INCOME-TAX OFFICER Vs. KODAIKANAL FINANCE LTD

JUDGEMENT

(1.) These appeals by the revenue are consolidated and disposed of by a common order for the sake of convenience as they involve common facts and common issue. These appeals arise out of the separate orders of the CIT (Appeals)-V, Madras wherein the levy of interest under section 201(1A) was upheld on principle but the quantum thereof has been reduced, by direction to restrict the levy of interest from the date on which tax was deductible to the date on which the tax was actually paid by the recipients.

(2.) The revenue has taken common grounds to urge that the CIT (Appeals) erred in his direction and he ought to have appreciated that the admission of interest income and payment of tax thereon by the recipients would not vitiate the liability on the part of the assessee to deduct tax at source and it would not relieve the assessee of its liability to interest under section 201(1A) of the I.T. Act, 1961. Therefore, it is prayed that the order of the CIT (Appeals) should be set aside and that of the Assessing Officer should be restored. The Assessing Officer has levied interest under section 201(1A) for failure to deduct tax at source from the interest credited to the accounts of the various recipients under section 194A. Demand notice was issued for the interest payable for various years by these assessee.

(3.) On appeal, the CIT (Appeals) noted that the assessees have filed certificates from the various recipients of interest for all the years except for the assessment year 1991-92 to the effect that the interest income payable by the respondent-assessee had been included in the return of income filed by them for the relevant assessment years and they have not claimed any credit for tax deducted at source that should have been deducted at source by the respondent-assessee. On the basis of this assertion or the certificates and relying on the observation of the Calcutta High Court in the case of British Airways V Cit,1992 193 ITR(Cal) 439, to the effect that the interest under section 201(1A) will stop running when the amount of tax that should have been deducted at source is actually paid by the employer or by the employee because section 201 makes it clear that the deduction of tax at source is only one mode of recovery of tax and is without prejudice to any other mode of recovery and also on the observation of the Calcutta High Court in the case of Grindlays Bank Ltd V Cit,1992 193 ITR 457(Cal) that there cannot be any double taxation on the same amount once in the hands of the recipients-employees and again in the hands of the paying employer, the CIT (Appeals) concluded the though the levy of interest under section 201(1A) is warranted but the quantum should be restricted to the date of actual payment by the recipients. However, the ratio of the Madras High Court in the case of Cit V Kumudam Publications (P) Ltd, 1991 188 ITR 84(Mad) was also taken into account.