ORDER
Per T. N. C. Rangarajan, Judicial Member – These appeals are directed against the levy of interest under section 201(1A) of the Income-tax Act, 1961.
2. The assessee is a registered firm. In making the assessment for the assessment years 1982-83 and 1983-84, the Income-tax Officer found that the assessee had not deducted tax at source while paying interest on capital borrowed. He, therefore levied interest under section 201(1A) of the Income-tax Act. This was confirmed in appeal.
3. In the further appeal before us it is not in dispute that the assessee was liable to deduct interest and it had failed to do so and, therefore, prima facie interest is chargeable under section 201(1A) of the Act. However, the assessee has taken a technical plea that the wording of this section does not extend to a person who has failed to deduct the tax. The argument is as follows : Sub-section (1A) states that if any such person, does not deduct or after deducting fails to pay the tax as required by the Act he shall liable to pay interest. Since the words such person has not been defined (even though it occurs in section 201(1) also, we have to refer to the immediately preceding section 200 which refers to any person deducting any sum in accordance with the provisions of sections 192 to 194 imposing a duty on him to pay the sum deducted within the prescribed time. It was submitted that if words such person refers only to the persons referred in section 200, those persons are those who have deducted the tax and delayed in making payment and not those who have failed to deduct the tax. Hence, such person does not take into account the persons who fail to deduct the tax. It was argued that section 201 refers to two separate offences, viz. failing to deduct, and failing to pay the tax after deduction. The second is a greater offence since it refers to the mis-use of the funds collected on behalf of the revenue and unless there is an express intention to treat the offences pari materia, interest, which is of a penal nature cannot be imposed on a person who has not committed an equally serious offence. On the other hand, it was contended on behalf of the revenue that in the context of section 201 the expression “such person” would refer to all persons liable to deduct tax under the provisions of sections 192 to 194.
4. On a consideration of the rival submissions, we are of the opinion that the plea of the assessee is highly technical. No doubt section 201 refers to “such person” and since this expression does not occur earlier in any other section under this Chapter, we have to look into the scheme of the Chapter including in particular the sections 200 and 204 to understand the meaning of section 201. Section 200 refers to the duty of a person deducting the tax under sections 192 to 195 to pay it within the prescribed time to the credit of the Government and the following section 201 lays down the consequences of failure to carry out that duty. In the context, therefore, it can only mean that such person is a person who is liable to deduct the tax and does not get narrowed down to mean only such persons who have actually deducted the tax. This view is strengthened by a reference to section 204 which defines “person responsible for paying” in the case of a credit as the payer. Therefore, by necessary implication “such person” in section 201(1A) is “the person who is responsible for paying” referred to in section 204. The argument of the assessee is that there cannot be any intendment in a charging section unless there is an explicit reference to the person who is to be charged interest. But we are of the opinion that the intendment can exist even by necessary implication if it does not result in any violence to the language of the section. Since the attempt should be read a section so as to achieve the object rather than defeat its purposes, we are of the opinion that the words such person must be read as reference to the person responsible for paying referred to in section 204 which will include the assessee, and hence the charging of interest was valid. Since the assessee had not put-forth any other plea, the order charging interest is up-held.
5. For the assessment year 1982-83, there is another ground relating to the addition of Rs. 4,284 being interest due from M/s. Sakthi & Company. The contention of the assessee was that it had taken interest free loan from M/s. Sakthi & Company, but the Income-tax Officer disallowed the interest paid to third parties to the amount borrowed on the ground of diversion of the borrowed capital. It is stated the same view taken for the earlier assessment year has been up-held by the Tribunal in ITA No. 112/79. In the circumstances, this point is also rejected.
6. In the result, the appeals are dismissed.