High Court Of Kerala
Secretary, Sultan Battery Co-Op. Housing Society Ltd. vs. CIT
Sections 201(1A), 231
Asst. Year 1987-88, 1989-90, 1990-91
G. Sivarajan & C.N. Ramachandran Nair, JJ.
IT Appeal No. 120 of 2000
3rd October, 2002
Counsel Appeared
P. Balakrishnan, for the Appellant : P.K.R. Menon & George K. George, for the Respondent
JUDGMENT
C.N. Ramachandran Nair, J. :
The assessee-appellant is a society which made payment to a contractor amounting to Rs. 50,02,730 during the period from 1st April, 1986, to 31st March, 1990, without deduction and payment of income-tax at source in time in terms of s. 194C of the IT Act. However, the assessee made the payment on 13th March, 1990. Obviously with substantial delay. The AO demanded interest amounting to Rs. 28,834 under s. 201(1A), of the IT Act. There is no dispute on the amount of interest compuyed under s. 201(1A), if the assessee is otherwise liable. The only contention raised against the demand of penal interest is the limitation provided under s. 231 of the IT Act which stands deleted by Taxation Laws (Amendment) Act of 1987 w.e.f. 1st April, 1989. The assessee relied on two decisions of this Court in Traco Cable Co. Ltd. vs. CIT (1987) 62 CTR (Ker) 174 : (1987) 166 ITR 278 (Ker) and in CIT vs. Meat Products of India Ltd. (1996) 136 CTR (Ker) 210 : (1997) 224 ITR 1 (Ker). In first appeal, the appellate authority following the decision of this Court referred to above held that no interest is payable for the default in payment of tax deducted at source from 1st April, 1986, to 31st March, 1990. On appeal filed by the Department, the Tribunal reversed the finding of the first appellate authority and de hors the decision of this Court held that there is no limitation for the recovery of interest demanded on 16th Aug., 1991, by virtue of deletion of s. 231 of the IT Act.
We have heard Shri P. Balakrishnan, counsel for the assessee, and Sri P.K.R. Menon, senior standing counsel for the Revenue. Counsel for the assessee relied on the above two decisions of this Court and contended that when the assessee was an assessee in default, limitation has to be worked out from the end of the financial year in which the assessee was treated as an assessee in default. Admittedly, if the assessee has to be treated as an assessee in default and if s. 231 applies, then of course the finding of the first appellate authority that the demand of interest for the period from 1st April 1986, to 31st March, 1990, is barred by limitation will stand because the limitation in such a case has to be worked out from the last day of the financial year in which the assessee is deemed to be an assessee in default. Though the Tribunal’s order is not elaborate, standing counsel has explained the logic behind the Tribunal’s order that the repeal of s. 231 by the Taxation (Amendment) Act of 1987 was effective from 1st April, 1989, and the Department had time to initiate proceedings to recover interest even for the first year of default under s. 231 upto 31st March, 1990. The section was repealed, before the expiry of the period of limitation provided
under s. 231. The Department’s contention is that it is entitled to the benefit of repeal of section which the has taken away the limitation. Therefore, according to standing counsel, after the repeal of s. 231, the Department was still free to demand interest and therefore, the demand of interest sought to be recovered by proceedings dt. 16th Aug., 1991, is within time. Of course in this case the question is only in respect of interest because the appellantassessee had remitted tax deducted at source voluntarily, though belatedly. Counsel for the assessee contended that interest goes along with tax. He has also relied on the decision of this Court in the Meat Products case referred to above. We find that case does not apply to the facts of this case because that was a case where the assessee-company failed to deduct and remit tax and by the time the Department demanded tax and interest, there was already time bar. This Court held that if tax cannot be demanded, then interest for default in payment of such tax also cannot be demanded. Obviously in a case where tax is not payable, the interest payable for default in payment of such tax also does not arise because interest has to be calculated for the period of default i.e., till the date of payment. Therefore, if tax is not payable, obviously interest will not be payable for the default in payment of such tax. However, in this case the assessee has admittedly paid the tax though with delay and therefore, the assessee was an assessee in default from the due date till date of payment and thereafter it will cease to be an assessee in default. We feel s. 231 cannot be applied to the assessee because s. 201 speaks about treating the assessee as a defaulter only in respect of an amount payable by the assessee. This obviously does not include interest for default in payment of tax. So long as the assessee is bound to deduct and remit tax under s. 194C, the default under s. 201, is only in respect of tax and, therefore, the assessee can be treated as an assessee in default in terms of s. 201 only in respect of tax payable. So far as interest is concerned, the same has to be demanded by the officer under s. 201(1A) of the IT Act. It is only after payment of tax by the assessee, the officer demanded interest by order dt. 16th Aug., 1991.
Therefore, the limitation under s. 231 so far as the interest is concerned applies only with reference to the date of demand. Since the date of demand itself is taken as the proceedings for recovery, the question of limitation does not apply at all in this case. Therefore, the assessee cannot contend that the assessee was an “assessee in default” and the limitation for recovery of interest has to be reckoned from the commencement of the financial year. We feel there is no limitation under s. 231 so far as the demand of interest vide proceedings dt. 16th Aug., 1991, is concerned. The Tribunal rightly decided the issue in favour of the Revenue though on a different footing. Since we have held that the assessee’s claim of limitation under s. 231 is not available to it, there is no need for us to go into whether s. 231 itself is available to the assessee after it’s repeal w.e.f. 1st April, 1989. The questions raised are, therefore, answered against the assessee and in favour of the Revenue.
[Citation : 261 ITR 364]
