1. This appeal involves a very important and rather ticklish question of interpretation of some of the provisions contained in the Income-tax Act, 1961 ("the Act"). The assessee-company is carrying on banking business through its numerous branches in India. In the course of its business it allowed interest on deposits in savings bank accounts and fixed deposit accounts to a lot of non-resident customers. The ITO found that the tax deducted from the interest allowed to such customers was not paid to the credit of the Government of India in respect of 24 branches of the assessee in accordance with Rule 30 of the Income-tax Rules, 1962 ("the Rules"). After he initiated enquiries in this behalf the assessee paid the tax. In respect of one branch at 10, Parliament Street, New Delhi, alone, the tax which had been credited to the Government (but was deposited after the enquiries) amounted to Rs. 4,54,979. As the assessee-bank did not furnish the particulars, as prescribed in the Rules, the ITO asked it to do so, i.e., to give the dates of credit of interest/payment of tax to the credit of the Government in respect of each account. The assessee took objection, by its letter dated 1-7-1974, alleging that the obligation to deduct tax under Section 195 of the Act arose only at the time of payment and not at the time of credit of the interest. Therefore, there was no default on its behalf. Regarding the other particulars, the assessee contended that it was physically impracticable to provide particulars in respect of each account of the nonresident customers which, may embrace over five thousand accounts. The total amount of tax deducted, but not credited to the Government, as at the end of each financial year and the dates on which the tax was ultimately paid to the credit of the Government was, however, mentioned by the assessee. The ITO, on further scrutiny and test checking, found that the interest had been credited to the parties accounts on the due dates and later it was transferred to their current or savings accounts included in the fixed deposits at the time of renewal and, at least in one case, interest was remitted to Lloyds Bank, London. On another occasion the amount of interest had been transferred to the current account of the party concerned out of which withdrawals were made later on. In another case interest amounting to Rs. 4,120, was credited to a fixed deposit account and this was remitted to the party through the Bank of Scotland. There were also similar credits and payments in respect of the branch at 19, Netaji Subhas Road, Calcutta. The ITO also noticed that the bank, itself, had chosen to deduct tax from such interest and had debited the accounts of the parties concerned with such tax from which it was evident that the assessee was aware of its liability to deduct tax therefrom. Apparently, there was no reason as to why tax should not have been credited to the Government as per the Rules. In the absence of any specific particulars as to the payment of the interest to the non-resident customers, which the bank was unable to furnish, and in view of the facts mentioned above, he held that the bank had committed default, in respect of the tax deducted at source out of the interest allowed to the non-resident customers under Section 195, with regard to 24 branches as it did not credit to the Government the tax deducted at source within the time permissible under Rule 30. He, therefore, levied interest for delayed payment under Section 201(1A) of the Act. As per detailed calculations in the chart annexed to the order, he computed the amount of such interest at Rs. 4,06,013 for which he issued a demand notice accordingly.
2. The assessee went up in appeal to the Commissioner (Appeals) and raised a number of legal issues. We need not repeat all of them, inasmuch as the Commissioner (Appeals) has rejected all of them and the same have been re-agitated in its second appeal before us. The detailed discussion thereof would follow henceafter.
3. We have heard the representatives of the parties at length in this appeal. The first point, argued on behalf of the assessee, was, that the liability to be treated as the assessee in default under Section 201 arose from the dates of actual payment of interest to the various non-residents and not from the dates of credit of the interest to their accounts. For this purpose Dr. Pal has led us through the detailed provisions contained in Sections 192, 193, 194, 194A, 194B, 194BB, 194Q 194D and 195 of the Act. It will be relevant to note that the liability for deduction of income-tax on the amount payable, at the average rate of income-tax computed on the basis of the rates in force in respect of salaries under Section 192, arises at the time of payment. Similarly, the words used in Sections 193, 194B, 194BB and 195 are "at the time of payment". As against this, the words used in Section 194A are "at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier". Similarly in Section 194 the words used are "at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier". Similarly, in Section 194D the words used are "at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier".
4. A perusal of these provisions would unmistakably reveal that the difference between credit and actual payment was alive to the mind of the Legislature. The Commissioner (Appeals) has rejected the assessee's contention on the ground that placing of money, unreservedly, at the disposal of the non-resident customers, as part of their current account or savings account or fixed deposit with the bank, was equivalent to payment. For that purpose he has gone to the extent of relying upon the meaning of the word "payment" as discussed in the famous English case of Garforth (Inspector of Taxes) v. New Smith Stainless Ltd.  2 All ER 73, and the observations from the judgment of Rowlatt, J. in Inland Revenue Comrs. v. Doncaster  8 TC 623 at page 631. To our mind, he has gone much beyond the words used in the Act itself. What we would like to point out is that not only the Legislature has sought to draw distinction between the words payment and credit ; they have also made a difference regarding the various modes of payment. For example, in Section 194A, the words used are "payment thereof in cash or by issue of a cheque or draft or by any other mode", but these are also the words used in Sections 194C and 194D. Again in Section 194, itself, where there is no reference of the term "credit", the words used again are "payment in cash or before issuing any cheque or warrant in respect of any dividend". As against all these words, the words used in Section 195 are only "at the time of payment". So, prima facie, this means payment not only by the issue of a cheque or draft or any other mode but means actual payment. Our view, in this behalf, finds support from the judgments of the House of Lords in Paton (Fenton's Trustee) v. IRC  6 ITR 644 (HL) and IRC v.Oswald  13 TTR 39 (HL) and from the decision of the Hyderabad High Court in CIT v. Nagaria Oil Mills  25 ITR 258.
5. One may pose a question as to why we have taken such an extreme view of the matter. In ordinary parlance, placing of money at the disposal of a party would amount to payment, but as we see that the Legislature itself has chosen to use different words in cognate sections, there must be some intention behind it and there is at least one apparent reason for this. While there would be no difficulty in the case of the persons to whom the payments have to be made in accordance with the provisions of Section 194D, in case of non-residents, the mere placing of the money at the credit of the party would not be sufficient, because before the money can actually be transmitted to the non-residents some kind of sanction or authorisation is necessary under the Foreign Exchange Regulations Act and the Reserve Bank of India Act.
Therefore, the Legislature advisedly used the words "payment" and not "credit" or "payment by issue of a cheque or draft or any other mode" in this section.
We are, therefore, of the opinion that prima facie the argument of the representative of the assessee that the liability under Section 195 arises from the actual dates of payment to the non-residents and not from the dates from which the interest was credited to their accounts, is to be accepted.
6. This, however, would not invalidate the orders passed by the authorities below altogether. As is apparent from the relevant discussion by the ITO, the assessee-bank did not furnish the particulars prescribed in the Rules. Thereafter, he asked the assessee to furnish the particulars, i.e., the dates of credit of interest as well as payment of interest to the nonresidents. While the assessee took an objection that the obligation to deduct tax under Section 195 arose only at the time of payment, it also pointed out the physical impracticability of providing particulars in respect of each account of the non-resident customers which, according to it, were very large. The fact of the payment of this interest to the various parties was well within the knowledge of the assessee. The order of the ITO is quite clear that, in respect of some accounts, the moneys have been remitted to the non-residents. In one case, interest was remitted to Lloyds Bank, London. In another case, of Miss Anita Basak, she made withdrawals from the credit balance soon after the interest had been credited to her savings bank account by the Netaji Subhas Road Branch.
In the case of H.N.H.D. Mello, interest amounting to Rs. 4,120 was credited in the fixed deposit account and remitted to his current account through the Bank of Scotland. So payments have certainly been made, at least, to some of the non-residents. In the peculiar circumstances of the case, it was primarily the duty of the assessee-bank to give the actual dates of payment to the non-residents if it wanted to avoid the liability on the ground that mere credit of amounts in favour of such parties was not sufficient for the purpose of Section 195. Since it has failed to do so, prima fade, the ITO was left with no alternative but to treat the dates of credit itself as the dates of payment. Anyhow, since the authorities below have proceeded upon an interpretation of law which we have not accepted, we direct that the assessee shall be at liberty to, once more, point out to the ITO that the actual dates of payments of the amounts, referred to by him, were different from the dates of credit and if it is in a position to do so, the interest under Section 201(1A) would be liable to be reduced accordingly. It needs, however, to be pointed out, at the cost of repetition, that the responsibility for proving the difference between the date of credit and the date of actual payment would be primarily that of the assessee. Of course, in cases where there has been no payment, no question of levying interest would arise at all.
7. The next point, argued on behalf of the assessee, was that the provisions of Section 195 would not be applicable to the present case because the case of the present assessee falls within Section 163 of the Act, inasmuch as the non-residents had received income directly from the assessee and, therefore, the assessee is an agent for the purpose of the Act. Therefore, according to Section 163, it being liable to pay income-tax on the interest credited to the accounts of the non-residents as an agent, Section 195 was not applicable. We are afraid, this argument has little substance. The mere fact that the assessee would fall within the ambit of "agent", as contemplated by Section 163, does not necessarily mean that in all cases, the assessee must be treated as an agent. A non-resident may pay the tax payable by him on his own accord. In such a case there would be no necessity of treating any body as an agent and making an assessment upon him.
According to Sub-section (2) of Section 163 no person shall be treated as the agent of a non-resident unless he has had an opportunity of being heard by the ITO as to his liability to be treated as such. A perusal of the language of this section will show that the discretion to treat any person as the agent of a non-resident is vested in the ITO. The mere fact that he falls within the ambit of Section 163 does not always mean that he is bound to be treated as such. On behalf of the assessee it was contended that whether the ITO chooses to treat him as an agent or not is immaterial. The fact remains that he is liable to pay income-tax on the interest in question as an agent within the meaning of Section 163. We are not inclined to accept this contention.
The heading of Section 163 is "Who may be regarded as agent" and not "Who shall be regarded" as such. Therefore it is not absolutely necessary that the assessee must be regarded as an agent. Again Chapter XVII relates to "Collection and Recovery of Tax", whereas Section 163 forms part of Chapter XV which relates to "Liability in Special Cases".
Whether a person would be liable as an agent or not would depend on a number of other circumstances. The mere fact that he comes within the scope of Section 163, would not always result in his automatic liability as an agent. As against this the duty to deduct income-tax is part of the scheme for collection and recovery of taxes and it is one of the modes of recovery. According to Section 202 of the Act the power to levy tax by deduction, under Sections 192 to 194, 194A, 194B, 194BB, 194C, 194D and 195, is to be without prejudice to any other mode of recovery, so that, even if it is possible to resort to recover the disputed tax by any other mode, the provisions of this Chapter can be made applicable at the discretion of the ITO concerned. We, therefore, overrule this part of the assessee's argument.
8. The last argument in this behalf was that the recovery in question is time barred. For this purpose reliance has been placed upon Section 231 of the Act, according to which no proceedings for recovery of any sum payable under this Act shall be commenced after the expiration of one year from the last day of the financial year in which the demand is made or in the case of a person who is deemed to be an assessee in default under any provision of this Act, after the expiration of one year from the last day of the financial year in which the assessee is deemed to be in default. Now the present dispute relates to the amounts credited to the accounts of the non-residents between 1-4-1969 and 31-12-1973. According to Section 201 the assessee should be deemed to be in default in respect of the tax to be deducted in the year in which credit was given to the non-resident and, therefore, recovery for all the years in dispute would apparently be time barred. For this proposition, reliance was placed upon two judgments of the Calcutta High Court itself in CIT v. Eyre Smelting P. Ltd.  114 ITR 51 and CIT v. Dunlop Rubber Co. (India) Ltd.  121 ITR 476. Reference was also made to a view taken by the Tribunal, "A" Bench, Calcutta in IT Appeal Nos. 4061 to 4075 (Cal.) of 1977-78 decided on 7-5-1979. It was contended that, since the right to recover the original tax by treating the appellant to be an assessee in default had already become time barred, no interest on it could be recovered by the revenue. This argument again seems to lose sight of certain other salient features of the case. Firstly, Section 231 only bars the remedy of recovery and does not extinguish the right. According to Section 232 of the Act, the several modes of recovery specified in this Chapter shall not affect in any way any other law for the time being in force relating to the recovery of debts due to the Government, or the right of the Government to institute a suit for the recovery of the arrears due from the assessee. The ITO, or the Government, as the case may be, are within their rights to have recourse to any such law or institution of suit notwithstanding that the tax due was being recovered from the assessee by any mode specified in this Chapter. Secondly, without prejudice to the provisions of Sub-section (1 A) of Section 201, if any person, as is referred to in that sub-section, does not deduct or after deducting fails to pay tax as required under this Act, he or it shall be liable to pay simple interest on the amount of such tax from the date on which such tax was deductible to the date on which such taxis actually paid.
Now, the question of computation of interest would come in only when the tax is actually paid. It may be that the tax is not paid in accordance with the provisions of Chapter XVII of the Act but recovered in some other manner as contemplated by Section 232. In such a case the liability to pay interest under Section 201(1A) would nevertheless be there because that liability is without prejudice to the provisions of Sub-section (1) of Section 201. If any authority is required for this purpose, we may refer to the decision of the Gauhati High Court in CIT v. Shyam Sundar Tea Co. (P.) Ltd.  114 ITR 116 which is directly in point. In this case, certain dividends had been declared by the assessee but the tax deducted therefrom had not been paid to the Government account. The ITO, therefore, treated the principal officer of the company to be an assessee in default under Section 201(1) and levied penalty under Section 221 of the Act. The assessee's appeal before the AAC was dismissed but on a further appeal to the Tribunal, it was held that the order of penalty with respect to certain years was bad in law inasmuch as the amounts of tax were not recoverable under the provisions of the Act. On a reference, the High Court overruled the view taken by the Tribunal and held that the penalty could be imposed on the facts and circumstances of the case and the Tribunal was not justified in cancelling the same on this ground.
9. It was contended that this judgment should be deemed to have been overruled by the Calcutta High Court decision in Dunlop Rubber (supra), but the said decision does not relate to penalty at all. Similarly, the judgment of the Tribunal on which great emphasis was laid was only to the effect that the recovery proceedings initiated by passing of the orders under Section 201(1) were only barred by limitation. The question of levy of interest under Section 201(1 A) was not considered by any of these authorities. This apart, as we have observed in para 6, the interest is to be calculated from the date the assessee made actual payment of the interest to the non-resident constituents. Therefore, we cannot say that the right to recover the original amounts has altogether been barred because the dates of actual payment had yet to be ascertained as argued by the assessee's representative himself.
Moreover, the interest is to be considered up to the date of payment and obviously the limitation prescribed by the Section 231 cannot be applicable to the levy of interest under Section 201(1 A), which only provides for the liability to pay interest, because the computation of interest could only be made after the tax itself had been deposited to the Government's credit.
10. In the result, the appeal by the assessee is dismissed subject to the observations made in para 6 above.
1. I agree with the conclusions reached by my learned brother, but I would like to make a few observations.
2. The assessee contended that Section 195 is not applicable to persons who are liable to pay income-tax as an agent. The learned counsel for the assessee then referred to Section 163(1)(c) which prescribes that a person from or through whom the non-resident is in receipt of any income, whether directly or indirectly, can be regarded as an agent.
The argument was that various non-residents receive income by way of interest from the bank and, thus, the bank becomes their agent. The bank is liable to be assessed as an agent of the non-residents and as such, applicability of Section 195 to the assessee-bank is ruled out.
3. Section 195 states that any person responsible for paying interest for a non-resident has to deduct tax thereon unless he is himself liable to pay tax as an agent. Thus, if the payer is not liable to deduct tax from the interest paid to the non-resident, since the payer is to be treated as an agent; the question arises as to who is to deduct tax under Section 195 since every person paying interest to the non-resident automatically becomes the agent of the non-resident.
Section 195 will be rendered otiose and unworkable. Since the section has to be interpreted in a manner that is workable, we have to hold that the provisions of Section 195 with regard to the agents of non-residents would apply only to such persons who have actually been declared as agents by the ITO after issuing notice under Section 163(2).