Law:

Section:

Section 5, read with section 9(1)(ii), of the Income-tax Act, 1961 - Income - Accrual - Place of - Assessee-bank had a number of expatriate officers working in India - These officers were entitled to proceed on furlough on completion of specific period of service in India and while on furlough they were entitled to furlough pay - Whether amount of furlough pay, which was paid in foreign currency abroad, was salary for services rendered in India and, therefore, it was an income accrued or arose in India - Held, yes Section 201, read with section 192, of the Income-tax Act, 1961 - Deduction of tax at source - Consequence of failure to deduct or pay - Whether in view of facts stated under head 'Income - Accrual - Place of - Since assessee failed to deduct tax from furlough pay paid to its employees, it was liable to pay interest under section 201(1A) - Held, yes FACTS The assessee-bank had a number of expatriate officers working in India during the year 1973. Those officers were entitled to proceed on furlough on completion of specific period of service in India and while on furlough they were entitled to furlough pay outside India. Consequently, the furlough pay was disbursed in foreign currency abroad. The ITO held that as the furlough pay was received by the expatriate officers for the period of furlough which they were entitled to on account of their service rendered in India, such pay was assessable in the hands of the officers under the head 'Salaries'. Since, the assessee failed to deduct tax under section 192(1), read with section 192(6) and section 9(1)(ii), it was liable to pay interest under section 201(1 A) on the amount. He, therefore, issued a demand for the payment of interest under section 201(1A) to the assessee. On appeal, the Commissioner (Appeals) as well as the Tribunal upheld the order of the ITO. On reference: HELD In the instant case, the bank was the employer. It paid a portion of the salary to its employees abroad. There was no dispute that the employees were residents in India at the material time. Therefore, the entire salary income, which was payable because of the services rendered in India by the employees in India, accrued in India.…

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