COMMISSIONER OF INCOME TAX Vs. RATHI GUM INDUSTRIES

JUDGEMENT

(1.) THE Tribunal has referred the following question of law in respect of asst. yrs. 1981 82 and 1982 83 under S. 256(1) of the IT Act, 1961 :

(2.) THE brief facts of the case are that the assessee derived the income from the sale of Gwar, Churi, Korma, etc. While completing the assessment, the ITO levied penal interest under S. 201 on the sum spent by the assessee under the head warehousing and handling charges. The assessee failed to deduct the tax at source under S. 194A of the IT Act and, therefore, it was held liable to pay interest under S. 201(1A) of the Act. In appeal before the CIT(A), the levy of interest was deleted following the decision of the Tribunal in the preceding year in which it was observed that the plea of the assessee was that the assessee entered into contract with several persons for ensuring availability of raw material at the proper time and also to cover himself against any possible losses due to fluctuation in prices. The assessee admitted that it did include financial arrangement but there was an agreement with the various parties by which they were provided commission for providing the assessee the various services such as provision of godown, safety of the goods and also finances. The contract was composite one and in spite of fact that separate figure was not given, the assessee was bound to deduct the tax at source under S. 194A. The failure to deduct the tax attracts interest under S. 201(1A). The matter has been dealt with in detail in the case of CIT vs. Rathi Gum Industries, (D.B. IT Ref. No. 24 of 1988) [reported at (1995) 127 CTR (Raj) 413]. Following the said decision we are of the opinion that the Tribunal was not justified in deleting the interest under S. 201(1A). Consequently, the reference is answered in favour of the Revenue and against the assessee. No order as to costs.