- (1.) ON being required by this Court under S. 256(2) of the IT Act, 1961 (for short 'the Act'), the Tribunal, Jaipur Bench, Jaipur, has raised and referred to us the following questions : "1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee was not under an obligation to deduct at source under S. 194A of the IT Act, 1961 and consequently directing the ITO to remit the interest charged under S. 201(1A) of the IT Act ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in not holding that unless there was valid justification for crediting interest to any account, other than the account of the payee, the credit to the account, such as interest payable account (in P&L a/c) would amount to constructively crediting the payee account ?"
(2.) THE assessment years involved are 1975-76 in DB. Ref. No. 94 of 1988 and 1976-77 in DB. Ref. No. 70 of 1988. The questions, reproduced above, are common to both the years. The assessee is a private limited company. While submitting its P&L a/c for the asst. yrs. 1975- 76 and 1976-77 the assessee-company had shown the sums of Rs. 4,32,896 and Rs. 5,04,264, respectively, for which provision had been made in respect of interest and the said amounts had been deducted from the income of the company. Tax under S. 194A of the Act on the said amounts had not been deducted in respect of the credits but was shown in the 'Interest payable account'. The ITO charged interest under S. 201(1A) from the date of default to the dates of payment. However, on appeal preferred to him, the CIT(A), following his order dt. 9th Jan., 1985 for asst. yr. 1980-81, deleted the addition. On second appeal, preferred by Revenue, the Tribunal held that since actual payment had not been made by the assessee to any of the creditors to whom credit had been given in the P&L a/c S. 194A would not apply and, therefore, the levy of interest was not justified. The Tribunal, accordingly, dismissed Department's appeal.
(3.) WE heard the learned counsel for the parties and perused the material placed before us. We find that both the above-mentioned questions stand squarely covered in favour of the assessee and against the Department by the decisions of this Court in the case of the assessee itself in CIT vs. Zenith Commercial Agencies (P) Ltd. (Raj.) (1993) 109 CTR (Raj) 115 : TC 43R.367 and DB. Ref. Appln. No. 71 of 1988 decided on 12th Aug., 1994 as also in the case of CIT vs. Oriental Power Cables Ltd. (1992) 105 CTR (Raj) 76 : (1993) 203 ITR 237 (Raj) : TC 43R.366 wherein it was held that where an assessee had opened an interest payable account or suspense account it would not be required to make any deduction as the Explanation added to S. 194A by Finance Act, 1987, w.e.f. 1st June, 1987, requiring deduction of tax at source or accrual basis at the end of the accounting year or at the time of crediting it to the account of the payee or at the time of payment, whichever event occurs earlier, was prospective and not retrospective in operation. We fully subscribe to the view expressed earlier by us in the cited cases. In view of the above, we answer both the above-mentioned questions in favour of the assessee and against the Revenue.;