9911796707
TMI Blog2007 (5) TMI 141X X X X Extracts X X X X X X X X Extracts X X X X ..... On the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) has failed to appreciate that having regard to the facts of the case, the decision in the case of CIT v. Vijay Ship Breaking Corporation [2003] 261 ITR 113 (Guj) would not be applicable to the assessee's case." 3 The brief facts of the case are that the assessee-company has paid the usance interest during the year which consists of the usance interest paid to the foreign banker as well as to the foreign branches of the Indian banker. The assessee was of the view that no income-tax at source is deductible in view of the only decision available at that time in the case of Visakhapatnam Port Trust [1983] 144 ITR 146 (AP). Subsequently, on March 20, 2003, the Gujarat High Court in the case of Vijay Ship Breaking Corporation [2003] 261 ITR 113 took, the view, contrary to the view taken by the Andhra Pradesh High Court in the case of Visakhapatnam Port Trust [1983] 144 ITR 146 that the TDS provisions are applicable to the usance interest. Due to the decision of the Gujarat High Court, the demand for TDS not deducted under section 195(1) read with section 201(1) amounting to Rs. 19,30,480 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to pay the interest starts from the day the decision has been delivered by the hon'ble Gujarat High Court. Since the Gujarat High Court has decided the issue after the decision by the Andhra Pradesh High Court, the assessee was under the genuine impression that no TDS provisions are applicable to usance interest. Thus, in the natural course the appellant has not deducted the TDS amount and also not paid the interest. The issue of levy of TDS amount has been decided, but the decision of the Supreme Court in respect of interest is clearly stating that one cannot accept the payment of liability retrospectively in case of payment of interest. Therefore, owing to the decision of the Supreme Court, the Assessing Officer is directed to delete the interest levied under section 201(1A) of Ps 1,70,817." 5 The learned Departmental representative contended that the levy of the interest is mandatory. There is no provision under section 201(1A) to reduce or waive the interest, The reliance was placed on the decision of the hon'ble Supreme Court in the case of CIT v. Anjum M. H. Ghaswala [2001] 252 ITR 1. The word used under section 201(1A) is "shall". It cannot be read as "may". The Legislatur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... source, the question of imposition of the interest does not arise. The assessee since was under the bona fide belief that no TDS is to be deducted on the usance interest paid by him, it cannot be said that the assessee has committed the default. At the most it was pointed out that the default could have been committed only from the date when the judgment of the hon'ble Gujarat High Court has become publicly known. The liability to deduct the tax has also arisen on the date due to the judgment of the hon'ble Gujarat High Court. Reliance was heavily placed on the Third Member decision of the Delhi Bench of the Tribunal in the case of Haryana Warehousing Corporation v. Deputy CIT [2001] 252 ITR (AT) 34. 7 It was pointed out that in this case also the assessee was granted exemption in respect of certain income in prior years on the basis of only the High Court decision on the subject. Subsequently, the Rajasthan High Court delivered the judgment on December 1, 1993 (CIT v. Rajasthan State Warehousing Corporation [1994] 210 ITR 906, that the exemption is not available in respect of those incomes. The decision of the Rajasthan High Court was subsequently affirmed by the hon'ble Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said income was not avail able due to the decision of the hon'ble Rajasthan High Court (see CIT v. Rajasthan State Warehousing Corporation [1994] 210 ITR 906) delivered on December 1, 1993, and confirmed by the Supreme Court, it was held: "The learned Departmental representative submitted that the provision of section 10(29) was unambiguous. The assessee was not entitled to get benefit in respect of section 10(29) on the incomes which it claimed. There was no decision of jurisdictional High Court or of the apex court at the relevant point of time dealing with this issue. As such, the assessee ought to have paid the due tax. It was further argued that the levy of interest under section 234B is mandatory. Interest charged under section 234B is compensatory in nature. As such, the assessee cannot be exonerated from the charge of interest. The defaults, which attract charge of interest under section 2MB, are as under : (i) Failure to pay advance tax during the financial year which an assessee is liable to pay under section 208 ; and (ii) Payment of advance tax under section 210 by an assessee, which is less than 90 per cent. of the 'assessed tax'. 'Admittedly, up to the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the date on which such tax was deductible to the date on which such tax is actually paid." 11 On the plain reading of the aforesaid section, (1) it is apparent that the liability to pay simple interest arises if any person does not deduct the whole or any part of the tax; (2) if any person after deducting tax failed to pay the tax as required by or under this Act; (3) the interest is payable on the amount of such tax from the date on which such tax was deductible to the date on which the tax is actually paid. 12 Now, the question before us arises when the tax was deducted in the case of the assessee. This is an admitted fact that the usance interest was not chargeable to tax prior to the decision of the Gujarat High Court in the case of Vijay Ship Breaking Corporation [2003] 261 ITR 113 as prior to this the only High Court decision was that of CIT v. Visakhapatnam Port Trust [1983] 144 ITR 146 (AP). The decision of Vijay Ship Breaking Corporation [2003] 261 ITR 113 was pronounced by the hon'ble Gujarat High Court on March 20, 2003. In view of the decision of the Third Member in the case of Haryana Warehousing Corporation v. Deputy CIT [2001] 252 ITR (AT) 34 (Delhi) the assessee c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est with effect from March 20, 2003. Accordingly, we, do not find any merit in the cross-objections taken by the assessee as, in our opinion, the Commissioner of Income-tax (Appeals) was correct in law in sustaining the demand of Rs. 11,55,060 raised on the assessee in respect of failure to deduct the tax at source under section 195(1) read with section 201(1). Thus, the cross-objections filed by the assessee stands dismissed. 15 In the result, the appeal of the Revenue is partly allowed while the cross-objections filed by the assessee are dismissed. 16 I. P. BANSAL (Judicial Member).—I have carefully gone through the order proposed by learned Accountant Member. I have discussed the issue with him but I could not persuade myself to agree with his order vide which it has been held that the assessee is liable to pay interest under section 201(1A) only from the date of pronouncement of the decision by the e jurisdictional High Court in the case of CIT v. Vijay Ship Breaking Corporation [2003] 261 ITR 113 (Guj), i.e., from March 20, 2003, to the date of actual payment. I, therefore, proceed to express my view on the subject. 17 The asses see paid "usance interest" on purchase of shi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the nature of the levy of interest under section 201(1A). Reference in this regard can be made to the following decisions 1. Pentagon Engineering P. Ltd. v. CIT [1995] 212 ITR 92 (Bom) (page 94) : "The use of the word 'shall' in section 201(1A) makes the liability to pay interest in circumstances mentioned mandatory and there is no pre-condition of consideration of 'reasonable cause' for non-payment in time of tax deducted under section 192 of the Act. We hold that section 201 (1A) of the Act is mandatory and the Tribunal was right in law in taking the view that the Income-tax Officer was not required to take into consideration the 'reasonable cause' for non-payment of taxes deducted under section 192 of the Act." 20 Thus, it was held that the provisions of section 201(1A) for levying interest are mandatory and the Income-tax Officer is not required to take into consideration the reasonable cause for non-payment of taxes deducted under section 192. 2. Bennet Coleman and Co. Ltd. v. V. P. Damle, Third ITO (TDS) [1986] 157 ITR 812 (Bom) ; [1985] 47 CTR 342 (Bom) (page 815) "It is an admitted position that the petitioners failed to remit within the prescribed time the tax deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not intentional. 3. CIT v. Dhanalakshmy Weaving Works [2000] 245 ITR 13 (Ker) [2000] 160 CTR 374 (Ker) "Levy of interest is of a compensatory measure for withholding tax which ought to have gone to the exchequer. Provision makes it clear that the levy is mandatory. It is true that use of the expression 'shall' is not always determinative of the fact whether a provision is directory or mandatory in nature. But the context in which the expression 'shall' is used in section 201(1A) makes it unambiguously clear that levy is mandatory. The purpose of levy is to claim compensation on the amount which ought to have been deducted and deposited and has not been done. Use of the word 'shall' raises a presumption that the particular provision is imperative. But this prima facie inference may be regarded by other considerations such as object and scope of the enactment and consequences flowing from such construction. . . . 'Interest' is a consideration paid either for use of money or for forbearance in demanding it after it has fallen due. It is a compensation allowed by law or fixed by parties or permitted by custom or usage for use of money belonging to another or for the delay in payi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g from such construction. Liability to pay interest arises by operation of law, being automatic. Looking at the nature of levy, it is clear that it is compensatory in character and not in the nature of penalty. It is seen that there are he several provisions where the Legislature has made a distinction of between interest payable and penalty imposable. The ultimate liability ay for tax being not there does not dilute the requirements for the non compliance with which interest is levied under section 201(1A). Judged in that background, the levy of interest was justified and the Tribunal was not justified in directing its deletion Sainik Motors v. State of Rajasthan, AIR 1961 SC 1480 ; Karimtharuvi Tea Estate Ltd. v. State of Kerala [1966] 60 ITR 262 (SC) ; CST v. Qureshi Crucible Centre [1993] 89 STC 467 (SC) and Prahlad Rai v. Sales Tax Officer [1992] 84 STC 375 (SC) applied." 26 Therefore, it was held that levy of interest under section 201(1A) is a compensatory measure for withholding tax and such levy is mandatory and automatic ; assessee having not properly deducted tax at source as required under section 192 it was liable to pay interest under section 201(1A). 5. Kanoi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, this case does not involve any substantial question of law for admission. The appeal is, therefore, dismissed.—CIT v. Darshan Treading and Finance P. Ltd. [1995] Tax LR 1203 (Guj), Grindlays Bank Ltd. v. CIT [1992] 193 ITR 457 (Cal) ; [1991] 94 CTR (Cal) 46 and Grindlays Bank Ltd. v. CIT [1992] 101 CTR (Cal) 164; [1992] 200 ITR 441 (Cal) relied on." 27 Therefore, it was concluded that section 201(1A) postulates mandatory liability to pay interest at the rate provided on the amount deductible as tax from the date on which such tax was deductible until it is actually paid, and the liability continues until the amount is actually paid voluntarily or non voluntarily pursuant to or through recovery proceedings, no substantial question of law is involved. 6. WestBengalState Electricity Board v. Deputy CIT [2005] 278 ITR 218 (Cal); 198 CTR (Cal) 122. "The scheme in which sub-section (1A) of section 201 has been framed does not leave any scope or ambiguity to hold such liability contingent upon good and sufficient reasons or otherwise. On the other hand, it makes it clear that an assessee-in-default is liable to pay simple interest for the period stipulated in sub-section (1A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee in accordance with law.—A. K. Kraipak v. Union of India, AIR 1970 SC 150. C. B. Gautam v. Union of India [1992] 108 CTR (SC) 304 read with [1993] 110 CTR (SC) 179: [1993] 199 ITR 530 (SC) and Assistant Collector of Customs and Superintendent, Preventive Service Customs v. Charan Das Maihotra, AIR 1972 SC 689 applied. 28 Thus, it was held that interest payable under section 201(1A) is mandatory and it can neither be waived nor reduced; however, an opportunity of hearing has to be given to the assessee before charging interest. 7. Ernakulam District Co-operative Bank Ltd. v. Asst. CIT (TDS) [2005] 272 ITR 95 (Ker) : It was held asunder (page 97) : "7. In Pentagon Engineering (P) Ltd. v. CIT [1996] 131 CTR (Bom) 78 : [1995] 212 ITR 92 (Bom), it was held as follows 'use of the word "shall" in section 201(1A) made the liability to pay interest, in the circumstances mentioned, mandatory and there was no pre-condition of consideration of "reasonable cause" for non-payment in time of tax deducted under section 192. Therefore, the Income-tax Officer was not required to take into consideration the "reasonable cause" for non-payment of taxes deducted under section 192'. In CIT v. Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01(1A) is mandatory but his only objection raised is that prior to the pronouncement of the decision in the case of CIT v. Vijay Ship Breaking Corporation [2003] 261 ITR 113 (Guj) there was no liability to deduct tax at source of the assessee in view of the decision of the Andhra Pradesh High Court in the case of CIT v. Visakhapatnam Port Trust [1983] 144 ITR 146. Therefore, it is his contention that the interest f should be charged only for the period from the pronouncement of thedecision in the case of CIT v. Vijay Ship Breaking Corporation [2003] 261 ITR 113 (Guj) till the payment of TDS. This contention of the assessee isbased principally on the argument that the liability of the assessee to deduct tax at source only commence from the date on which the decision in the case of CIT v. Vijay Ship Breaking Corporation [2003] 261 ITR 113 (Guj) was pronounced. 31 There is little force in such contention of the assessee. After narrating and analysing all the relevant provisions their Lordships of the jurisdictional High Court in the case of CIT v. Vijay Ship Breaking Corporation [2003 261 ITR 113 (Guj) have held that the assessee was liable to deduct tax at source. Reference ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxation of interest of the revised Model Convention 77 and the DTAAs relevant to the present cases followed that Model Convention which included the expression 'debt claim of every kind' in the article concerning taxation of interest which expression was absent in the said article VIII of the agreement with Germany. The decision of the Andhra Pradesh High Court was, therefore, rendered in a different context. We are, however, for the foregoing reasons unable to subscribe to the view that the outstanding purchase price of goods is not a debt." (emphasis mine) 33 In view of the above observations of their Lordships of the jurisdictional High Court the arguments that the assessee was not required to deduct tax at source from "usance interest" earlier to the pronouncement of the decision in the case of CIT v. Vijay Ship Breaking Corporation [2003] 261 ITR 113 (Guj), is liable to be rejected as the decision of the Andhra Pradesh High Court was rendered in a different context and thus was not an authority to be relied upon to escape from the liability to deduct tax at source from "usance interest". It has also been found by the jurisdictional High Court that the provisions considered b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orders in the petitioner's cases and that both the decisions were given after the assessment orders were made. But these decisions did not enact or make the law in any sense but merely interpreted the expression 'debt owed' occurring in section 2(m) of the Act which was undoubtedly on the statute book at the time when the assessment orders were made by the Wealth-tax Officer. These decisions, in so far as they declared that the amounts claimed by an assessee in respect of provision for taxation are deductible in computing the net wealth of the assessee since they represent 'debt owed' by the assessee within the meaning of section 2(m) of the Act, merely stated what the law had always been and must always be understood to have been. The fact that these decisions were not before the Wealth- tax Officer when he made the orders of assessment in the petitioner's cases has, therefore, no material bearing on the question whether the said orders disclose any mistake apparent from the record. If that be the correct legal position, and we hold that it is, the only conclusion possible is that the assessment orders, in so far as they disallowed the claim of the petitioner for deduction in res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ancial year relevant to the assessment year for which the assessee is liable to pay advance tax. If income is not arising to the assessee up to a particular date when instalment of advance tax did not fall due, it was held that the assessee could not visualize such accrual of income up to a particular date, therefore, the assessee was not liable to deposit advance tax by that due date. Here, in the present case, the facts are entirely different. It cannot be said that the assessee could not quantify the amount which is liable to deduct at source as there is no dispute regarding the quantification of 'usance interest'. (ii) The decision of the Third Member was rendered prior to the decision of the hon'ble Supreme Court in the case of CIT v. Anjum M. H. Ghaswala [2001] 252 ITR 1 as up to that date the issue of chargeability of interest under section 234B was debatable and that the decision of the Tribunal did not have the benefit of later pronouncement of the hon'ble Supreme Court in the case of CIT v; Anjum M. H. Ghaswala [2001] 252 ITR 1. 38 Since there is no dispute regarding the liability of the assessee to deduct tax at source, the interest under section 201(1A) being mandator ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " 43 In a survey action carried out in cases of certain foreign banks, it was found that the assessee had remitted usance interest through these banks. This was paid in respect of outstanding amount of purchase price of equipments. The assessee had not deducted tax at source on such payment of interest in terms of section 195 of the Act, by entertaining the belief that it was part of the cost of acquisition of the equipments in view of the decision of the Andhra Pradesh High Court in the case of CIT v. Visakhapatnam Port Trust [1983 144 ITR 146. By an order dated July 12, 2004, the Assessing Officer held the assessee liable to deduct tax under section 195(1) on the payment of such usance interest and accordingly directed the assessee to pay amount of tax deductible at source under section 201(1) at Rs. 52,80,400 along with interest under section 201(1A) amounting to Rs. 11,55,060. The assessee made an application for rectification on various grounds, one of which was that the assessee was not liable to deduct tax on payment of such usance interest and also contended that the decision of the Gujarat High Court in the case of CIT v. Vijay Ship Breaking Corporation [2003] 261 ITR 113 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee, the decision of the Supreme Court in respect of interest is clear in stating that one cannot accept the payment of liability retrospectively in case of payment of interest. That decision of the Supreme Court is in the case of Star India P. Ltd. v. CCE [2006] 280 ITR 321. He, accordingly, deleted the entire interest levied of Rs. 3,68,632 without taking into consideration the fact that some of the liabilities did pertain to the period after the decision of the Gujarat High Court in the case of Vijay Ship Breaking Corporation [2003] 261 ITR 113. 45 The Revenue came in appeal against the deletion of interest whereas the assessee filed C. O. against confirming the liability to deduct tax. There is no dispute between the two Members on the issue that there was a liability to deduct tax at source by the assessee in view of the decision of Vijay Ship Breaking Corporation [2003] 261 ITR 113. The difference between the two Members is on the liability to pay interest for the non-deduction and delayed payment of TDS. The Accountant Member directed the Assessing Officer to impose interest on the assessee from the date when the Gujarat High Court decision in the case of Vijay Ship Breaki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmission that interest should be charged from the date of inception of the provision and not from the date of court decision. These are (a) CIT v. Assam Oil Co. Ltd. [1982] 133 ITR 204 (Cal), wherein it has been held that on principle, the Supreme Court does not make the law from the date it is pronounced but declares it to be so from its very inception. (b) Deep Chand Jain v. Board of Revenue [1966] ALJ 112 (All), wherein it has been held that "The courts while deciding cases do not make law. When the courts interpret any law, they only explain what the pre-existing law is. They do not create or impose it. The courts do not possess the power to say that its view of the law will hold good from a date of its choice or for a period of time that set by itself, that will in substance amount to amending the law from time to time. That is a power which r vests exclusively in the law-making authority and not in the courts. The true rule appears to be that the court's declaration is co-extensive with the life of the law. It is effective for the whole of the time that the law remains in force." (c) ACE Investments Ltd. v. Settlement Commission [2003] 264 ITR 571, 577 (Mad) wherein it ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed rule are governed by the law established in the overruling decision. The overruling is retrospective, except as regards matters that are res judicata, or accounts that have been settled in the meantime.' (d) Madras Auto Service v. ITO [1975] 101 ITR 589, 591 (Mad) observing that when a statutory provision is interpreted as to its precise ambit and effect, it will have effect right from the inception of the statutory provision. In other words, when the law is declared by the court, it has its effect not merely from the date of decision but also from the inception of statutory provision. (e) Karamchand Premchand P. Ltd. v. CIT [1975] 101 ITR 46, 52 (Guj) holding that such declaration of law has retrospective effect. (f) Mysore Cements Ltd. v. Deputy CCT [1994] 93 STC 464 ; [1994] 116 CTR 284 (Karn) held that when a superior court declares the law, it is not making law on the date of judgment but merely declaring the law. The decision being an enunciation of the true and correct position of law, becomes applicable from the date when the concerned law came into effect. If, therefore, the Supreme Court or the concerned High Court declared the true position on the point of law, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er for reassessment was valid—Section 147(b) of Income-tax Act, 1961. (ii) Export Enterprises P. Ltd. v. ITO [1983] 142 ITR 641 (Cal) Reassessment under section 147(b)—Information—Audit's opinion on law point—Reassessment proceedings also initiated in the meantime on the basis of an information from the audit department that such expenses not allowable—Though an information on point of law, reopening still valid as the same was initiated prior to the pronouncement of the Supreme Court judgment in Indian and Eastern Newspaper Society v. CIT [1979] 119 ITR 996 (SC) ; [1979] 12 TR 190 (SC). (iii) Sagar Co-operative Central Bank Ltd. v. CIT [1990] 186 ITR 292 (MP). Issue involved—Appeal (Tribunal)—Rectification under section 254(2)—Exemption under section 80P(2)(a)(i)—Mistake apparent from record must be obvious and patent mistake and not something which can be established by a long-drawn process of reasoning on points on which there may be conceivably two opinions—Tribunal had come to the same conclusion with respect to exemption under section 80P(2)(a)(i) as in the earlier years—Merely because subsequently the High Court took a contrary view, it could not be said that there was an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3m chargeable to tax, which is obvious from the fact that the Gujarat High :an Court decision in Vijay Ship Breaking Corporation [2003] 261 ITR 113 was delivered in March, 2003, and the Government in effect nullified it by me amending the Act by inserting a new Explanation below section :he 10(15)(iv)(c), more importantly making this amendment retrospectively from April 1, 1962. This Explanation declares for the removal of doubts that the usance interest payable outside India by an undertaking engaged in the business of ship breaking in respect of purchase of a ship from outside be India shall be deemed to be the interest payable on a debt incurred in a foreign country in respect of the purchase outside India. 49 Mr. Soparkar further submitted that to the best of the assessee s knowledge and belief, no assessee (at least in Gujarat) was effecting TDS from is the usance interest before the pronouncement of the Gujarat High Court decision in March, 2003, in the case of Vijay Ship Breaking Corporation [203] 261 ITR 113. Therefore, according to him, it cannot be said that at the time of paying usance interest the assessee too should have taken a view that such usance interest was char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of law, the person concerned should be in the know of the facts and the position of law consciously. Before March, 2003, the assessee and almost everybody genuinely believed that the usance interest was not chargeable to tax, therefore, the quasi-punishment of levying interest should not be inflicted. 52 In reply to the submissions of the assessee, the learned Commissioner of Income-tax-Departmental representative Mr. A. K Panda submitted that a decision is only an authority for what it actually decides, not what can logically be deduced therefrom; what is of the essence in a decision is its ratio and not every observation found therein nor what logically follows from the various observations made in it (Goodyear India Ltd. v. State of Haryana [1991] 188 1TR 402 (SC)). Every judgment must be read as applicable to the particular facts proved, or assumed to be proved, since generality of the expressions found there are not intended to be expositions of the whole law but governed by particular facts of the case. He submitted that in the first two decisions, i.e., Assam Oil Co. Ltd. [1982] 133 ITR 204 (Cal) and Export Enterprises (P.) Ltd. [1983] 142 ITR 641 (Cal) relied upon by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Act, he or it shall be liable to pay simple interest at twelve per cent. per annum on the amount of such tax from the date on which such tax was deductible to the date on which such tax is actually paid and such interest shall be paid before furnishing the quarterly statement for each quarter in accordance with the provisions of sub-section (3) of section 200. (2) Where the tax has not been paid as aforesaid after it is deducted, the amount of the tax together with the amount of simple interest thereon referred to in sub-section (1A) shall be a charge upon all the assets of the person, or the company, as the case may be, referred to in sub-section (1)." 55 Both the Members held the assessee liable to TDS. The assessee also did not dispute its liability to deduct tax but wanted exemption from interest up to the date of the High Court judgment in CIT v. Vijay Ship Breaking Corporation [2003] 261 ITR 113 (Guj) on the ground of bona fides and effective date of application thereof. 56 As to the effect of the High Court order, the cardinal principle is that on the pronouncement of the decision the High Court declares the law as to what it means and what the law had always been. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent order in the assessee's case, had no material bearing on the question whether the said order disclosed any mistake apparent on the record. When this court held that capital gains were taxable in the hands of a registered firm, it merely stated "What the law had always been and must always be understood to have been". If the capital gains were liable to payment of tax as has been held by this court in Hasanali Khanbhai's case [1987] 165 ITR 195, the only conclusion possible is that the assessment order in so far as it failed to determine the tax payable on capital gains proceeded on a wrong view of law and was bad from its very inception, i.e., from the date on which it was made. 59 This view was reiterated by the Gujarat High Court in subsequent two decisions of Suhrid Geigy Ltd. v. Commissioner of Surtax [1999] 237 ITR 834 and in Asst. CIT v. Saurashtra Kutch Stock Exchange Ltd. [2003] 262 ITR 146. In 1959, the Bombay High Court when it had jurisdiction over Gujarat also held in the case of Bhagwandas Kevaldas v. N. D. Mehrotra [1959] 36 ITR 538 at 543 that : "When the court decides a matter, it doesnot make the law in any sense but all it does is that it interprets the lawan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Guj) has decided is that the usance interest is a payment of interest within the meaning of section 195(1) of the Act and is subject to deduction of tax at source. This is a proposition of law, which has to be understood as available right from the beginning of the enactment fastened upon the assessee right from the date of the transaction itself and not from the date of the judgment of the High Court who only interpret the law and do not make it. 63 It might be true that the assessee was under a bona fide impression that he was under no liability to deduct tax because of the decision of the Andhra Pradesh High Court in the case of Visakhapatnam Port Trust [1983] 144 ITR 146 but that does not make a change in the law. It is a view expressed by the High Court, which has been interpreting the law in the particular manner the same way the Gujarat High Court has interpreted it in the case of Vijay Ship Breaking Corporation [2003] 261 ITR 113, the other way. The liability of the assessee to deduct tax has to be understood in the light of the jurisdictional High Court decision and if that be so understood, the assessee was liable right from the inception of making the payment of usanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lf states that the decision of the Andhra Pradesh High Court in the case of Visakhapatnam Port Trust [1983] 144 ITR 146 was rendered in the context of liability to pay tax on the basis of the Double Taxation Avoidance Agreement (DTAA). The case of the German company was that it had no permanent establishment in India, and, therefore, since section 9(1)(i) of the Act was subject to the DTAA, it was not taxable in India, but taxable in the other Contracting State. It was further observed that the assessment in that case related to the period prior to the introduction of section 9(1)(v) in the Act with effect from June 1, 1976, under which by a deeming fiction interest, such as usance interest payable by a resident, would be deemed to accrue and arise in India. The Gujarat High Court, therefore, held that the decision of the Andhra Pradesh High Court did not assist the assessee as it was rendered in a different context. From this view of the matter also, it cannot be said that the assessee was not under a liability to deduct tax in view of the decision of the Aridhra Pradesh High Court in the case of Visakhapatnam Port Trust [ 144 JTR 146 as it was prior to the provisions of section 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be liable to pay interest on account of this simple fact and there is no requirement to further find whether there was a failure thereof. The requirement of failure of an assessee is for the second situation, namely, if he deducts but does not pay. In this second situation alone failure is a necessary to charge interest. 69 By the proviso to section 201(1) the concept of reasonable cause is implicit but it provides that only for exonerating the assessee from the levy of penalty under section 221 and not from the levy of interest. It provides that no penalty shall be charged under section 221 from such person, principal officer or company unless the Assessing Officer 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. Therefore, in the context of levying the interest the reasonability of the cause or existence of good and sufficient reasons for non-deduction or failure to pay is no criterion. 70 In my opinion, therefore, as the assessee was liable to deduct tax at source in respect of usance interest as held by both the Members, it would be liable to interest unde ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
