TMI Blog1983 (2) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... e ITO found that the assessee had not deducted tax on the amount of interest credited on various dates mentioned above in terms of s. 194A of the Act. Therefore, he charged interest under s. 201(1A) of the Act from the date on which the tax was deductible (August 16, 1974), to the date on which the said tax was actually paid. The total amount of interest thus charged came to Rs. 12,818. Aggrieved by the order of the ITO, the assessee took the matter in appeal to the AAC contending that the financial position of the assessee as well as the managing agents was in a very bad shape, that though the assessee credited the amount of interest due to the managing agents, it was done only for the purpose of accountancy and that there was no intention to actually pay the interest as there was no money. The AAC, however, did not accept the said contention of the assessee and upheld the order of the ITO. On further appeal, the Income-tax Appellate Tribunal also agreed with the view taken by the authorities below and upheld their orders. Before us the learned counsel for the assessee contends that the assessee-company was itself running at a loss continuously, that the resources of the compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the meaning of s. 16(2) of the Indian I.T. Act, 1922, the credit must be in such form that the dividend is unconditionally available to the member. We do not see how the said decision helps the assessee. In that case the assessee-company credited the amounts only in the dividend account and not in the accounts of the shareholders. In addition, even in the resolution declaring dividend, it has been specifically stated that the other moiety of the dividend will be paid within two months from the date of its receipt from Pakistan. It was in those circumstances the Supreme Court held that the mere credit entries in the regular dividend account of the assessee cannot be taken to form part of the dividend declared. The learned counsel for the assessee then relied on the decision in CIT v. Nagaria Oil Mills [1954] 25 ITR 258 (Hyd), holding that crediting of interest amounts in the accounts of the lenders could not be held to be payment within the meaning of s. 24(12) of the Hyderabad Income-tax Act corresponding to s. 18(7) of the Indian I.T. Act, 1922. In that case the assessee-firm who maintained its accounts on the mercantile system credited certain non-residents with interest on mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been a credit entry in favour of the creditor in the accounts of the assessee and, therefore, the occasion for deducting tax has occurred earlier. The learned counsel for the assessee then contends that the book entries are of no consequence in tax matters and, therefore, it is only the actual payment of interest that should be taken into account. We do not see how we can ignore the provision in s. 194A which provides that making credit entries in favour of the creditor in relation to interest is one of the modes of payment of interest. Reference has been made by the learned counsel for the assessee to the decisions in CIT v. Chamanlal Mangaldas Co. [1960] 39 ITR 8 (SC) and H. V. Kashiparekh Co. Ltd. v. CIT [1960] 39 ITR 706 (Bom), in support of his contention that mere credit entries cannot be taken to be conclusive. In the first case the Supreme Court has held in a case where the managing agency agreement provided for a commission of 3 1/2% on the sale proceeds of all cotton yarn and cloth manufactured and sold by the company but the amounts of commission were credited in the books of the managing company every six months, that the agreement was an integrated and indivisibl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d it is for that reason the court held that it is the real income that should be taken into account and not the amount as shown credited in the accounts. On the facts before us there is no room for applying the notion of real income. CIT v. Shoorji Vallabhdas and Co. [1962]46 ITR 144 (SC), is a case where, by a subsequent agreement, the rate of commission payable to the managing agent stood altered in such a way as to make the income which really accrued to the assessee under the original agreement different from what has been entered in the books of account. The question arose as to whether the amount of commission credited in the books of account to the managing agent or whether the amount of commission reduced by the subsequent agreement should be taken as the basis for taxation. The Supreme Court held that if the assessee has in fact received only a lesser amount in spite of the entries in the account books, then the lower amount alone was taxable. In the course of the judgment, the learned judges of the Supreme Court pointed out (p. 148): " Income-tax is a levy on income. No doubt, the Income-tax Act takes into account two points of time at which the liability to tax is at ..... X X X X Extracts X X X X X X X X Extracts X X X X
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