VASANT CHITRA MANDIR Vs. INCOME TAX OFFICER
LAWS(IT)-1989-12-22
INCOME TAX APPELLATE TRIBUNAL
Decided on December 28,1989

Appellant
VERSUS
Respondents

JUDGEMENT

V.P. Elhence, Judicial Member - (1.)THESE 4 appeals, filed by the assessee arise out of the consolidated order dated 24-6-1986 of the learned Appellate Asstt. Commissioner, Ghaziabad for the assessment years 1981-82 to 1984-85.
(2.)The assessee M/s. Vasant Chitra Mandir is a registered firm. It had raised a loan from its sister concern namely M/s. Khacherumal Vishnu Swarup, Naya Ganj, Ghaziabad for the construction of a cinema hall and had agreed to pay interest thereon. However, the Income-tax Officer found that the assesseehad not deducted tax on the amount of interest credited on various dates in terms of Section 194A of the Income-tax Act, 1961, the details thereof being as follows:-
JUDGEMENT_2356_TLIT0_19890.htm

What the assessee did for all these assessment years in question was that instead of crediting the amounts of interest mentioned in column No. 3 above to the account of the creditor M/s. Khacherumal Vishnu Swarup, credited the same to "Interest payable account" and showed these amounts as liabilities in its balance sheet over and above the amounts of the loan. The Income-tax Officer inferred therefrom that since tax had not been deducted on the amount of interest credited in terms of Section 194 A, it was liable under Section 201(1 A) to pay simple interest at the rate specified thereunder. The Income-tax Officer took the view that the assessee had been intentionally doing so in order to evade deduction of tax at source on the amounts of interest and payment thereof to the Government account. He accordingly levied interest in terms of Section 201 (1 A) at the rate of 12% up to 30-9-1984 and @ 15% up to 31-12-1985 amounting to Rs. 15,582, Rs. 11,261, Rs. 9,583 and Rs. 7,048 respectively for the assessment years in question.

Before the learned Appellate Asstt. Commissioner it was submitted on behalf of the assessee that there was a reasonable and sufficient cause for not crediting the interest amounts to the account of the payee M/s. Khacherumal Vishnu Swarup although interest had been credited to the "Interest payable account". It was also submitted by the assessee that in the light of the provisions of Section 231, the orders passed by the Income-tax Officer were barred by limitation except for the assessment year 1984-85. It was also sought to be explained on behalf of the assessee that the liability to deduct tax at source accrued only when interest was actually paid or was credited to the account of the creditor and not on the facts of these cases. However, the learned Appellate Asstt. Commissioner noticed that in its Income-tax return the creditor M/s. Khacherumal Vishnu Swarup had included the amounts of interest receivable from the assessee in its total income. He took the view that although at the time of the credit of the interest for the assessment years in question, the account of M/s. Khacherumal Vishnu Swarup was not credited but in its books of account the assessee firm had duly credited the amounts of interest payable to the said concern under the head "Interest payable account". He took the view that the liability to deduct tax on the said amounts arose as soon the amounts had been credited to the "Interest payable account". The learned Appellate Asstt. Commissioner also noted that the assessee had claimed deduction of the said amounts of interest payable to the sister concern, while computing the net profit. Accordingly, the orders of the Income-tax Officer were upheld.

(3.)BEFORE us on behalf of the assessee, the contentions put forward before the Income-tax authorities were reiterated by Shri Ashok Gandhi, the learned counsel and reliance was also placed on the decision in the case of Paterson Engg. Co. (I) Ltd. v. ITO [1989] 35 TTJ (Bom.) 245. Reference was also made by Shri Gandhi to the decision of the Hon'ble Delhi High Court in the case of P.NJS. Finance &Industries Ltd. v. Miss Gita Kripalani, IT0 [1986] 157ITR 385. On the other hand, Shri Satish Khosla, the learned Departmental Representative strongly supporting the orders of the Income-tax authorities, submitted that the entries in the assessee's books of account did not change the nature and character of the amount. He submitted that on facts, the provisions of Section 194A were very much attracted and that if the view canvassed by the assessee's counsel was accepted, it would lead to evasion of tax.


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