COMMISSIONER OF INCOME TAX Vs. RAMESH ENTERPRISES

JUDGEMENT

(1.) THE assessee is a registered firm which had borrowed monies from two of its sister concerns, viz., Ramesh Enterprises (P.) Ltd., and Ramesh Exports (P.) Ltd. For the assessment year 1983-84, interest paid to Ramesh Enterprises (P.) Ltd., was Rs. 17,18,827. For the assessment year 1984-85, interest paid to Ramesh Exports (P.) Ltd., was Rs. 4,88,479. Tax at source was not deducted on these amounts. Penalty was therefore levied under Section 201(1A) of the Act by the Income-tax Officer in the sum of Rs. 1,71,500 for the assessment year 1983-84 and in the sum of Rs. 1,17,406 for the assessment year 1984-85.

(2.) THE assessee unsuccessfully appealed to the Commissioner of Income-tax. On further appeal to the Tribunal, the Tribunal accepted the assessee's claim that it had no liability to deduct tax at source as the recipients had filed loss returns or had claimed refund of the tax on the ground that the advance tax paid was in excess of the amount of tax due.

(3.) IT is not the convenience of the assessee, and its assessment of the likely extent of the liability for payment of interest of the recipients of the interest, that determines the extent of the assessee's obligation to deduct tax at source on the interest paid by it. The provision requiring deduction of tax at source on interest payment is applicable to all persons paying such interest and it is not left to the individual assessee to decide the extent of compliance that it will make with regard to the obligation imposed by the statutory provision.