1. The assessee has filed these appeals against the orders of the Commissioner (Appeals) upholding the levy of interest by the ITO under Section 201(1A) of the Income-tax Act, 1961 ('the Act'), for the delayed payment of tax into the Government treasury.
2. The assessee is a private limited company. During the years under consideration, the ITO was of the opinion that the assessee had delayed the payment of tax into the Government treasury which the assessee had deducted from the salaries paid to its employees. He, therefore, proceeded to calculate interest under Section 201(1A) from the date on which the salaries were payable to the employees to the date on which the tax was actually paid by the assessee into the Government treasury, on each occasion and demanded the same from the assessee.
3. The assessee appealed before the Commissioner (Appeals) in respect of the interest levied by the ITO for the years under consideration.
The main ground on which the assessee objected to the levy was that it was in extreme financial difficulties and, therefore, was not in a position to pay the taxes into the Government treasury as and when due under Section 192 of the Act. The Commissioner (Appeals), however, was of the opinion that the causes for the delay in the payment of taxes under Section 192 and, therefore, the reasonableness of the levy under Section 201(1A) were not justiciable. The Commissioner (Appeals), however, expressed no opinion on the assessee's alternative plea that if the interest was to be levied under Section 201(1A) it should be levied from the date on which the salaries were actually paid to the employees and thus the assessee became liable to pay the tax thereon into the Government treasury under Section 192.
4. The assessee is, therefore, in appeal before the Tribunal against the orders of the Commissioner (Appeals) on these issues. The learned counsel for the assessee has proceeded to argue that the order under Section 201(1A) is an appealable order and, therefore, the appellate authority had enough justification for going into the reasonableness of the causes which prevented the assessee from paying the taxes into the Government treasury under Section 192. In support of this plea, the learned counsel has relied on the Tribunal decision dated 3-2-1981 in IT Appeal Nos. 193 to 196 (Bom.) of 1980. In support of his alternative plea, the learned counsel has invited our attention to the provisions of Section 192, whereunder the assessee is liable to deduct income-tax.
According to the counsel, the deduction has to be made at the time of the 'payment' of the salary. The learned counsel has proceeded to invite our attention to the provisions of Section 194A of the Act, whereunder any person, who is responsible for paying to a resident any income by way of interest other than income chargeable under the head 'interest on securities' is obliged at the time of credit of such amount to the account of the payee or at the time of payment thereof in cash or in any other manner, deduct income-tax thereon at the rates in force. According to the learned counsel, under Section 192, the tax has to be deducted at the time of actual payment, whereas under Section 194A, the tax has to be deducted even when the amount of interest is credited to the payee's account. In the absence of such a specific provision, the ITO cannot proceed to levy interest from the date on which the salary was payable or was credited to the account of the employees. He has furnished before us the details of the actual payments of salaries to the various employees and the dates on which the taxes have been paid into the Government treasury, which were deductible from those salaries. This statement is also supplemented by production of the relevant cash book, ledger and personal accounts.
5. The learned departmental representative has relied on the provisions of Section 201(1A) in support of his contention that the levy of the interest is mandatory and the ITO has no choice in the matter of levy of the interest by reference to the assessee's financial circumstances or otherwise. As to the assessee's liability to pay interest, the learned departmental representative has relied on the Tribunal decision in IT Appeal Nos. 1058 to 1061 (Bom.) of 1980 for the assessment years 1975-76 to 1978-79 dated 2-4-1981 in the assessee's own case whereby the Tribunal had upheld the levy of the interest for these very years for non-payment of the taxes in the Government treasury in time.
6. We have carefully considered the facts and circumstances of the case and the submissions of the parties. On a reference to the provisions of Section 201(1A), we find that the ITO is under an obligation to levy interest for the delayed payment of taxes into the Government treasury.
The obligation is mandatory. The ITO has no choice in this respect. The order of the Tribunal in IT Appeal Nos. 193 to 196 (Bom.) of 1980 relied upon by the assessee, to our mind, does not clearly support the assessee's case that the reasonableness of the causes leading to the delayed payment of the taxes into the Government treasury are justiciable. Just because an appeal is provided against an order under Section 201(1A), it does not mean that the appellate authority can go into the reasonableness of the causes. All that the appellate authorities can look into is whether the circumstances prerequisite for the levy existed and whether the quantum of the levy was in order. The assessee's appeals on this ground are rejected.
7. In our opinion, however, the assessee is entitled to succeed on the alternative plea that the interest should be levied from the date of the actual payment of the salaries to the date of the payment of the taxes into the Government treasury. In our opinion, the provisions of Section 192 clearly laid down that the tax has to be deducted from the salary at the time of the 'payment' to the employee. There is considerable force in the argument on behalf of the assessee on the basis of Section 194A that where the Legislature desired that the tax was to be deducted even if the payment was merely credited to the payee's account to the date of the payment of the tax into the Government treasury, it had so provided. The language used in Section 192 refers merely to 'payment'. So long as the assessee does not pay the salary to the employee, it is not liable to deduct tax therefrom under Section 192.
8. Perhaps an argument can be made, based on the fact that the assessee in this case had credited the accounts of the respective employees on the dates on which the salary was due, with the amount of salary and thus it obtained deduction for the amount of salary in the determination of its total income. But such an argument is too puerile to be considered. In the first place, the accounts are kept by the assessee on mercantile basis for determination of the income under Section 143 of the Act for which purpose the assessee has to follow some system of accounting. If it is maintaining the books of account on mercantile system, the salary has to be credited to the accounts of the employees as and when it is due. But the tax has to be deducted when the actual salary is paid to the employee.
9. Our view in this respect is also supported by the Tribunal Calcutta Bench 'B' decision in the case of Grindlays Bank Ltd. v. ITO  1 ITD 1100. In the aforesaid decision dated 4-9-1981, the Calcutta Bench held that the words used in Sections 193, 194B, 194BB and 195 of the Act are 'at the time of payment' whereas those used in cognate sections like Sections 194C and 194D of the Act are 'at the time of credit'.
Thus, the difference between credit and actual payment was alive to the minds of the Legislature and word 'payment' was intentionally used in Section 195, for at least one reason, that in the case of nonresidents, the mere placing of money at the credit of the party would not be sufficient and some kind of sanction or authorisation was necessary under the Foreign Exchange Regulation Act or the Reserve Bank of India Act, before the money was actually transmitted to the nonresidents.
Hence, the assessee's contention that the liability to deduct tax arose under Section 195 only from the actual date of payment to non-resident is to be accepted.
10. In the circumstances, we hereby restore the matter to the file of the ITO for recomputation of the interest under Section 201(1A) from the date on which the salaries were actually paid to the employees to the dates on which the taxes thereon were paid by the assessee into the Government treasury.