TaxTMI 
TaxTMI 
2006 (1) TMI 56
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....ixed remuneration with perquisite of rent-free accommodation, car with driver and a servant. The said employee filed his individual tax return and paying taxes on the same under section 140A of the Act. The Assessing Officer noticed from a perusal of the bank account of the employee and the TDS return filed by the assessee that no salary had been paid to the employee nor any deduction under section 192 made by the respondent-assessee. The Assessing Officer accordingly held the assessee-company to be in default under sections 201(1) and 201 (1A) of the Act. Liability arising on account of interest at 15 per cent, per annum for different periods for the assessment years 1995-96 to 1999-2000 was consequently determined by the Assessing Officer....
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.... to the Income-tax Appellate Tribunal who delivered a split decision. While the Judicial Member of the Tribunal held that since the salary payable to Mr. Garnett had not been actually paid to him, no obligation to deduct tax at source under section 192 of the Act arose nor was the assessee liable to either pay tax under section 201 or interest under section 201(1A) of the Act. The Accountant Member of the Tribunal however adopted a different line of reasoning and opined that the obligation to deduct tax at source arose even if the salary payable to the employee was simply credited into his account even if not actually paid. The following question was, in the face of that decision, referred to the Third Member under section 255(4) of the Inc....
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....a substantial question of law as to the interpretation of section 192 of the Income-tax Act, 1961, arises for consideration of this court. Relying upon the decision of the Supreme Court in Standard Triumph Motor Co. Ltd. v. CIT [1993] 201 ITR 391, he submitted that once the amount was credited to the account of the employee, the same amounted to receipt thereof by the payee giving rise to the obligation to deduct tax at source. He urged that the distinction drawn by the majority judgment of the Tribunal between the facts of Standard Triumph Motor Co.'s case [1993] 201 ITR 391 (SC) and the case at hand was without any difference. Once the payment credited to the account of the payee was accepted as having been received by the payee for purpo....
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....tion could not be overlooked according to Mr. Sharma, while interpreting the provisions of section 192. He placed reliance upon the decision of the Andhra Pradesh High Court in Y.S.C. Babu's case [2002] 253 ITR 1, to argue that for an obligation to deduct tax at source, payment as also accrual should co-exist. Section 192 of the Income-tax Act, inter alia, requires any person responsible for paying any income chargeable under the head "Salaries" to deduct income-tax on the amount payable at the stipulated rate at the time of payment. The term "payment" has not been defined either in section 192 or at any other place of the Act. The expression shall, therefore, have to be given its ordinary literal meaning. It follows that the person maki....
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....time of payment or credit of the amount to the payee's account. The decision of the Andhra Pradesh High Court in Syndicate Bank's case [2002] 253 ITR 1 takes a somewhat similar view. In Standard Triumph Motor's case [1993] 201 ITR 391 relied upon by Mr. Jolly, the Supreme Court was dealing with a situation where a nonresident Indian company was entitled to a royalty on all sales effected by it. The Indian company which was liable to make this payment credited the amount of royalty to the appellant in its account books. In the returns filed by the assessee-non-resident company it admitted the royalty but filed nil returns claiming that it was maintaining its accounts on cash basis and since no part of the royalty had been received by it, ....
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....out of the non-deduction of tax at source. We see no reason to go beyond the finding of fact recorded by the Tribunal that there was no actual payment of the salary by the assessee to Mr. Garnett. The Tribunal has, in this regard, observed: "The lower authorities have simply proceeded on the assumption that the money credited in the account of Mr. Garnett with Hongkong & Shanghai Banking Corporation was paid by the assessee out of unknown sources. Such assumption, in our opinion, is based on surmises and conjectures and, therefore, no adverse inference can be drawn against the assessee. If the Assessing Officer could obtain the account of Mr. Garnett from the bank, he could also make enquiries as to who paid the amount in the account of ....