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Grindlays Bank Ltd. v. Commissioner Of Income-Tax

Calcutta High Court

Sep 11, 1989

Judgment

Subsequent
References

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Factual and Procedural Background

The Tribunal referred four questions of law to this Court under section 256(1) of the Income-tax Act, 1961, on the assessee's request. The factual matrix, as set out in the statement of case, is that a bank (the assessee) carrying on banking business in India credited interest on savings and fixed deposits to a number of non-resident customers. The Income-tax Officer (ITO) found that tax deducted from such interest had not been credited to the Government within the time permitted under rule 30 of the Income-tax Rules, 1962, in respect of 24 branches. After inquiries, the bank paid the tax, but for one branch the tax so paid amounted to Rs. 4,54,979. The ITO required particulars, including dates of credit of interest and dates of payment to Government; the bank objected, contending that the duty to deduct under section 195 arises only on payment (not on credit) and that furnishing particulars for thousands of accounts was impracticable. The ITO, on scrutiny and test-checks of account movements and in view of the bank having debited customers' accounts with tax, concluded there was default in crediting tax to the Government within rule 30 timelines and levied interest under section 201(1A), calculating interest of Rs. 4,06,013 and issuing a demand notice.

The bank's appeal to the Appellate Assistant Commissioner was dismissed and it appealed to the Tribunal. The Tribunal rejected the bank's contention that section 195 did not apply because the bank was an agent/representative assessee and concluded that liability under section 195 arises on actual payment dates; it left open the possibility for the bank to show actual payment dates to the ITO and placed the primary burden of proving the difference between credit dates and actual payment dates on the assessee. The Tribunal also rejected the contention that recovery was time-barred.

Legal Issues Presented

Whether, on the true and proper interpretation of section 195 of the Income-tax Act, 1961, the assessee was itself liable to pay any income-tax in respect of interest paid to its customers as an agent and whether, on the facts and circumstances, the assessee was liable to deduct income-tax on such interest under section 195?
Whether, on the facts and in the circumstances and on a true and correct interpretation of section 201(1A) of the Act, the assessee-bank was liable to pay any interest under section 201(1A) when, admittedly, the amount of interest in respect of which the tax is to be deducted in the year in which the credit was given to the non-resident had become time-barred?
Whether the Tribunal was correct in law in holding that it was primarily the duty of the assessee-bank to give the actual dates of payments to the non-resident if it wanted to avoid liability on the ground that they were different from the dates of credit and, consequently, in not accepting the assessee's appeal in its entirety?
Whether the Tribunal was justified in not quashing the order of the Income-tax Officer under sub-section (1A) of section 201 and instead sending it back to the ITO with directions to ascertain cases where interest had been paid by the bank but tax had not been deducted and deposited, and charge interest under section 201(1A) only in respect of such cases?

Arguments of the Parties

Assessee's Arguments (as recorded)

The duty to deduct tax under section 195 arises only at the time of payment to the non-resident, not at the time of credit of interest to the account.
The bank functioned as an agent (representative assessee) for non-resident depositors; under sections 161 and 163 the bank was liable to be assessed as representative assessee and to pay income-tax on interest income as agent, so that section 195 would not apply.
The bank submitted that it was physically impracticable to provide particulars for each non-resident account (which might exceed five thousand accounts), although it provided totals and dates when tax was ultimately paid to Government.
The recovery sought by the Revenue had become time-barred (contention that the right to recover tax treating the appellant as an assessee in default had become time-barred for credits between 1.4.1969 and 31.12.1973).
Reliance was placed on Bunge and Co. Ltd. v. ITO ([1971] 79 ITR 93 (Cal)) in support of the contention that the bank should not be proceeded against simultaneously as agent under sections 160–163 and as an assessee-in-default under sections 195–201.

Revenue / Income-tax Officer / Tribunal Positions (as recorded)

The ITO found that tax deducted from interest was not credited to the Government within rule 30 timelines for 24 branches, and levied interest under section 201(1A), computing Rs. 4,06,013 as interest due.
The ITO's enquiries showed interest had been credited to parties' accounts and in many instances transferred or remitted, and that the bank had debited customer accounts with tax, indicating awareness of duty to deduct and no reason why tax should not have been credited timely.
The Tribunal rejected the bank's contention that it was an agent for all non-resident depositors and held section 195 applied; it held liability under section 195 arises from actual dates of payment to non-residents (not dates of credit), but left the orders of authorities below intact while permitting the assessee to point out actual payment dates to the ITO to seek reduction of interest; the Tribunal placed the primary burden on the assessee to prove differences between credit dates and payment dates.
The Tribunal also rejected the time-bar argument, observing that section 231 bars a mode of remedy but does not extinguish the right; section 232 preserves other recovery modes and the right to institute suits; and that liability to pay simple interest under section 201(1A) arises when tax is actually paid, so computation depends on actual payment dates.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
CIT v. Shyam Sundar Tea Co. Pvt. Ltd., [1978] 114 ITR 116 (Gauhati)	Authority for the proposition that liability to pay interest under section 201(1A) can exist even where tax is recovered by some other mode and that section 231 bars a remedy but does not extinguish the right to recover; supports that interest under s201(1A) is payable from the date tax was deductible to the date actually paid.	The Tribunal (and the Court in its discussion) referred to this decision as directly in point to reject the assessee's time-bar argument and to support the view that interest under s201(1A) remains payable even if recovery of the principal tax might be affected by limitation in one mode.
Bunge and Co. Ltd. v. ITO, [1971] 79 ITR 93 (Calcutta)	Held that the same person cannot be treated as an agent under section 163 and simultaneously proceeded against under section 201; the two groups of sections (160–163 and 195–201) are mutually exclusive in operation unless the authorities elect which route to follow.	The Court treated this precedent as going against the assessee's contention that the bank could simultaneously be treated as agent (representative assessee) and be relieved of duties under section 195; the Court noted that in the present case the ITO had not proceeded under sections 160–163, so the Bunge principle did not negate the ITO's action under sections 195–201.
Grindlays Bank Ltd. v. Commissioner Of Income-Tax (Income-tax Reference No. 154 of 1983), judgment of this Court dated 5.9.1989 — reported [1992] 193 ITR 457	Principles laid down in that judgment (as applied to issues concerning section 201(1A) and related procedural questions).	The Court concluded that Questions Nos. 2 and 4 should be answered in the affirmative and in favour of the Revenue in view of the principles laid down in the Grindlays Bank judgment; the present reference applied that prior judicial reasoning to the time-bar and scope-of-recovery issues in this case.

Court's Reasoning and Analysis

The Court's analysis proceeded in discrete stages, closely following statutory language and the factual record:

Interpretation of section 195(1): The Court recited section 195(1), noting that any person responsible for paying interest to a non-resident must, at the time of payment, deduct income-tax unless he is himself liable to pay the tax as an agent. The Court emphasized that the exemption from the deduction duty (i.e., the person being liable as agent) does not arise automatically; it depends on steps taken by the Income-tax Officer to treat the person as an agent and to assess him as a representative assessee.
On the bank's claim to be a representative assessee (sections 161 and 163): The Court examined sections 161 and 163, observing that, while a representative assessee may be treated as liable for the income of the person represented, the liability to be so treated requires the Income-tax Officer to initiate proceedings under sections 160–163. Section 163(2) was noted to require that no person be treated as agent of a non-resident unless afforded an opportunity to be heard by the ITO. In the present case no assessment proceedings treating the bank as representative assessee had been initiated by the ITO.
Consequence for section 195 duty: Because the ITO had not proceeded to treat the bank as agent or to assess it as a representative assessee, the Court concluded there was no present liability on the bank to pay tax on behalf of the non-resident depositors; therefore, the bank's obligation to deduct tax under section 195 remained intact.
On the time-bar and section 201(1A): The Tribunal's reasoning was endorsed in part. The Court highlighted the Tribunal's reliance on sections 231 and 232: section 231 may bar a particular mode of recovery but does not extinguish the underlying right; section 232 preserves other modes of recovery and the Government's right to institute suits. The Tribunal (and the Court) reasoned that liability to pay simple interest under section 201(1A) arises where a person who fails to deduct or, after deducting, fails to pay the tax is liable to interest from the date the tax was deductible to the date it is actually paid. Computation of interest depends on the date tax is actually paid; recovery might proceed by other modes notwithstanding limitation under a specified mode. The Court cited the Gauhati High Court decision in CIT v. Shyam Sundar Tea Co. Pvt. Ltd. as directly in point to sustain that view.
On reliance upon Bunge and the mutual exclusivity argument: The Court analyzed Bunge and held that its reasoning supported the proposition that authorities should elect whether to proceed under the group of sections 160–163 (agent/representative assessee route) or under 195–201 (deductor/assesse-in-default route). In Bunge the authorities had not made an election and had improperly combined approaches; the present case, by contrast, involved only proceedings under sections 195–201 with no action under 160–163 having been taken by the ITO, so Bunge did not avail the assessee.
Final application to the referred questions: The Court found the assessee's contention that it was itself liable as agent (thereby absolving it from duty to deduct under section 195) to be misconceived because the ITO had not proceeded to treat the bank as representative assessee. Accordingly, Question No. 1 was answered in the affirmative in favour of the Revenue (i.e., section 195 duty to deduct remained). Questions Nos. 2 and 4 were decided in the Revenue's favour by application of this Court's earlier Grindlays Bank Ltd. judgment. Question No. 3 was not pressed by the assessee and therefore was not answered.

Holding and Implications

Core Rulings:

Question No. 1: Answered in the affirmative and in favour of the Revenue — the assessee-bank did not, on the facts before the Court, have a present, automatically invoked liability to pay income-tax as an agent such that its duty to deduct under section 195 would be displaced, because the Income-tax Officer had not proceeded to treat the bank as a representative assessee under sections 160–163.
Questions Nos. 2 and 4: Answered in the affirmative and in favour of the Revenue — these questions were concluded by reference to this Court's earlier judgment in Grindlays Bank Ltd. (judgment dated 5.9.1989, reported [1992] 193 ITR 457), applying its principles to sustain the Revenue's position on recovery/interest under section 201(1A).
Question No. 3: Not pressed by the assessee and therefore no answer was given by the Court.

Implications (limited to what is stated in the opinion):

The bank's statutory duty to deduct tax under section 195 remains operative in the absence of formal steps by the Income-tax Officer to treat the bank as a representative assessee under sections 160–163.
The Revenue's entitlement to levy interest under section 201(1A) was upheld in principle as compatible with the view that section 231 does not extinguish the right of recovery and that interest is computed from the date tax was deductible to the date it is actually paid; the Court applied prior authority (Grindlays Bank Ltd.) to answer Questions 2 and 4 in the Revenue's favour.
The Court made no order as to costs.

Note: This summary faithfully reflects only the information and reasoning contained in the provided opinion. No information has been added beyond what appears in the text.

Show all summary ...

Suhas Chandra Sen, J.:— The Tribunal has referred the following questions of law to this court at the instance of the assessee under section 256(1) of the Income-tax Act, 1961:

“(1) Whether, on the true and proper interpretation of section 195 of the Income-tax Act, 1961, the assessee was itself liable to pay any income-tax in respect of interest to be paid to its customers as an agent and whether, on the facts and in the circumstances of the case, the assessee was liable to deduct income-tax on such interest under section 195 of the Income-tax Act, 1961?

(2) Whether, on the facts and in the circumstances of the case and on a true and correct interpretation of section 201(1A) of the Act, the assessee-bank was liable to pay any interest under section 201(1A) when, admittedly, the amount of interest in respect of which the tax is to be deducted in the year in which the credit was given to the non-resident had become time-barred?

(3) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that it was primarily the duty of the assessee-bank to give the actual dates of payments to the non-resident if it wanted to avoid liability on the ground that they were different from the dates of credit and, consequently, in not accepting the assessee's appeal in its entirety?

(4) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in not quashing the order of the Income-tax Officer under sub-section (1A) of section 201 and instead sending it back to the Income-tax Officer with the direction that he should ascertain the cases in which interest had been paid by the bank and yet tax had not been deducted by the bank in respect of the said interest and deposited in the Government Treasury and charged interest under sub-section (1A) of section 201 in respect of such cases only?”

2. The facts narrated in the statement of case are as under:

“The assessee is carrying on the business of banking 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 number of non-resident customers. The Income-tax Officer 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. 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 Income-tax Officer 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 July 1, 1974, alleging that the obligation to deduct tax under section 195 arises 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 non-resident 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 Income-tax Officer, on further scrutiny and test-check, 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 or 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 in a fixed deposit account and this was remitted to the party through the Bank of Scotland. There were also similar credits and pay-ments in respect of the branch at 19, Netaji Subhas Road, Calcutta. The Income-tax Officer also noticed that the bank itself had chosen to deduct tax from such interest and had debited the accounts of the parties con-cerned with such tax from which it was evident that the assessee was aware of its liabilities to deduct tax therefrom. Apparently, there was no reason as to why tax should not have been credited to the Government as per 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 of the Income-tax Rules, 1962. He, therefore, levied interest for delayed payment under section 201(1A) of the Income-tax Act, 1961. 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”.

3. Being aggrieved by the order of the Income-tax Officer, the assessee went up in appeal before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner, however, dismissed the appeal. The assessee preferred a further appeal to the Tribunal. The assessee contended before the Tribunal that the provisions of section 195 of the Income-tax Act would not be applicable to the present case because the non-resident had received incomes by way of interest directly from the assessee and, therefore, the assessee was an agent for the purpose of the Income-tax Act. Therefore, it was liable to pay income-tax on the interest credited to the accounts of non-residents as an agent and, consequently, section 195 of the Income-tax Act was not at all applicable. The Tribunal rejected this contention. The second plea raised by the assessee was that the recovery in question had become time-barred.

4. This controversy relates to the amounts credited to the accounts of the non-residents between April 1, 1969, and December 31, 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 was time-barred. It was contended that since the right to recover the 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 again was rejected by the Tribunal with the following observation:

“This argument again seems to lose sight of certain other salient features of the case. First, section 231 only bars the remedy of recovery and does not extinguish the right. According to section 232, 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 Income-tax Officer or the Government, as the case may be, are within their rights to have recourse to any such law or 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), if any person as is referred to in that sub-section does not deduct or after deducting fails to pay the 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 tax is 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 Income-tax Act but recovered in some other manner as contemplated by section 232 of the Act. 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. Pvt. Ltd., [1978] 114 ITR 116 (Gauhati) which is directly in point.”

5. The last dispute relates to the assessee's liability to pay interest on the amounts for which it was to be treated as an assessee in default under section 201 of the Income-tax Act and the dates from which it was payable. The Tribunal concluded that the liability under section 195 arose from the actual dates of payment to the non-residents and not from the dates from which the interest income had been credited to their accounts. However, the Tribunal did not altogether cancel the orders passed by the authorities below but it only observed that the assessee would be at liberty to point out to the Income-tax Officer that the actual dates of payment of the amounts referred to by him were different from the dates of the credit in the account of the non-resident and that the interest under section 201(1A) would be liable to be reduced accordingly. The Tribunal, however, was of the opinion that the responsibility for proving the difference between the dates of credit and the dates of actual payment was primarily on the assessee.

6. It has been argued by Dr. Pal that, having regard to the provisions of section 195, there was no liability on the assessee to deduct tax at source. It has been argued that the assessee had a business connection with the depositors. Any interest credited to the account of the business creditor can be assessed by treating the assessee as a representative assessee. My attention was drawn to section 161 of the Act which makes every representative assessee subject to the same duties, responsibilities and liabilities as if the income in respect of which he is a representative assessee were income received by or accruing to or in favour of him beneficially. A representative assessee shall be liable to assessment in his own name in respect of that income. The tax should be levied upon and recovered from the representative assessee in like manner and to the same extent as it would be leviable upon and recoverable from the person represented by him. It has been argued that under section 163, an “agent” in relation to a non-resident will include any person in India who, inter alia, has any business connection with the non-resident or from whom or through whom the non-resident is in receipt of any income, whether directly or indirectly. Therefore, the assessee-bank is clearly a represen-tative assessee in respect of the deposits kept by non-resident persons in the assessee-bank. The interest on those deposits is payable to the non-residents by the assessee-bank. Therefore, the assessee is liable to be assessed under the provisions of section 161 in respect of the income accruing or arising to the non-resident as if he was the assessee in respect of that income. Therefore, by virtue of the provisions of section 161 read with section 163, the assessee is liable to be assessed and to pay tax in respect of the interest income which had accrued or arisen to the non-residents who had deposits with the assessee-bank.

7. It has been argued that, having regard to the provisions of section 195 of the Income-tax Act, since the assessee is a statutory agent and as such is liable to pay income-tax on the interest income of the non-resi-dents as an agent, it has no duty to deduct income-tax from any interest income of the non-residents.

8. In support of this contention, reliance was placed on the judgment of this court in the case of Bunge and Co. Ltd. v. ITO, [1971] 79 ITR 93 (Cal).

9. In my view, this argument is entirely misconceived. Section 195(1) provides as follows:

“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 that nothing in this sub-section shall apply to any payment made in the course of transactions in respect of which a person responsible for the payment is deemed under the proviso to sub-section (1) of section 163 not to be an agent of the payee:

Provided further that the deduction of income-tax from any sum, being income chargeable under the head ‘Capital gains’ relating to capital assets other than short-term capital assets, paid 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, shall be of an amount equal to the amount of income-tax on such sum calculated in accordance with the provisions of clause (i) of section 115.”

10. Thus, it will be seen that the liability has been foisted upon any person responsible for paying to a non-resident, inter alia, any interest, not being “interest on securities”, to deduct income-tax thereon at the rates in force. This liability will not arise if the assessee is himself liable to pay any income-tax thereon as an agent. The liability to pay as agent does not arise automatically but will depend upon certain steps that have to be taken in that regard by the Income-tax Officer. If the Income-tax Officer proceeds to treat the assessee as an agent of the non-resident depositors and proceeds to make assessment of the bank as a represen-tative assessee of the depositors, then, possibly, the assessee will be able to take the plea that he is not liable to pay income-tax as an agent and, therefore, he has no duty to deduct income-tax under section 195 of the Act. But that has not happened in this case. The Income-tax Officer has not proceeded to assess the interest income of the non-resident depositors by treating the assessee-bank as a representative assessee of all the non-resident depositors. In fact, if this step is taken, the bank will be saddled with innumerable assessment cases on behalf of the depositors. I am not expressing any opinion on the question as to whether this is permissible in law at all. But, since no step has been taken by the Income-tax Officer to treat the assessee as an agent of the non-resident depositors, there is no liability on the assessee to pay any income-tax on behalf of the non-resident depositors.

11. Section 163(2) of the Income-tax Act clearly provides that “No person shall be treated as the agent of a non-resident unless he had an oppor-tunity of being heard by the Income-tax Officer as to his liability to be treated as such”. The Income-tax Officer, before treating the assessee as an agent and proceeding against the bank as an agent of the non-resident depositors, will have first to serve a notice upon the assessee. If it can be established by the Income-tax Officer that the assessee-bank is an agent, then only can an assessment proceeding be commenced against the assessee.

12. Reliance was placed on Bunge and Co. Ltd. v. ITO, [1971] 79 ITR 93 (Cal) in support of the contention made by Dr. Pal. In my view, that judgment clearly goes against the contentions of the assessee. In that case, it was held that the same person cannot be treated as an agent under section 163 of the Act and proceeded against under section 201 of the Act simultaneously. In that case, a foreign company had an office at Calcutta. It carried on the business of exporting jute goods from India and had agents, some of whom were also the buyers in various foreign countries. The agents were non-residents. During the accounting year 1961–62, the company had remitted money to the foreign agents. The Income-tax Officer sent a notice to the company under section 163(2) of the Act proposing to treat the company as agent of the non-resident under section 163 for the purpose of recovery of taxes under section 201 of the Act in respect of the sum remitted to the foreign agents. The argument before the court in that case on behalf of the company was as follows (at page 97):

“This group of sections of the Act, it is pointed out, contains a complete machinery for assessment and recovery of tax from a person who is an ‘agent’ within the meaning of section 163 of the Act.

Turning to the other group of sections from sections 195 to 201 of the Act, it is pointed out that section 195 speaks of any person responsible for paying to a non-resident or to a company specified therein who is liable to deduct income-tax and super-tax on the sums so payable at the rates currently in force. Such person is also charged with the duty of making payment of the sums so deducted to the Revenue. In the event of the failure of any such person to deduct or to pay the tax on the sums payable to a non-resident or a company, section 201 provides that ‘such person’ shall be deemed to be an assessee in default in respect of such tax. The plain effect of section 201 is that such a person who has either failed to deduct the tax or to pay the same to the credit of the Central Government may be subjected to the recovery proceedings which are available under the Act in respect of assessees in default.

The former group of sections from sections 160 to 163 and the latter group of sections from sections 195 to 201 of the Act, it is contended, are mutually exclusive and operate in different fields. Pointed reference is made in this connection to the proviso to section 195(1) of the Act which prescribes that nothing in section 195(1) shall apply to any payment made in the course of transactions in respect of which a person responsible for the payment is deemed to be an agent of the payee under the proviso to sub-section (1) of section 163 of the Act. This, it is pointed out, puts the matter beyond the pale of controversy. It is clearly an expression of the legislative intention that these two groups of sections are entirely independent of each other and are mutually exclusive.”

13. This argument was accepted by the court and the court observed as follows (at page 99):

“This is quite clear from the heading of the second notice which speaks of action under sections 163 and 201 of the Act and of ‘treatment as an agent’. Such an action, in my view, is plainly not permissible in law and the court is entitled to restrain the authorities from continuing proceedings on the basis of such a notice.”…

“I make it clear, however, that it would be open to the income-tax authorities, if and when they make up their minds to elect as to whether the petitioner should be proceeded against either under the former group of sections of the Act or the latter which are, in my view, mutually exclusive.”

14. In that case, the Income-tax Officer himself had not made up his mind whether the assessee should be proceeded against under the group of sections 195 to 201 or under the group of sections 160 to 163.

15. In the instant case, no action was taken by the Income-tax Officer under sections 160 to 163. There is no present liability of the assessee to pay any tax on behalf of the non-resident depositors. No proceeding has been taken against the assessee-bank as representative of the non-resident depositors.

16. Dr. Pal has sought to argue that the liability may arise in future. The liability in section 195 must be construed in a way as to include any possible or any future liability.

17. I am unable to uphold this contention. Unless the assessee is able to establish that it is liable to pay income-tax on the interest income as statutory agent of the non-resident depositors, its obligation to deduct income-tax on the interest income remains. It has not been shown how the assessee is itself liable to pay any income-tax on the interest income on the deposited amount.

18. Under the above circumstances, question No. 1 is answered in the affirmative and in favour of the Revenue.

19. Questions Nos. 2 and 4 are concluded by the judgment delivered by this court on September 5, 1989, in the assessee's own case, in Income-tax Reference No. 154 of 1983 (Grindlays Bank Ltd. v. Commissioner Of Income-Tax.— since reported in [1992] 193 ITR 457). In view of the principles laid down in that judgment, questions Nos. 2 and 4 are also answered in the affirmative and in favour of the Revenue.

20. It has been stated on behalf of the assessee that it does not want to press question No. 3. Therefore, no answer is given to this question. There will be no order as to costs.

Bhagabati Prasad Banerjee, J.:— I agree.