TMI Blog2014 (1) TMI 1543X X X X Extracts X X X X X X X X Extracts X X X X ..... d – Decided against Assessee. - ITA No.165/Coch/2012 - - - Dated:- 16-8-2013 - N R S Ganesan and B R Baskaran, JJ. For the Appellant : Shri U Mohanan For the Respondents : Smt Susan George Sr DR Shri M Anil Kumar, CIT ORDER:- PER : B R Baskaran The appeal filed by the assessee is directed against the order dated 19.4.2012 passed by the ld CIT(A)-III, Kochi and it relates to the AY 2005-06. The assessee is challenging the decision of the ld CIT(A) in confirming the demand raised u/s 201 and interest charged u/s 201(1A) of the I T Act. 2. The facts relating to the issue are stated in brief: The assessee is a Private Limited company. The AO noticed that the assessee had credited interest to the following sister concerns during the year under consideration without deducting tax at source u/s 194A of the Act, the details of which are below: Sl.,No Name of the party Interest credited Tax deductible 1 Agreenco Rubber Technology P Ltd 1443077 3,01,750 2 Agreenco Videsh (P) Ltd 3523950 7,36,860 3 Agreen Hashco 559057 1,16,900 4 Agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count of either payee or Suspense Account, if any. Hence, the failure on the part of the assessee to claim the same as expenditure in the return of income, will not exonerate the assessee from TDS liability. Elaborating further the ld DR submitted that the capital expenditure incurred by any assessee will not be claimed as deduction from the total income, but still the assessee would be liable to deduct tax at source from the capital expenditure, if such payments are liable for deduction of tax at source. The ld DR submitted that the assessee here in has accounted for the liability to pay interest in its books of account and hence, it is liable to deduct tax at source u/s 194A of the Act. The Ld D.R submitted that there is no dispute that the payees of interest amount are liable to pay tax under the I T act and hence, the decision rendered in the case of Mahindra Mahindra (referred supra) is not applicable to the facts of the present case. 5. We have heard the rival contentions and perused the record. Admittedly, the assessee has accounted for the interest liability, which is detailed in the table extracted in paragraph 2 supra, in its books of account. Admittedly, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eque or draft or by any other mode, whichever is earlier, deduct income tax thereon at the rates in force. Explanation:- For the purposes of this section, where any income by way of interest as aforesaid is credited to any account, whether called Interest payable account or Suspense account or by any other name, 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 payee and the provisions of this section shall apply accordingly. A plain reading of above provision clearly shows that the person responsible to pay the interest is liable to deduct tax at source at the time of credit or payment, whichever is earlier. It is pertinent to note that the section uses the term any income by way of interest . The interest payment may constitute expenditure in the hands of the person making the payment, while it may constitute income in the hands of the payee/recipient. Since the section uses the term any income by way of interest , in our view, it should be viewed from the angle of the recipient/payee and not from the angle of the person making the payment. Accordingly, the accounting/tax tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omputing its total income, in which case the revenue is entitled to initiate proceedings u/s 201 of the Act for such failure. 6. The Ld A.R also contended that the department did not take any action in the hands of the recipient of interest and hence the proceedings initiated u/s 201 are not valid and for this proposition, the Ld A.R placed reliance on the decision of Mumbai Special Bench in the case of Mahindra and Mahindra Ltd (referred supra). We have carefully considered the said decision. The issue therein was regarding deduction of tax at source u/s 195 of the Act in respect of payments made to a non-resident, which are chargeable under the provisions of the Act. After analyzing the provisions relating to tax deduction at source, the Special bench came to the following conclusions (@ page 314 of ITR, para 70):- Thus the essence of the provisions of deduction of tax at source is that there is a presumption of liability of the payee to tax on the income. As discussed in an earlier paragraph that if there is no or lower liability of the payee to tax on the income so received without deduction of tax at source, then the payer cannot be treated as the assessee in default f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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