TMI Blog2005 (5) TMI 236X X X X Extracts X X X X X X X X Extracts X X X X ..... facts of the case, the decision in the case of Vijay Ship Breaking Corporation 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 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 CIT v. Vishakhapatnam Port Trust [1983] 144 ITR 146 (AP). Subsequently on 20-3-2003, Gujarat High Court in the case of CIT v. Vijay Ship Breaking Corpn. [2003] 261 ITR 113 (Guj.) took the view, contrary to the view taken by the Andhra Pradesh High Court in the case of Vishakhapatnam Port Trust 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 section201(1) amounting to Rs. 52,80,400 and also the interest under section 201(1A) read with section 201 (1) was raised by the Assessing Officer vide order dated 12-7-2004. The assessee found certain mistakes in the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant 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 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 Supreme Court, the Assessing Officer is directed to delete the interest levied under section 201(1A) of Rs. 3,68,632." 5. The ld. DR 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 Legislature made the collection of the interest mandatory therefore the word 'shall' has been used. The reliance was also placed on the decision of Mumbai High Court in the case of Pantagon Engg. (P.) Ltd. v. CIT [1995] 212 ITR 92. Referring to the order of the CIT(A) it was contended that the CIT(A) was not correct in law in relying on the decision of the Hon'ble Supreme Court in the case of Star ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -tax Appellate Tribunal in the case of Haryana Warehousing Corpn. v. Dy. CIT [2001] 252 ITR (AT) 34. 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 High Court decision on the subject subsequently Rajasthan High Court delivered the judgment on 1-12-1993 that the exemption is not available in respect of those incomes. The decision of Rajasthan High Court was subsequently affirmed by the Hon'ble Supreme Court when the interest under section 234B was imposed. It was held that although the interest is mandatory but it is imposable only if assessee was liable to pay advance tax. The assessee was under bona fide belief in view of the decision of Allahabad High Court in the case of UP State Warehousing Corporation [1992] 195 ITR 275 till 31-3-1992 that the assessee is not liable for the advance tax in respect of those incomes for the assessment year 1992-93. When the matter went on a difference of opinion to the Third Member, the Third Member held that the interest under section 234B is not leviable in view of the fact that at the relevant point of time the assessee could not foresee the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nancial 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 assessment year 1991-92 the assessee did get the benefit of section 10(29) of the Act. It was assessed on nil income. The exemption was granted on the basis of the Allahabad High Court decision in U.P. State Warehousing Corporation's case [1992] 195 ITR 275. Till March 31, 1992, this was the only decision available on the point. The assessee acted bona fide in conformity with the decision of the High Court. Just because the decision was reversed by the Apex Court liability to pay advance tax cannot be fastened on the assessee. At the relevant point of time it was impossible on the part of the assessee to foresee the decision of the Supreme Court on the point. Law is trite on the subject. It is canonized in the well known common law dictum. "LEX NON COGIT AD IMPOSSIBILIA" (Law cannot compel you to do the impossible. I am inclined to agree with the argument of the learned Departmental Representative that section 234B is mandatory in nature. But before invoking section 23 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arat High Court on 20-3-2003. In view of the decision of the Third Member in the case of Haryana Warehousing Corpn. the assessee could not foresee that the usance interest will be chargeable to tax by the decision of the Hon'ble Gujarat High Court and thus will become liable to deduct tax at source. The law cannot compel the assessee to do the imposition. Since the decision of the Gujarat High Court has came on 20-3-2003, therefore, the assessee was liable to deduct the tax at source on the usance interest on or after 20-3-2003 in accordance with the provisions of income-tax as in our opinion, the liability to deduct tax has arisen on that date. Therefore, in view of the provisions of section 201(1A) the assessee is liable to pay interest on the amount of such tax from the date when the liability to deduct the tax has arisen i.e. on 20-3-2003. 12. We have also gone through the decision of Supreme Court in die case of Star India (P.) Ltd. as relied upon by the CIT(A). We find that in this decision, there was retrospective amendment and due to retrospective amendment the liability to pay service tax has arisen and accordingly, the interest was charged retrospectively. This case, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not be treated as an independent source of income and, therefore, no liability to tax arose on the said interest in the hands of recipient. Taking clue from the said decision, the assessee did not deduct tax on usuance interest. However, subsequently Hon'ble Jurisdictional High Court in the case of Vijay Ship Breaking Corpn. has held that usance interest paid by the assessee to non-resident in connection with purchase of ships was not a part of the purchase price of the ships but was interest and the assessee being responsible for paying to the non-resident usance interest which was chargeable under the provisions of the Income-tax Act, 1961, was liable to deduct income-tax thereon under section 195(1); disallowance under section 40(a)(i) for failure on the part of the assessee to deduct tax at source from usance interest paid to the non-resident was justified. Their Lordships of Jurisdictional High Court also observed that the above mentioned decision of Andhra Pradesh High Court was not an authority to hold that tax was not deductible on such interest. 3. As per arguments of the assessee, interest under section 201(1A) can be levied only from the date when the decision in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. There is, therefore, no question of the waiver of such payment on the basis that the default was not intentional or on any other basis." Thus it was held that section 201(1A) makes payment of interest mandatory and therefore it could not be waived on the basis that default was not intentional; rule 119A introduced long after has no bearing. Section 201(1) deems a person to be an assessee in default in respect of tax if, after deducting tax deductible at source, he fails to remit it as required under the Act. Under sub-section (1A), if that person, after deducting such tax, fails to remit it as required under the Act, he is made liable to pay interest. Further it was observed that - "It is admitted that the petitioners failed to remit within the prescribed time the tax deducted at source from the salaries of their employees. They, therefore, became assessees in default under section 201(1) and they became liable to pay interest at the rate of 12 per cent per annum. Such liability arose immediately upon each default and can be computed only with reference to the law as it then stood. Rule 119A was not introduced till long after. Rule 119A can have, therefore, no bearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te the requirements for the non-compliance of which interest is levied under section 201(1A). Judged in that background, levy of interest is justified and Tribunal was not justified in deleting it. Sainik Motors v. State of Rajasthan AIR 1961 SC 1480, Karimtharuvi Tea Estate Ltd. v. State of Kerala [1966] 60 ITR 262 (SC) : TC 38R 479, CST v. Quereshi Crucible Centre [1993] 89 ITR467 (SC) and Prahlad Rai v. STO [1992] 84 STC 375 (SC) applied." Therefore, it was held levy of interest under section 201(1A) is mandatory, interest is chargeable for failure to deduct tax at source even if ultimately no tax was payable by the payee. 4. CIT v. Prem Nath Motors (P.) Ltd. [2002] 253 ITR 705 (Delhi)- "The levy of interest under section 201(1A) is of a compensatory measure for withholding tax which ought to have gone to the exchequer. The provision makes it clear that the levy is mandatory. It is true that the 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 the levy is mandatory. The purpose of the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of tax, on account of failure to deduct or on account of any other reason after deduction, makes the "assessee in default" liable to pay interest on the amount deductible made recoverable as a charge on the assets of the "assessee in default" under sub-section (2). The charging of interest has been made continuous till it is actually paid. The use of the expression "shall" in sub-section (1A) makes the liability to pay interest in the circumstances mentioned mandatory. Unlike sub-section (1), no pre-condition of reasonable cause for non-payment of tax in time has been included in sub-section (1A). Unlike the restriction provided for in sub-section (1), sub-section (1A) does not contain any restriction for charging interest thereunder. The provision of sub-section (1A) is mandatory and automatic. The interest is payable from the date the tax was deductible till the date it is actually paid. The liability is absolute. It is obligatory for the Assessing Officer to charge interest upon noncompliance of any of the provision requiring deduction at source if noticed by him. It may be for failure to deduct or for failure to pay after deduction. The expression "actually paid" is the oute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and can neither be waived nor the rate could be reduced. - Kanoi Industries (P.) Ltd. v. Asstt. CIT [2003] 182 CTR (Cal.) 427 : [2003] 261 ITR 488 (Cal.) followed; Vikrant Tyres Ltd. v. ITO [1993] 115 CTR (Kar.) 210: [1993] 202 ITR 454 (Kar.) applied; Pentagon Engg. (P.) Ltd. v. CIT [1996] 131 CTR (Bom.) 78 : [1995] 212 ITR 92 (Bom.); CIT v. Rathi Gum Industries [1995] 127 CTR (Raj.) 413: [1995] 213 ITR 98 (Raj.) and CIT v. Assam Small Industries Development Corpn. Ltd. [1996] 134 CTR (Gau.) 354: [1996] 219 ITR 324 (Gau.) relied on; The State v. Amru Tulsi Ram AIR 1957 Punjab 55 distinguished. It is the settled proposition of law that even in respect of administrative orders, if visits a person with penal consequences, then hearing is to be given even though the statute may not provide. Natural justice is to be read into the provision. An interpretation that saves the constitutionality is to be preferred than what exposes it to unconstitutionality. Having regard to the above principle, failure to give opportunity while passing the order in respect of the assessment year 1985-86 has affected the right of the assessee. Order having been passed admittedly without giving an opportuni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regarded by other considerations such as the object and scope of the enactment and consequences flowing 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." 8. To the same effect is the case in CIT v. Dhanalakshmy Weaving Works [2000] 160 CTR (Ker.) 374 : [2000] 245 ITR 13 (Ker.). In another Division Bench decision of this Court of which one of us was a party (Sankarasubban, J.) in CIT v. K.K. Engineering Co. [2001] 167 CTR (Ker.) 209 : [2001] 249 ITR 447 (Ker), it was held that the levy to interest under section 201(1A) is automatic." 5. Principles emerging out of above mentioned decisions are- (a) that liability of interest under section 201(1A) is mandatory, (b) For the purpose of levy of interest under section 201(1A) it is irrelevant to take into consideration the existence of reasonable cause as reasonable cause has nothing to do with the liability of interest under section 201(1A); (c) levy of interest under section 201(1A) is compensatory measure for withholding tax and such levy is mandatory and automatic an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est under section 40(a)(i) of the Act was not warranted, is, therefore, obviously erroneous." Their Lordships further found that reliance to contend that the assessee was not liable to deduct tax at source from 'usance interest' on the decision of Andhra Pradesh High Court was misplaced as the said decision was rendered in a different context. Reference can be made to the following observations:- "The decision of the Andhra Pradesh High Court in CIT v. Visakhapatnam Port Trust, was rendered in the context of liability to pay tax on the basis of the DTAA and the case of the German company was that it had no "permanent establishment" in India and therefore, since section 9(1)(i) of the said Act was subject to the DTAA, it was not taxable in India, but in the other Contracting State. The assessments in that case related to the years prior to the introduction of section 9(1)(v) in the Act with effect from 1-6-1976, under which by a deeming fiction interest, such as usance interest payable by a resident, would be deemed to accrue and arise in India. Therefore, the said decision of the Andhra Pradesh High Court cannot assist the asses sees. It will be noticed that article VIII concer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest under section 201(1A) for the rest of the period i.e. from the date of pronouncement of decision in the case of Vijay Ship Breaking Corpn. till the actual payment of TDS. The liability to pay interest under section 201(1A) was from the date of payment of usance interest as the tax was not deducted and paid on usance interest. Such liability was creation of statute and is not dependent on pronouncement of decision. The proposition of law that decision of High Court is "statement of law which law had always been and must always be understood to have been" is supported by the following decision:- Parshuram Pottery Works Co. Ltd. v. D.R. Trivedi, WTO [1975] 100 ITR 651 (Guj.): "5. We are of the opinion that the submission is not well-founded. It is true that the WTO did not have before him the decision of this Court in Raipur Manufacturing Company's case or that of the Supreme Court in Kesoram Industries Cotton Mills' case when he passed the assessment 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" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If the capital gains were liable to payment of tax as has been held by this Court in Hasanali Khanbhai's case, the only conclusion possible is that the assessment order insofar 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." 7. In my view reliance is also misplaced on the decision in the case of Haryana Warehousing Corpn. for the following reasons:- (i) The said decision was rendered for the liability of interest under section 234 which relates to liability of interest regarding failure of assessee to pay appropriate advance tax on the basis of estimate during the financial year relevant to assessment year for which the assessee is liable to pay advance-tax. If income is not arising to assessee up to a particular date when instalment of advance-tax did not fall due, it was held that assessee could not visualize such accrual of income up to a particular date, therefore, 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 assessee could not quantify the amount wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a difference of opinion between the Accountant Member and Judicial Member, the following common point of difference is referred to me as Third Member by the President, Income-tax Appellate Tribunal under section 255(4) of the Act:- "Whether on facts and in the circumstances of the case interest under section 201 (1A) of Income-tax Act, 1961 is chargeable from the date of payment of "usance interest" or from the date of pronouncement of decision in the case of CIT v. Vijay Ship Breaking Corpn. 261 ITR 113 (Guj.)?" 2. 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 Vishakhapatnam Port Trust. By an order dated 12-7-2004, the Assessing Officer held the assessee liable to deduct tax under section 195(1) on the payment of such usance interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no TDS provisions were applicable to usance interest, and thus, in the natural course the assessee has not deducted the TDS amount and also not paid the interest thereon. According to him, though the issue of levy of TDS amount has been decided against the assessee, the decision of 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 Supreme Court is in the case of Star India (P.) Ltd. 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 Corpn. 4. The revenue came in appeal against the deletion of interest whereas the assessee filed C.O. against the 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 Corpn. The difference between the two Members is on the liability to pay interest for the non-deduction and delayed paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom 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 vests exclusively in the law-making authority and not in the courts. The true rule appears to be that the court's declaration is coextensive 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 [2004] 264 ITR 571 (Mad.) wherein it has been held that "When a superior court declares the law, it is not "making" law on the date o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etrospective, 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 (Mad.) observing that when a statutory provision is interpreted as to its precise ambit and effect, it will have effect right from 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 (Guj.) holding that such declaration of law has retrospective effect. (f) Mysore Cements Ltd. v. ITO[1987] 167 ITR 370 (Kar.) 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 relates back to the date of enactment itself. If so, the law so declared is deemed to have existed and applied, on the date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on on law point - Reassessment proceedings also initiated in the meantime on basis of an information from audit Department that such expenses not allowable - Though an information on point of law, reopening still valid as the same was initiated prior to pronouncement of the Supreme Court's judgment in Indian Eastern Newspaper Society v. CIT [1979] 119 ITR 996 (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 any error apparent in the order - On the date of purported rectification there was no order of the High Court and decision was pending in appeal before Supreme Court - It cannot be said that no debatable point is invo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by inserting a new Explanation below section 10(15)(iv)(c), more importantly making this amendment retrospectively from 1-4-1962. 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 India shall be deemed to be the interest payable on a debt incurred in a foreign country in respect of the purchase outside India. 8. Mr. Soparkar further submitted that to the best of assessee's knowledge and belief, no assessee (at least in Gujarat) was effecting TDS from the usance interest before the pronouncement of the Gujarat High Court decision in March 2003 in the case of Vijay Ship Breaking Corpn. 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 chargeable to tax. It is submitted that it is not a case of existence of mere cleavage of judicial opinion or of existence of two possible views. It is actually a matter which most of the people connected with the aspect of usance interest understood it as not chargeable to tax. After the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the ld. CIT-DR 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 ITR 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.'s case and Export Enterprises (P.) Ltd.'s case relied upon by the assessee, it was held that where the reassessment proceedings under section 147 (b) were validly initiated on the basis of a High Court decision and a subsequent reversal of the decision of the High Court by the Supreme Court would not render the reassessment proceedings void ab initio. In the third decision i.e. Sagar Co-operative Central Bank Ltd.'s case, it was held that an order granting exemption under section 80P(2) to a co-operative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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)." 14. 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 High Court judgment in Vijay Ship Breaking Corpn.'s on the ground of bona fides and effective date of application thereof. 15. As to the effect of the High Court order, the cardinal principal is that on pronouncement of the decision the High Court declares the law as to what it mean and what the law had always been. Salmond's Jurisprudence (Twelfth Edition) at page 148 in this connection may be usefully mentioned stating that a Judge does not make law; he merely declares it; and the overruling of a previous decision is a declaration that the supposed rule never was law and hence, any intermediate transactions made on the strength of the supposed rule are governed by the law established in the overruling decision and that the overruling is retrospective, except as regards matters that are res judicata, or accounts that have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 18. This view was reiterated by Gujarat High Court in subsequent two decisions of Suhid Geigy Ltd. v. CIT [1999] 237 ITR 834 (Guj.) and in Asstt. CIT v. Saurashtra Kutch Stock Exchange Ltd. [2003] 262 ITR 146 (Guj.). 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 (Bom.) at 543 that "When the Court decides a matter, it does not make the law in any sense but all it does is that it interprets the law and states what the law has always been and must be understood to have been." 19. Besides above jurisdictional High Court decisions, the Calcutta High Court in Assam Oil Co. Ltd.'s case, Allahabad High Court in Deepchand Jain's case, Madras High Court in ACE Investment Ltd.'s case and in Madras Auto Services case, Kerala High Court in N.A. Jailabdeen's case and Karnataka High Court in Mysore Cement Ltd.'s case have taken a similar view as stated and submitted by the ld. DR above. In Mysore Cement Ltd.'s case, the decision of Kerala High Court in Kil Kotagiri Tea Coffee Estate Co. Ltd. v. ITAT [1988] 174 ITR 579 is noted which held that "When the Court decides a matter, it does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 usance interest to the foreign banks. Consequently, the assessee was liable to pay interest thereon for not deducting the same or up to the date of payment thereof. 23. The liability to interest, it may be stated, is not a penal one but a compensatory in view of the decisions of Supreme Court in Anjum M.H. Ghaswala's case and Central Provinces Manganese Ore Co. Ltd. v. CIT [1986] 160 ITR 961 (SC) as also various High Courts decisions i.e., Pentagon Engg. (P.) Ltd.'s case, CIT v. Dhanalakshmy Wvg. Works case, CIT v. Prem Nath Motors (P.) Ltd.'s case, Kanoi Industries (P.) Ltd.'s case, West Bengal State Electricity Boards case and Ernakulam District Co-operative Bank Ltd.'s case. Therefore the bona fide belief of the assessee, even if was there, would not of any help and on compensatory ground the assessee had to pay interest as the money due to Government was utilized by the assessee until paid. Assessee's contention that it was not wholly compensatory but quasi-punishment i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... planation is an exception created by statute for giving benefit of exemption of interest paid by shipping industries. It is not of a general exemption and application. On the contrary, it gives an impression that to other industries the position of law of usance interest as laid by Gujarat High Court still hold good and these other assessees are deducting tax and not taking any shelter of the amendment. 26. The liability of the assessee to deduct tax at source was there from the beginning. It cannot be said that it has been introduced by the decision of the Gujarat High Court in the case of Vijay Ship Breaking Corpn. It has been only clarified to be so in existence by the Gujarat High Court decision, and consequently, for non-deduction thereof or for delayed payment thereof, the assessee would be liable to pay tax under section 201(1) and also interest under section 201(1A) of the Act. 27. The contention that circumstances must show that the assessee was reasonably sure that the payment of usance interest was chargeable to tax on the date of its payment has no force. It is not the understanding of the assessee or the businessman about the charge ability of a particular payment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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