Income Tax Appellate Tribunal - Ahmedabad
Income-Tax Officer vs Delwada Investment (P.) Ltd. on 8 October, 1990
Equivalent citations: [1991]36ITD322(AHD)
ORDER
R.L. Sangani, Judicial Member
1. These four appeals by the department, which pertain to A.Y. 1982-83, are being decided by this common order.
2. We shall deal with ITA No. 2595(Ahd.)/1987 in respect of the assessee Delwada Investments Pvt. Ltd.
2.1 The assessee-company had filed estimate of advance-tax in form No. 29 on 15-6-1981 declaring income subject to advance-tax. The said estimate of income included interest income. While computing the advance tax payable on the basis of said estimated income, the assessee had reduced the total tax payable by amounting representing tax deductible at source during the financial year from said interest income as per provisions in Section 194-A of the Act.
2.2 According to the ITO, who initiated proceedings u/s 273(2)(a) of the Act, the assessee should not have reduced the income-tax calculated on estimated income by the amount representing tax deductible at source u/s. 194-A on interest income because the companies who had incurred liability to pay interest to the assessee-company had not in fact deducted the tax at source in the relevant financial year but had done so in the next financial year. According to the ITO, the assessee knew this fact and as such, the assessee should be regarded to have filed estimate of advance tax payable by it which the assessee knew or had reason to believe to be untrue with the consequence that assessee was liable for penalty u/s. 273(2)(a) of the Act.
2.3 The ITO did not accept the plea of the assessee to the effect that the estimate of advance tax filed by it was bonafide and there was no justification for imposing penalty. He, accordingly imposed penalty of Rs. 4,580 under said provision. The CIT(Appeals) has cancelled the penalty and department is in appeal before us.
3. We have heard the parties. The ITO has noted that interest became due to assessee from payer company at the end of the year and the payer company credited the interest amount to interest payable account and not to the account of the assessee and the assesseealso debited the interest to interest receivable account and not to the account of payer company and income-tax was not deducted and paid to the credit of Central Government by the payer company during the financial year and that it was after several months that payer company gave credit to the assessee company about interest and it is then that income-tax on interest was deducted and paid to the credit of Central Government. The learned departmental representative has relied on these facts in support of his submission that the income-tax deductible at source was not liable to be taken into account in this case since it was not actually deducted at source in the relevant financial year.
4. We are unable to accept these submissions. We find that legal obligation of the assessee at the time of filing of estimate was to make estimate of income of the current year and calculate the advance-tax payable thereon and file the said estimate and pay the advance-tax accordingly. The advance tax was required to be computed by the assessee in the manner laid down in Section 209 ofthe Act. Under that provision, the assessee had to calculate income tax on current estimated income at the rates in force in the financial year and income tax so calculated is to be reduced by the amount of Income-tax which would be deductible at source during the said financial year under any provision of the Act from any income which has been taken into account in computing the current income. The assessee had taken interest income into account in computing the current income. Hence, the income tax calculated on estimated current income would be liable to be reduced by amount of income tax which would be deductible at source during the financial year. The assessee in his computation reduced the income tax calculated on estimated current income by income-tax which would be deductible at source during the financial year. It cannot, in the circumstances, be said that the assessee had filed estimate of advance tax which he knew or had reason to believe to be untrue.
5. The only ground on which the department wants us to draw such inference is that the company which had incurred liability to pay interest to assessee had not in fact credited the income tax to Central Government in the financial year in question but had done so in the next year. That would not be relevant as far as the stage of filing the estimate was concerned. What all the assessee had to sec at the time of filing estimate was whether tax was deductible at source or not. Deductible at source-would mean liable to be deducted at source. When interest income is included in the estimate of current income, the income tax which was liable to be deducted at source automatically enters as deduction in the computation of advance tax. If the assessee had not taken into account interest income in the estimate of current income, the matter would have been different. If the payer company had committed any default, appropriate action relatable to such default could very well be taken against payer company. As far as assessee company was concerned, when it was including interest income in the estimate of current income, it was entitled to reduce the tax payable on current estimated income by the tax deductible at source on interest income. That computation is not dependent on what happens subsequently in the course of the year to the tax deductible at source, namely whether it was in fact paid to the credit of Central Government in the financial year or not. In any case, it can not be said that at the time assessee filed estimate of income-tax, the assessee knew or had reason to believe that the said estimate was untrue. Consequently, penalty provisions u/s. 273(2)(a)ofthe Act were not attracted and the CIT (Appeals) was justified in cancelling the penalty imposed by the ITO under aforesaid provision.
6. The facts in other appeals are admittedly identical and above reasons would apply to these appeals.
7. The appeals are dismissed.