PENTAGON ENGINEERING PVT. LTD. VS COMMISSIONER OF INCOME TAX
1995 P T D 569
[212 I T R 92]
[Bombay High Court (India)]
Before Dr. B.P. Saraf and S.M. Jhunjhunuwala, JJ
PENTAGON ENGINEERING PVT. LTD.
versus
COMMISSIONER OF INCOME TAX
Income Tax Reference No. 143 of 1984, decided on 30/11/1994.
Income-tax---
----Deduction of tax at source---Failure to remit within prescribed time-- Assessee liable to pay interest---Use of word "shall" in S.201 (lA) makes liability to pay interest mandatory---No pre-condition of consideration of "reasonable cause" for non-payment in time of tax deducted at source---Indian Income Tax Act, 1961, Ss. 192 & 201(1 A).
During the previous years relevant to the assessment years 1973-74 to 1979-80, the assessee failed to remit within the prescribed time into the Government Treasury the tax it had deducted from the salary paid to its employees. The Income Tax Officer levied interest under section 201(lA) of the Income Tax Act, 1961, from the date on which the salaries were payable to its employees to the date on which the tax was actually paid by the assessee into the Government Treasury. The Commissioner (Appeals) and the Tribunal affirmed the order of the Income Tax Officer. On a reference, the assessee contended that section 201(lA) of the Act is not mandatory and the pre-condition of "reasonable cause" for non-payment of taxes deducted under section 192 ought to have been considered while levying interest under section 201(lA):
Held, that the use of the word "shall" in section 201(lA) made the liability to pay interest, in the circumstances mentioned, mandatory and there was no pre-condition of consideration of "reasonable cause" for non-payment in time of tax deducted under section 192. Therefore, the Income Tax Officer was not required to take into consideration the "reasonable cause" for non-payment of taxes deducted under section 192.
Bennet Coleman & Co. Ltd. v. V.P. Damle, Third ITO (1986) 157 ITR 812 (Bom.) fol.
Arun Sathe for the Assessee.
G.S. Jetley, Senior Advocate, P.S. Jetley instructed by Mrs. S. -Bhattacharyya for the Commissioner.
JUDGMENT
S.M. JHUNJHUNUWALA, J. ---By this reference under section 256(1 of the Income Tax Act, 1961, made at the instance of the applicant-assessee the Income Tax Appellate Tribunal has referred the following question of law to this Court for opinion:
"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in taking the view that the provisions of section 201(lA) for levying interest are mandatory and the Income Tax Officer is not required to take into consideration the reasonable cause for non-payment of taxes deducted under section 192?"
The assessee is a private limited company. The assessment years concerned are 1973-74 to 1979-80. During the previous years relevant to the assessment years under consideration, the assessee delayed payment of tax into the Government Treasury, which the assessee had collected from the salary paid to its employees. The Income Tax Officer, therefore, proceeded to calculate interest under section 201(lA) of the Income Tax Act, 1961 (for short, referred to as "the Act"), from the date on which the salaries were payable to the employees to the date. on which the tax was actually paid by the assessee into the Government Treasury on each occasion and demanded the same from the assessee. The assessee appealed before the Commissioner of Income-tax (Appeals) in respect of the interest levied by the Income Tax Officer for the assessment years under consideration. The main ground on which the assessee objected to the levy of interest was extreme financial difficulties of the assessee. The Commissioner' of Income-tax (Appeals) upheld the order passed by the Income Tax Officer. The assessee then filed an appeal before the Income Tax Officer. The assessee then filed an appeal before the Income Tax Appellate Tribunal and the Tribunal approved the finding of the Commissioner of Income tax (Appeals). It is in these circumstances, the above, question of law has been referred to this Court for opinion, at the instance of the assessee.
The basic question pertains to the interpretation of section 201(lA) of the Act. According to learned counsel, Mr. Arun Sathe, appearing for the assessee, section 201(lA) of the Act is not mandatory and the precondition of reasonable cause for non-payment of taxes deducted under section 192 of the Act ought to have been considered while levying interest under section 201(lA) of the Act.
We have perused section 201(lA) of the Act, which reads as under:
"201 (IA). --Without prejudice to the provisions of subsection (1), if any such person, principal officer or company as is referred to in that subsection does not deduct or after deducting fails to pay the tax as required by or under this Act, he or it shall be liable to pay simple interest at twelve per cent per annum on the amount of such -tax from the date on which such tax was deductible to the date on which such tax is actually paid."
The use of the word "shall" in section 201(lA) makes the liability to pay interest in circumstances mentioned mandatory and there is no precondition of consideration of "reasonable cause" for non-payment in time of tax deducted under section 192 of the Act. We hold that, section 201(lA) of the Act is mandatory and the Tribunal was right in law in taking the view that the Income Tax Officer was not required to take into consideration the "reasonable cause for non-payment of taxes deducted under section 192 of the Act. We may add here that in the case of Bennet Coleman & Co. Ltd. v. V.P. Damle, Third IT( (1986) 157 ITR 812, a learned Single Judge of this Court has taken the same view on the interpretation of section 201 (l A) which we have taken herein.
Accordingly, we answer the question referred in the affirmative, that is, in favour of the Revenue and against the assessee.
There shall be no order as to costs.
M.B.A./1061/F Order accordingly.