``The non-deduction of tax was a deliberate act, for which the accused cannot seek refuge under the `reasonable excuse' clause,'' Justice V Rengasamy held and awarded the minimum sentence of three months imprisonment, in addition to the fine already imposed.

The Income-Tax Officer prosecuted Electrical Fittings and Equipment Madras Private Limited, Chennai, its managing director (MD) D Manoharilal Kothari and three other directors before the Additional Chief Metropolitan Magistrate for offences under various sections of the Income-Tax Act. He alleged that the firm had not deducted the income tax on the remuneration paid to its directors and also on the interest credited to their accounts.

The ACMM found them guilty and imposed a total fine of Rs 10,800 each on the firm andthe MD. The accused preferred an appeal and the Principal Sessions Court upheld the order of the ACMM. Not satisfied with the imposition of fine alone, IT department senior public prosecutor Ramasamy K moved the Madras High Court with a prayer to award the minimum punishment of three months imprisonment to the MD, as prescribed in the IT Act. On behalf of the firm and its MD, it was contended that the materials placed before the court were not adequate to find them guilty of the offences, and therefore, the conviction was bad in law. Actually, no payment was made to the directors and the entries of credit would not attract Sec 192 of the IT Act.

As regards deduction of IT on interest, the accused submitted that the entries in the accounts books were mere `interest payable' and that would not amount to credit entries. As the accounts did not show credit entries, no offence is made out. Rejecting the contention, the judge observed that the fact of payment of remuneration by the firm cannot be disputed fromthe documents placed before this court and the reports submitted by it through its auditors. Sec 192 requires that when once salary or remuneration was paid, tax should be deducted on such remuneration. In this case, entries have been made for payment of remuneration. If once payment is made, the person responsible for such payment has to deduct the income tax and if there is failure in this duty, Sec 276-B of the Act is attracted for punishment. Rejecting the submission with regard to deduction of IT on interest, the judge said that even if the entries are made as `interest payable account,' or `suspension account' or by any other name in the books of accounts, it is to be deemed that the entries for the credit of such income are made in the account of the payee.

In this case, the interests have actually been paid by making debit entries, and credit entries have also been made in the ledger pages of the creditors concerned. Hence, the words `interest payable' are introduced obviously to evade deduction ofIT, which is a liability on the part of the person responsible to deduct the tax, the judge said. So, the courts are correct in holding that credit entries have been made in the accounts and the same is liable for deducting tax.