to in that sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t payable on a tax-free security 44 % B. On interest on other securities 65 % Note: Surcharge on income-tax The amount of tax deducted as per the rates given above shall be increased: (i) by a surcharge for purposes of the Union at 8 per cent of such income-tax in the case of resident person; (ii) by a surcharge at 8 per cent of such income-tax in the case of a domestic company." For the accounting years 1990-91 and 1991-92 the rate of surcharge was increased to 15 per cent of income-tax. 22. The assessee deducted income-tax at the prescribed rate of 21.5 per cent but did not deduct surcharge on the interest paid or credited by it on Bonds. It was contended that above deduction was not made under a bona fide belief that surcharge was not to be deducted. It was contended that the payees were directly paying the surcharge by including the same in the advance-tax paid/payable by them. In this connection, the assessee had placed strong reliance on its co-operative conduct. It has been emphasised how immediately after statutory obligation was brought to the notice of the assessee, it lost no time in making payment of surcharge. It has also been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) Tribunal A Bench Allahabad in the case of Asstt. CIT vs. J.P. National Mfg. Ltd.; (ii) ITAT C Bench Delhi in the case of Mitsui Co. Ltd. vs. Dy. CIT and (iii) Mahendra Kumar vs. Union of India (1974) 94 ITR 65 (Mad). In the light of above decisions and facts and circumstances of the case, we are of the view that the CIT(A) was right in cancelling penalty levied on the assessee. We uphold his orders in both the assessment years, i.e. 1991-92 and 1992-93. 25. As regards the levy of interest under s. 201(1A) of the IT Act, we are of the view that statutory provisions in this regard are very clear. We refer to the provisions of sub-s. (1A) of s. 201 providing for payment of interest. The interest is to be paid by the defaulter on the amount of tax not deducted from the date on which such tax was deductible to the date on which such tax is "actually paid". Therefore, the period is prescribed by the statute and the provision is mandatory. It can neither be extended nor shrunk at the discretion of the Revenue authorities. Mandate of sub-s. (1A) is to be given effect to. The interest is to be charged strictly in accordance with the statutory provisions till tax is "actually ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount is "actually paid". 28. The AO in the assessment order has recorded that on verification, the contention of the assessee that recipients paid surcharge on interest received by them was correct. The CIT(A) on the basis of material available has held that surcharge must have been paid before 31st of March of the financial years 1991-92 and 1992-93 and, therefore, directed that interest could be charged only upto 31st of the respective financial year. Similar recommendation was made in the period relevant to asst. yr. 1990-91. The aforesaid inference from the facts collected by the AO is possible. But both the parties are aggrieved from the aforesaid finding. In principle, it has to be accepted that interest could be charged only upto the date the surcharge due was actually paid to the credit of the Government. Now what is the actual date of payment, is a question of fact. Each payment will have to be examined in case the interest is to be correctly computed. We see no reason why correct amount should not be determined. After all, interest payable is compensatory in nature and has to be recovered for the period for which the state was deprived of the amount due to it. None of ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
