Suhas Chandra Sen, J. - (1.) The Tribunal has referred the following questions of law to this court at the instance of the assessee under Section 256(1) of the Income-tax Act, 1961 : "(1) Whether, on the true and proper interpretation of Section 195 of the Income-tax Act, 1961, the assessee was itself liable to pay any income-tax in respect of interest to be paid to its customers as an agent and whether, on the facts and in the circumstances of the case, the assessee was liable to deduct income-tax on such interest under Section 195 of the Income-tax Act, 1961? (2) Whether, on the facts and in the circumstances of the case and on a true and correct interpretation of Section 201(1A) of the Act, the assessee bank was liable to pay any interest under Section 201(1A) when, admittedly, the amount of interest in respect of which the tax is to be deducted in the year in which the credit was given to the non-resident had become time-barred ? (3) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that it was primarily the duty of the assessee-bank to give the actual dates of payments to the nonresident if it wanted to avoid liability on the ground that they were different from the dates of credit and, consequently, in not accepting the assessee's appeal in its entirety ? (4) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in not quashing the order of the Income-tax Officer under Sub-section (1A) of Section 201 and instead sending it back to the Income-tax Officer with the direction that he should ascertain the cases in which interest had been paid by the bank and yet tax had not been deducted by the bank in respect of the said interest and deposited in the Government Treasury and charged interest under Sub-section (1A) of Section 201 in respect of such cases only?"
(2.) The facts narrated in the statement of case are as under : "The assessee is carrying on the business of banking through its numerous branches in India. In the course of its business, it allowed interest on deposits in savings bank accounts and fixed deposit accounts to a number of non-resident customers. The Income-tax Officer found that the tax deducted from the interest allowed to such customers was not paid to the credit of the Government of India in respect of 24 branches of the assessee in accordance with Rule 30 of the Income-tax Rules, 1962. After he initiated enquiries in this behalf, the assessee paid the tax. In respect of one branch at 10, Parliament Street, New Delhi, alone, the tax which had been credited to the Government (but was deposited after the enquiries) amounted to Rs. 4,54,979. As the assessee-bank did not furnish the particulars as prescribed in the Rules, the Income-tax Officer asked it to do so, i.e., to give the dates of credit of interest/payment of tax to the credit of the Government in respect of each account. The assessee took objection by its letter dated July 1, 1974, alleging that the obligation to deduct tax under Section 195 arises only at the time of payment and not at the time of credit of the interest. Therefore, there was no default on its behalf. Regarding the other particulars, the assessee contended that it was physically impracticable to provide particulars in respect of each account of the non-resident customers which may embrace over five thousand accounts. The total amount of tax deducted but not credited to the Government as at the end of each financial year and the dates on which the tax was ultimately paid to the credit of the Government was, however, mentioned by the assessee. The Income-tax Officer, on further scrutiny and test-check, found that the interest had been credited to the parties' accounts on the due dates and later it was transferred to their current or savings accounts or included in the fixed deposits at the time of renewal and at least in one case interest was remitted to Lloyds Bank, London. On another occasion, the amount of interest had been transferred to the current account of the party concerned out of which withdrawals were made later on. In another case, interest amounting to Rs. 4,120 was credited in a fixed deposit account and this was remitted to the party through the Bank of Scotland. There were also similar credits and payments in respect of the branch at 19, Netaji Subhas Road, Calcutta. The Income-tax Officer also noticed that the bank itself had chosen to deduct tax from such interest and had debited the accounts of the parties concerned with such tax from which it was evident that the assessee was aware of its liabilities to deduct tax therefrom. Apparently, there was no reason as to why tax should not have been credited to the Government as per rules. In the absence of any specific particulars as to the payment of the interest to the non-resident customers which the bank was unable to furnish and in view of the facts mentioned above, he held that the bank had committed default in respect of the tax deducted at source out of the interest allowed to the non-resident customers under Section 195 with regard to 24 branches as it did not credit to the Government the tax deducted at source within the time permissible under Rule 30 of the Income-tax Rules, 1962. He, therefore, levied interest for delayed payment under Section 201(1A) of the Income-tax Act, 1961. As per detailed calculations in the chart annexed to the order, he computed the amount of such interest at Rs; 4,06,013 for which he issued a demand notice accordingly".
(3.) Being aggrieved by the order of the Income-tax Officer, the assessee went up in appeal before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner, however, dismissed the appeal. The assessee preferred a further appeal to the Tribunal. The assessee contended before the Tribunal that the provisions of Section 195 of the Income-tax Act would not be applicable to the present case because the non-resident had received incomes by way of interest directly from the assessee and, therefore, the assessee was an agent for the purpose of the Income-tax Act, Therefore, it was liable to pay income-tax on the interest credited to the accounts of non-residents as an agent and, consequently, Section 195 of the Income-tax Act was not at all applicable. The Tribunal rejected this contention.;