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TMI Blog2002 (3) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... n the above principal from February 7, 1989, to December 31, 2001, came to Rs. 10,31,344. The Food Corporation of India has an account with the State Bank of India. The decree-holder, M/s. Islamic Investment Company, sought a garnishee order against the State Bank of India which was granted on September 12, 2001. On the garnishee order being served on the State Bank of India, that bank informed the Food Corporation of India which, accordingly, paid the decretal amount as per decree along with interest amounting to Rs. 10,31,344 to the Sheriff of Bombay. The aforesaid amount is not in dispute. By this chamber summons the Food Corporation of India claims that it is entitled to withdraw a sum of Rs. 2,06,269 being 20 per cent of the interest paid b) it towards satisfaction of the decree, on account of tax deducted at source which it is liable to pay under section 195 of the Income-tax Act, 1961. Whether it is in law entitled to do so is the question. Mr. Desai, the learned senior counsel for the Food Corporation of India, the judgment debtor, submitted that since the payment is being made to a nonresident and it is on account of interest, the Food Corporation of India is liable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r sum without deducting tax thereon under sub-section (1). (4) A certificate granted under sub-section (3) shall remain in force till the expiry of the period specified therein or, if it is cancelled by the Assessing Officer before the expiry of such period, till such cancellation. (5) The Board may, having regard to the convenience of assessees and the interests of revenue, by notification in the Official Gazette, make rules specifying the cases in which, and the circumstances under which, an application may be made for the grant of a certificate under sub-section (3) and the conditions subject to which such certificate may be granted and providing for all other matters connected therewith." There is, no doubt, on a plain reading of section 195, that where interest is being paid to a non-resident or to a foreign company, the person responsible for making such payment must at the time of credit of such income to the account of the payee deduct income-tax at the rate in force, unless of course, the Assessing Officer has granted a certificate under sub-section (3). Mr. P.V. Shah, learned counsel for the petitioner/decree-holder, however, submits that this amount is not liable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Act. While considering this issue, the Supreme Court observed that a substantial part of the claim decreed represented compensation for wrongful termination of employment and it would be difficult to predicate of the claim sought to be enforced what part thereof if any represented salary due. However, the Supreme Court observed as follows: "Granting that compensation payable to an employee by an employer for wrongful termination of employment be regarded as in the nature of salary, when the claim is merged in the decree of the court, the claim assumes the character of a judgment-debt, and to judgment-debts, section 18 has not been made applicable. The decree passed by the civil court must be executed subject to the deductions and adjustments permissible under the Code of Civil Procedure. The judgment-debtor may, if he has a cross-decree for money, claim to set off the amount due thereunder. If there be any adjustment of the decree, the decree may be executed for the amount due as a result of the adjustment. A third person who has obtained a decree against the judgment-creditor may apply for attachment of the decree and such decree may be executed subject to the claim of the thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Govindaraju Chetty v. CIT [1967] 66 ITR 465, which take the view that interest retain its character and is liable to be treated as income under the Act. This decision has no direct application to the facts of the present case. Learned counsel for the Food Corporation of India further cited a recent decision of the Supreme Court in Transmission Corporation of A.P. Ltd. v. CIT [1999] 239 ITR 587 and relied on the observation of the Supreme Court. In particular, learned counsel relied on the following observations: "Under the Act, total income for the previous year would become chargeable to tax under section 4. Sub-section (2) of section 4, inter alia, provides that in respect of income chargeable under sub-section (1), income-tax shall be deducted at source where it is so deductible under any provision of the Act. If the sum that is to be paid to the non-resident is chargeable to tax, tax is required to be deducted. The sum which is to be paid may be income out of different heads of income provided under section 14 of the Act, that is to say, income from salaries, income from house property, profits and gains of business or profession, capital gains and income from other sources." ..... X X X X Extracts X X X X X X X X Extracts X X X X
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