COMMISSIONER OF INCOME TAX vs ZENITH COMMERCIAL AGENCIES LTD.

BY THE COURT :

Mr. N. M. Ranka, appears on behalf of the assessee and submitted that this reference application is required to be answered on the short ground because the point which has been referred to in this case already stands answered by this Court in the case of CIT vs. Oriental Power Cables Ltd. (1992) 105 CTR (Raj) 76.

This reference application under s. 256(2) of the IT Act, has been filed by the CIT, Rajasthan, Jaipur, for calling reference, on the following two questions :

"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee was not under an obligation to deduct tax at sources under s. 194A of the IT Act, 1961 and consequently, directing the ITO to remit the interest charged under s. 201(1A) of the IT Act ?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in not holding that unless there was a valid justification for crediting interest to any account, other than the account of the payee, the credit to the account, such as interest payable account (in Profit & Loss Account) would amount to constructively crediting the payee account ?"

The Tribunal had come to the conclusion that no Income Tax was to be deducted when the credit is not provided to the accounts of the persons who have lent the money. In the application, it is submitted that the provisions of s. 201(1A) are applicable when a default is committed of the provisions of s. 194A and the question whether there is a default or not is a question of interpretation of the of the provisions of the section.

We regret, we cannot accept this contention. This Court in the case referred to above, relying on the decision of the Honble Supreme Court, in the case of Commissioner of Income Tax, Andhra Pradesh Vs. Toshoku Ltd., Guntur and Others, held that the amount was credited to suspense account and not to the accounts of individual parties, for that the assessee is not required to make any deduction under s. 194A. Consequently, it is not liable to pay any interest It has been categorically held that the explanation to s. 194A inserted by Finance Act, 1987, w.e.f. 1st June, 1987, is prospective in operation. Amendment therefore, does not apply to this case as the assessment year involved is 1974-75.

In this view of the matter, we dismiss this reference application and refuse to call for the reference