Law: Income Tax Act, 1961

Section: 191

Income-tax---Advance tax---Interest payable by assessee---Meaning of expression "tax deductible" in definition "assessed tax" in S.215(1)---Payer not deducting tax under S. 194-A at the time of accrual of interest but deducting and paying such tax after financial year ---ITO levying interest under S.215(1) after reducing actual "tax deducted" at source under S.194-A---Not justified--¬"Tax deductible" on interest income should be reduced for levying interest under S.215(1)---Indian Income Tax Act, 1961, Ss.191, 194-A, 201(1-A), 209-A & 215. The words "assessed tax" occurring in subsection (1) of section 215 of the Income Tax Act, 1961, dealing with interest payable by the assessee are to be read in the light of the special meaning given to them under subsection (5) of section 215 and accordingly, "assessed tax" would mean not the full amount of the assessed tax determined on the basis of the regular assessment, but the amount reduced therefrom to the extent of tax deductible in accordance with the provisions of sections 192 to 194, 194-A, 194-C, 194-D and 195 so far as it related to income subject to advance tax. The words "reduced by the amount of tax deductible" which appear in subsection (5) of section 215 also occur in clause (iii) of section 209(1)(a) dealing with computation of advance tax. The amount of tax deductible in accordance with section 194-A would obviously mean the tax as was required to be deducted in respect of the interest income at the, time of credit to the account of the payee or payment whichever is earlier. The words "at the time of credit of such income to the account of the payee" in section 194-A would take within their sweep, the interest debited to "interest account" or any other nominal account when the debit is for a specific amount calculated with reference to the deductors liability to a particular creditor in accordance with the terms and conditions of the loan. The time of deduction would be when the interest is credited. The liability of the deductor would arise for failure to make deduction at the tithe of credit notwithstanding that it came to be made later on at the time of actual payment. Deduction made at such…

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