MADHUSUDAN SHRIKRISHNA Vs. EMKAY EXPORTS

JUDGEMENT

(1.) Parties have settled the dispute. A query, however, is raised by the Counsel appearing on behalf of defendants regarding deduction of TDS on the interest component of the decree. Apprehension is expressed by the learned Counsel appearing on behalf of defendants that under the provisions of section 194A of the Income Tax Act, on the interest component which is payable, tax has to be deducted at source and if it is not so done, the person who does not deduct tax at source on the interest component would be liable for prosecution and penal consequences under the provisions of the Income Tax Act. It is, therefore, submitted that defendants had withheld the payment of the amount which is payable to the Income Tax Department as TDS and a certificate to that effect was also kept ready.

(2.) Counsel for plaintiff, on the other hand, submitted that since the amount was being paid for discharge of the liability which had accrued in favour of the plaintiff and against the defendants and the said liability had been crystallized by a decree of the Court, defendants were not liable to deduct tax at source.

(3.) Counsel appearing on behalf of defendants, however, relied upon the judgment of the Apex Court in Lt. Col. K.D. Gupta v. Union of India and another,181 ITR 530. Both the Counsel also relied upon the judgment of this Court in Islamic Investment Company v. Union of India and another, 2002 3 MhLJ 555. Counsel appearing on behalf of defendants invited my attention to paragraph 15 of the said judgment and submitted that the learned Single Judge had granted liberty to the decree holder to apply and get certificate of release from the security or an adjudication from the Income-tax Authority that it is not liable to pay tax in India on the decretal amount or any part thereof.