Itta/4/2001 Of Commissioner Of Income Tax Hyd v. M/S Shree Shaktiresorts And Hotels Ltd

IN THE HIGH COURT OF JUDICATURE, ANDHRAPRADESH AT HYDERABAD THURSDAY, THE TWENTY SEVENTH DAY OFJUNE TWO THOUSAND AND THIRTEEN PRESENT THE HON’BLE THE CHIEF JUSTICESRI KALYAN JYOTI SEN GUPTA AND THE HON'BLE MS. JUSTICE G.ROHINI I.T.T.A. Nos.13 & 15 OF 2001 Between: The Commissioner of Income Tax,Visakhapatnam ..... Appellant in both the appeals AND M/s. Manchanganga Seas Foods Limited,Kasturibaipet, Vijayawada .....Respondent in both the appeals The Court made the following : JUDGMENT:(per the Hon’ble the Chief Justice Sri K.J. Sengupta) It appears that by an order dated 31.01.2001, theappeal was admitted without formulating substantialquestion of law in this case. Section 260A of the Income Tax Act, 1961 obliges the court to hear the appeal on onlysubstantial question of law. Therefore, after hearing thelearned counsel for the appellant and reading theimpugned judgment and order, as none appeared for therespondent, we are inclined to hear the appeal on thefollowing substantial question of law: Whether on facts and in thecircumstances of the case, the learnedTribunal is correct in law in deleting the amountof interest? This appeal has been preferred against thejudgment and order of the learned Tribunal dated23.05.2000 in relation to the assessment year 1994-95.None appeared for the respondent – assessee despitecall. The fact of the case is that the respondent –assessee during the years 1992-1993 and 1993-1994paid an amount of Rs.13,17,441/- towards technical know-how and consultancy to the non-residents, but did notdeduct tax at source. The reason assigned by theassessee for not deducting is that the assessee hadobtained no objection certificate from the concernedAssessing Officer for the remittance of the said amountswithout deduction of the tax at source. At the time ofassessment, copy of the certificate issued by the IncomeTax Officer was produced, but the Assessing Officer didnot accept the contention that the respondent – assessee is exempted from deduction of tax at source, in view of thesaid no objection certificate as well as the provisions ofthe Act. The assessee is also not obliged to deduct taxfrom the non-residents in view of the Agreement, forAvoidance of Double Taxation. It was held by theAssessing Officer that the provisions of Sec. 4, 5 and 6 ofthe Income Tax Act override the provisions of Sec.90 ofthe Act. Moreover, the provision of double taxationagreement does lend support to the assessee’scontention and, therefore, it was held that the assesseewas in default and it was asked to pay the necessaryamount of tax and imposed penalty as well. Therespondent – assessee had taken this matter in appeal tothe Income Tax Commissioner (Appeals), who dismissedthe appeal and upheld the order of assessment. Thereafter, the appeal was taken by the respondent -assessee to the Tribunal, which confirmed the order ofboth the authorities. As regards the imposition of intereston the amount because of the default in deducting the taxat source, the learned Tribunal had deleted the amount ofinterest, for the reason that the failure to deduct tax wasnot deliberate or willful, as the assessee was engaged inexchange of correspondence whether to deduct the tax atsource or not. Against this portion of the deletion of interest of thatamount, the appeal has been preferred by the revenue. Learned counsel for the appellant contends that theprovision of Sec.201(1A) of the Act clearly mentions themoment the tax is deducted and if it is not paid, penalty isliable to be imposed. In this case, the tax is not paid and,therefore, the interest at the rate mentioned herein, willautomatically follow. He further contends that the Sub-Section leaves no discretion as regards the rate or levy ofinterest or to waive the interest either fully or partly. Against this portion of the deletion of interest of thatamount, the appeal has been preferred by the revenue. Learned counsel for the appellant contends that theprovision of Sec.201(1A) of the Act clearly mentions themoment the tax is deducted and if it is not paid, penalty isliable to be imposed. In this case, the tax is not paid and,therefore, the interest at the rate mentioned herein, willautomatically follow. He further contends that the Sub-Section leaves no discretion as regards the rate or levy ofinterest or to waive the interest either fully or partly. We have gone through the impugned judgment andorder to the extent for the appeal is preferred. Havingheard the learned counsel for the appellant, we find thatthere is strong force in the arguments of the learnedcounsel for the Department and we are of the view thatthe provision of Sec.201(1A) in clear terms and withoutany ambiguity envisages that once the tax is payable andthe same is not paid after deduction, interest has to belevied automatically at the rate mentioned therein. Weappropriately set out Sec. 201(1A) of the Income Tax Acthereunder: “…Without prejudice to the provisions of sub-section (1), if any such person, principal officer orcompany as is referred to in that sub-section doesnot deduct the whole or any part of the tax or afterdeducting fails to pay the tax as required, by or underthis Act, he or it shall be liable to pay simple interest, (i)one per cent per for every monthor part of a month on the amount ofsuch tax from the date on which suchtax was deductible to the date onwhich such tax is deducted; and (ii)at one and half percent for everymonth or part of a month on theamount of such tax from the date onwhich such tax was deducted to thedate on which such tax is actuallypaid, and such interest shll be paidbefore furnishing the statement inaccordance with the provisions ofsub-Section (3) of Section 2000month or part of a month on theamount of such tax from the date onwhich such tax was deducted to thedate on which such tax is actuallypaid, and such interest shll be paidbefore furnishing the statement inaccordance with the provisions ofsub-Section (3) of Section 2000 The word shall employed under Sec.201(1A)Aclearly denotes to hold that the same is mandatory incharacter and there is no question of any discretion. Wehave read the entire Sub-section (1) and we find there isno scope for any waiver or remission of interest.According to us, when the factum of failure is established,whether deliberate or indeliberate, interest has to belevied and it becomes part of, so to say, part of tax. We,therefore, hold that the learned Tribunal is totally wrong indeleting the interest levied under Sec.201(1A) of theIncome Tax Act. Accordingly, we set aside this portion of thejudgment and order and we allow the appeal.Consequently, we direct the Assessing Officer to demandthe amount of interest, in accordance with law. No orderas to costs. _______________________ Kalyan Jyoti Sengupta, CJ. June 27, 2013MAS __________ G.Rohini, J.