JUDGMENT
D.K. Seth, J.
1. Learned counsel for the appellant points out that this appeal involves a substantial question of law. There cannot be any computation of interest payable under Section 201(1A) of the Income-tax Act, 1961, until there has been a deduction inasmuch as unless there is a deduction, there is no question of actual payment and unless there is an actual payment and the date of such actual payment is discernible, no interest can be levied under Section 201(1A) of the Act. According to him, there is no direct decision on this point except one by the Tribunal in Ess Kay Construction v. Asst. CIT [1997] 58 Taxman 32. Relying on this decision, he contended that interest under Section 201(1A) was not leviable because the date of payment of tax deducted at source being not known, the interest was incapable of being calculated. The language used in Section 201(1A) is different from the language used in Sections 220(2) and 221. Under Section 220(2) interest is chargeable from the date immediately following the end of the period mentioned in Section 220(1) and ending with the date on which the amount is paid. This shows that the concept of continuing default is in-built in the section. Similarly, in Section 221(1) there is in term a reference to a continuing default and the section empowers the Assessing Officer to levy penalty from time to time, so, however, that the total amount of penalty does not exceed the amount of tax in arrear. Section 201(1A), however, is not couched in similar terms as the other two sections referred to above and even if there is discrimination in favour of companies for paying the tax deducted at source such discrimination cannot be helped. In fact, such lacunae in laws abound. One has, therefore, to interpret the law as it is and not to add to or subtract therefrom. Where the computation provisions, which constitute an integral code with the charging section fail, interest is not chargeable under Section 201(1A). Learned counsel distinguished the decisions of this court in Grindlays Bank Ltd. v. CIT [1992] 193 ITR 457 and Grindlays Bank ltd. v. CIT [1993] 200 ITR 441; and relied upon the decision in CIT v. B. C. Srinivasa Setty .
2. The question is very simple. Section 201, Sub-section (1), provides that in case of failure to deduct or in case of failure to pay after deduction, the person shall be responsible for such deduction, or the principal officer in a case referred to under Section 194, shall be deemed to be an “assessee in default” in respect of the tax, though, however, he may explain such default on account of good and sufficient reasons in terms of the proviso thereto. In Sub-section (1) of Section 201(1A), it is provided that an “assessee in default”, if he fails to deduct or if he fails to pay after deduction, is liable to pay simple interest at 15 per cent. per annum on the amount of tax deductible from the date on which it was so deductible till the date it is actually paid. Sub-section (1A) is without prejudice to the provision of Sub-section (1). Therefore, in order to interpret Sub-section (1A) aid of Section 221 is not material. It has to be interpreted independent of it. The expression used in Sub-section (1A) is clear and unambiguous. It postulates liability to pay interest at the rate provided on the amount deductible as tax from the date on which such tax was deductible until it is actually paid, if the “assessee in default” does not deduct the tax. Similarly, the “assessee in default” is liable to pay interest in the same manner, if the “assessee in default” after deducting, fails to pay the tax. Non-payment of tax, on account of failure to deduct or on account of any other reason after deduction, makes the “assessee in default” liable to pay interest on the amount deductible made recoverable as a charge on the assets of the “assessee in default” under Sub-section (2). The charging of interest has been made continuous till it is actually paid. Under Section 202, deduction is only one of the modes of recovery of tax. The person from whose income the tax is deducted is an assessee. If an assessee is in default, various modes of recovery have been provided for in the Act itself. A legal fiction is created under Section 201 by a deeming clause that the person liable to deduct shall be the “assessee in default”. Section 206 makes the person responsible for deducting tax to furnish the prescribed return. Chapter XVII deals with collection and recovery of tax. Section 200 makes the person deducting to deposit the deducted amount of tax within the time prescribed. The deduction absolves the assessee from whose income the deduction is made from his liability to pay tax through legal fiction.
3. The use of the expression “shall” in Sub-section (1A) makes the liability to pay interest in the circumstances mentioned mandatory. Unlike Sub-section (1), no pre-condition of reasonable cause for non-payment of tax in time has been included in Sub-section (1A). Unlike the restriction provided for in Sub-section (1), Sub-section (1A) does not contain any restriction for charging interest thereunder. The provision of Sub-section (1A) is mandatory and automatic. The interest is payable from the date the tax was deductible till the date it is actually paid. The liability is absolute. It is obligatory for the Assessing Officer to charge interest upon non-compliance of any of the provision requiring deduction at source if noticed by him. It may be for failure to deduct or for failure to pay after deduction. The expression “actually paid” is the outer limit for the purpose of calculation of interest. If it is not paid within the period prescribed under Section 200, then the liability accrues and continues until the amount is actually paid voluntarily or non-voluntarily pursuant to or through recovery proceedings. The actual payment of tax is relevant only for the purpose of determining the period up to which a defaulting person would be liable to pay interest under that section. In CIT v. Darshan Trading and Finance P. Ltd. [1995] Tax LR 1203, 1205 (Guj), it was held that the liability to pay interest continues even after passing of the order, charging interest under Section 201(1A) if the amount of tax is actually paid later on. Interest can be charged irrespective of the fact whether the amount of tax due is deducted or not by the “assessee in default”.
4. In Grindlays Bank Ltd, v. CIT [1992] 193 ITR 457, 469 (Cal), it was held that a proceeding under Section 201 could be initiated and continued and interest thereunder could be recovered from the employer even where the assessee fails to deduct income-tax at source under Section 192 from furlough pay payable in terms of the contract of service paid to an expatriate officer of the assessee in sterling in the UK outside the territories of India. This decision was followed in Grindlays Bank Ltd. v. CIT . Therefore, it implies that if he has failed to deduct, still he has to pay as an “assessee in default” the amount of tax, and if he has deducted and failed to pay, he has to pay the tax. Therefore, the interest will be chargeable on both counts. The provision of Section 201 is as simple as that. It was so held in the two decisions in Grindlays Bank Ltd. v. CIT and [1992] 193 ITR 457 (Cal). The distinction sought to be made in respect of these two decisions does not seem to be sensible. Therefore, this case does not involve any substantial question of law for admission. The appeal is, therefore, dismissed.
5. All parties concerned are to act on a xerox signed copy on this order on the usual undertaking.
R.N. Sinha, J.
6. I agree.