Sumac International (P) Ltd. vs Inspecting Assistant ...
2007 Latest Caselaw 2011 Del

JUDGMENT

Pradeep Nandrajog, J.

1. Petitioners have been imp leaded as accused in a complaint filed by Shri A.K. Fotedar, IAC, IT Department, Government of India under Section 276B of the IT Act.

2. Petitioner of Criminal Misc. Case No. 3248 of 2002 is accused No. 1. Petitioners of Criminal Misc. Case No. 307 of 2003 are the directors of the first accused, i.e. the company.

3. Gravemen of the allegations in the complaint are that pertaining to the asst. yr. 1983-84, the company and its directors violated the provisions of the IT Act pertaining to deduction of tax at source, in that, Rs. 2,25,690 which had to be deducted as tax at source under Section 195(1) of the IT Act was not fully deposited in the treasury and only Rs. 86,340 was deposited with the treasury.

4. According to the petitioners the tax at source had to be deducted and deposited only at the time of making payment and not when money was credited to the account of the person to whom it was to be paid and that in respect of the transaction in question it had to pay royalty to a foreign national. For the assessment year in question, total royalty payable was Rs. 6,42,376.40 per cent of the royalty had to be deducted at source, i.e. Rs. 2,25,690 had to be deducted. That the RBI did not give permission to remit the money to the foreign company and hence notwithstanding the company having credited Rs. 6,42,376 payable towards royalty since none was actually paid, nothing had to be paid to the Government Treasury. Petitioners explain having deposited Rs. 86,340 as an erroneous deposit of tax at source at their end.

5. Section 195(1) of the IT Act, 1961 as existing in the asst. yr. 1983-84 reads as under:

195(1) Any person responsible for paying to a non-resident, not being a company, or to a company which is neither an Indian company nor a company which has made the prescribed arrangements for the declaration and payment of dividends within India, any interest, not being interest on securities, or any other sum, not being dividends, chargeable under the provisions of this Act, shall, at the time of payment, unless he is himself liable to pay any income-tax thereon as an agent, deduct income-tax thereon at the rates in force:

Provided:....

Provided further:....

6. The aforesaid provision was amended in the year 1987. As amended, Section 195(1) reads as under:

195. (1) Any person responsible for paying to a non-resident, not being a company, or to a foreign company, any interest (not being interest on securities) or any other sum chargeable under the provisions of this Act (not being income chargeable under the head 'Salaries' shall, 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 the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force.

Provided:....

Provided further:....

7. A bare perusal of Sub-section (1) of Section 195 as it existed in the asst. yr. 1983-84 reveals that tax had to be deducted at source at the time of making payment to the payee. In 1987, the provision was amended making it mandatory to deposit with the IT authorities the tax at source at the time amount was credited to the account of the payee.

8. In the complaint filed by IT authorities there is no averment that the accused persons made any payment to M/s Fabcon Inc., the foreign company to whom royalty was payable. Only averment is that the accused company debited Rs. 2,25,690 as the royalty payable to said American company.

9. In that view of the matter, in view of the legislative provision in force as of the asst. yr. 1983-84, ex facie, no offence has been disclosed as having been committed by the petitioners.

10. I thus dispose of the petitions quashing the order dt. 19th Feb., 2001 passed by the learned Metropolitan Magistrate summoning petitioners to face trial. I also quash criminal complaint being Complaint No. 1783 of 1987.

No costs.