Court upholds income tax deduction on furlough pay abroad, affirms interest liability.

The court upheld the obligation to deduct income tax at source from furlough pay paid outside India, ruling that the income accrued in India. It affirmed the liability to pay interest under section 201(1A) despite provisions in section 231. The court held that the Income-tax Officer had jurisdiction to levy interest and that challenges to jurisdiction must be raised at the appropriate stage. It was decided that proceedings could continue, and interest could be recovered from the employer-bank, ensuring no double taxation. All issues were resolved in favor of the Revenue, with no costs awarded.

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Issues Involved:
1. Obligation to deduct income-tax at source u/s 192 from furlough pay paid outside India.
2. Liability to pay interest u/s 201(1A) despite the provisions of section 231.
3. Jurisdiction of the Income-tax Officer to treat the assessee as in default and levy interest.
4. Challenge to the jurisdiction of the Income-tax Officer at the appellate stage.
5. Continuation of proceedings and recovery of interest u/s 201(1A) from the employer-bank.

Summary:

Issue 1: Obligation to Deduct Income-Tax at Source u/s 192 from Furlough Pay Paid Outside India
The Tribunal held that it was obligatory for the assessee to deduct income-tax at source u/s 192 from furlough pay paid to expatriate officers in the UK. The court upheld this view, stating that the salary income, including furlough pay, accrued in India as it was earned due to services rendered in India. The payment location (UK) did not alter the tax liability under the Income-tax Act, 1961.

Issue 2: Liability to Pay Interest u/s 201(1A) Despite Section 231
The Tribunal ruled that the assessee's liability to pay interest u/s 201(1A) was not barred by the provisions of section 231. The court affirmed this decision, referencing its earlier judgment in British Airways v. CIT, which established that interest must be calculated up to the date of actual payment, regardless of recovery limitations under section 231.

Issue 3: Jurisdiction of the Income-tax Officer
The Tribunal found that the Income-tax Officer, H-Ward, Companies Dist. IV, Calcutta, had concurrent jurisdiction to pass the order u/s 201(1A). The court agreed, noting that the assessee did not challenge the jurisdiction during the initial proceedings and that the jurisdictional provisions were more about administrative convenience than inherent jurisdictional authority.

Issue 4: Challenge to Jurisdiction at the Appellate Stage
The Tribunal held that the assessee could not challenge the jurisdiction of the Income-tax Officer at the appellate stage, as it should have been raised earlier. The court supported this view, emphasizing that the objection to jurisdiction should have been made during the initial proceedings, and the failure to do so constituted a waiver of the right to challenge later.

Issue 5: Continuation of Proceedings and Recovery of Interest u/s 201(1A)
The Tribunal concluded that proceedings u/s 201 could be initiated and continued, and interest u/s 201(1A) could be recovered from the employer-bank. The court upheld this, stating that the employer-bank's liability for interest due to failure to deduct tax at source was valid, and any double taxation concerns should be addressed separately, ensuring no double recovery of tax.

Conclusion:
All five questions were answered in the affirmative and in favor of the Revenue, with no order as to costs.

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