TMI Blog2000 (9) TMI 208X X X X Extracts X X X X X X X X Extracts X X X X ..... omputation the AO has taken the period starting from 1st April, 1990 (date on which such tax is deductible), to 28th March, 1994 (date of passing order). 3. Aggrieved, assessee contended before the CIT(A) that there was no default on the part of the assessee, as envisaged in s. 194C of the Act and there was no obligation to deduct tax at source from the job work payments made to different parties as there was no contract between the assessee and the recipients. Even if it is assumed that the payments fall under s. 194C of the Act, the transactions involving consideration of less than Rs. 10,000 per contract should be excluded from the purview of s. 194C. It was submitted that the total amount covered by bills more than Rs. 10,000 was Rs. 79.50 lakhs only. It was also contended that if the payer has defaulted under s. 194C, proceeding under s. 201(1) cannot be automatically initiated if the regular assessments in the cases of the payees had already been completed and taxes payable have been fully paid by them before initiation of proceeding under s. 201(1) of the Act. Placing reliance on the decision of Hon'ble Madhya Pradesh High Court in the case of CIT vs. M.P. State Co-op. De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich is less than Rs. 10,000 is not attracted by s. 194C of the Act because it is not a payment against contract, was not accepted by the CIT(A). 6. As regards the chargeability of interest under s. 201(1A) of the Act, the CIT(A) observed that the interest can be charged independent of the default under s. 201(1) of the Act because of the use of the words 'Without prejudice to the provisions of sub-s. (1).' in s. 201(1A) of the IT Act. He further observed that the expression the date on which such tax is actually paid', in s. 201(1A), means the date on which payment was made by the deductor or by the recipient of income; there is no reason that such actual payment would always have to be ascribed to the deductor. In the case of Salwan Construction Co. vs. Asstt. CIT (1995) 53 TTJ (Del) 39, the Tribunal has placed narrow interpretation on the aforementioned expression and held that the words 'actually paid' means actually paid by the assessee and not by the recipient and since the assessee need not pay there is no question of charging any interest. In the light of a different interpretation placed upon those words by the CIT(A), the order of Tribunal cited supra was not followed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... below Rs. 10,000 would fall outside the purview of s. 194C of the Act in as much as tax is not deductible on such payments. The learned counsel contended that the assessee has not entered into a written agreement/contract with the manufacturers/parties and hence each job work/each bill should be treated as a separate contract. Adverting our attention to pp. 7 to 33 of the paper book, learned counsel submitted that in all those cases the payment of each bill is less than Rs. 10,000 and, therefore, tax is not deductible thereon. 10. Ground No. 3 is not pressed for our consideration and, therefore, rejected. 11. Vide ground No. 4 assessee contends that the CIT(A) erred in directing the AO to levy interest under s. 201(1A) of the Act upto the date of completion of regular assessment of the different payees or upto 31st March, 1993. Apart from the main contention that the interest is not chargeable in a case where the payees have filed the returns, it is also submitted that even if interest is chargeable it should be limited till the date of payment of tax by the recipient because interest is charged only towards compensation and the purpose would be served if the interest is cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. On the other hand the learned counsel appearing on behalf of the assessee submitted that the assessee should be presumed to be an assessee in default only if the recipient had not paid the tax. Placing reliance on the following decisions, he relied upon the order of the CIT(A) on this issue to submit that the assessee is not a defaulter under s. 201(1) of the Act: (1) CIT vs. Divisional Manager, New India Assurance Co. Ltd. (1983) 33 CTR (MP) 248 : (1983) 140 ITR 818 (MP); (2) CIT vs. Life Insurance Corpn. (1986) 52 CTR (MP) 278 : (1986) 166 ITR 191 (MP); (3) CIT vs. Manager, M.P. State Coop. Development Bank Ltd. (1982) 31 CTR (MP) 187 : (1982) 137 ITR 230 (MP); (4) Salwan Construction Co. vs. Asstt. CIT (1995) 53 TTJ (Del) 39; (5) Munak Investment (P) Ltd. vs. ITO (6) ITO vs. Sood Enterprises; and (7) N.K. Patel Co. vs. ITO. 15. It could be seen from the grounds raised by the Revenue as well as the assessee that the issues are common in both the matters. Only two issues arise for our consideration i.e. (a) whether the assessee is deemed to be in default under s. 201(1) of the Act and (b) whether interest is chargeable under s. 201(1A) and, if so, whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll is less than Rs. 10,000 it cannot be said that the contract is for a sum involving less than Rs. 10,000. At any rate it is not the intention of the legislature as could be seen from the provisions of s. 194C(3) of the Act. We therefore hold that the total payments to each party during the previous year relevant to the assessment year under consideration should be taken into consideration, in which event the assessee is liable to deduct tax at source. This leaves us with the main issue as to whether interest is chargeable under s. 201(1A) of the Act. The contention of the assessee is mainly based on the decision of the Tribunal, Delhi Bench, in the case of Salwan Construction Co. cited supra wherein it was held that interest under s. 201(1A) is not chargeable in a case where the payer has not deducted and paid the tax at all. The Bench interpreted the words "to the date on which such tax is actually paid" to mean the amount payable by the assessee and since there was no question of payment by the assessee-recipient having paid the tax—it is not practicable to compute the length of delay because interest cannot be charged for an indefinite period. Under these circumstances it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely failed to deduct tax at source. It would also lead to a situation where a honest assessee who deducts the tax and makes a delay of couple of months in payment or a person who deducts the tax after a delay of couple of months would suffer payment of interest under s. 201(1A) of the Act, whereas an assessee who do not comply with the provisions of the Act by not deducting the tax and paying the same would escape payment of interest, even though in both cases the recipient ultimately files the return. Certainly the legislature would not have intended such a result. 19. Our view is also supported by the latest decision of the Hon'ble Kerala High Court in the case of CIT vs. Dhanalaksmy Weaving Works (2000) 160 CTR (Ker) 374 : (2000) 245 ITR 13 (Ker) and of the Hon'ble Rajasthan High Court in the case of Rathi Gum Industries wherein it was held that even if the tax has already been paid by the recipient on such income, so far as the liability of interest is concerned, that cannot be considered to be non-existent on account of deposit of tax by the recipient at a subsequent or later stage. The aforecited decision was not available to the Delhi Bench of the Tribunal and therefore a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vanced by parties and argued forcefully, or that one such view which is favourable to the assessee has been accepted by some Tribunal or High Court, by itself will not be sufficient to attract the principle of beneficial interpretation. In the instant case, as we are not satisfied with the interpretation given by the Tribunal or the Calcutta High Court to s. 33(6) of the Act, in our opinion, accepting those decisions by applying the test of beneficial interpretation does not arise." 20. As we are of the opinion that the interpretation placed upon the provisions of s. 201(1A) by the Hon'ble Rajasthan High Court is the only proper view on the matter, in the light of the decision of the Hon'ble Bombay High Court cited supra, we respectfully follow the decision of the Hon'ble Rajasthan High Court and hold that interest is chargeable under s. 201(1A) of the Act even in a case where the recipient of income has paid the tax. 21. The next question that survives for our consideration is the date upto which interest is chargeable. Under the circumstances of the case it is fair and equitable to hold that the date of payment of tax by the recipient or 31st March, 1993, should be taken as ..... 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