Rengasamy, J.
1. These revisions arise against the orders of the Principal Sessions Judge, City Civil Court, Madras, and also the Additional Chief Metropolitan Magistrate, Egmore, Madras.
2. The Income-tax Officer, who is the revision petitioner in Crl. R. C. No. 314 of 1989 prosecuted Electricals Fittings and Equipments (Madras) Pvt. Ltd., Madras, and its directors, accused Nos. 2 to 5, before the Additional Chief Metropolitan Magistrate (Economic Offences I), Egmore, Madras, in E. O. C. C. Nos. 38 to 85 and 176 to 195 of 1986, for the offences under sec tion 276B read with Sections 192, 194A, 200 and 204 of the Income-tax Act, 1961, hereinafter to be referred to as the Act, read with Rule 30 of the Income-tax Rules, 1962, and Section 278B of the Act, alleging that the first accused company had not deducted the income-tax on the remuneration to the directors and also the interest credited to the creditors. Sixty-eight complaints were filed for the above violations under the abovesaid provisions and all the cases were clubbed and the learned Additional Chief Metropolitan Magistrate after trial, has found that all the charges relating to the offences mentioned above have been proved against the first accused company and sentenced it to pay a fine of Rs. 200 for each count for the offence under Section 276B of the Act for non-deduction of the income-tax on salary of the directors and also to pay a fine of Rs. 100 for each of the sixty counts for non-deduction of the tax on the interest credited to the account of the creditors. The same sentence was imposed upon the second accused, who is the director of the first accused company. The total fine amount for each of the accused Nos. 1 and 2 is Rs, 10,800. Accused Nos. 3 to 5 have been acquitted holding that there is no proof on their part for their participation in the affairs of the company. Aggrieved of this conviction and sentence of fine only imposed on accused No. 2, the Income-tax Department has filed Crl. R. C. No. 314 of 1989 for the imposition of the minimum sentence prescribed under the Act as it was not awarded to the second accused, who has been found guilty.
3. Accused Nos. 1 and 2 filed appeal before the Principal Sessions Judge, City Civil Court, Madras, in C. A. No. 97 of 1988 against the convictions and the learned Principal Sessions Judge, fully concurred with the findings of the trial court and dismissed the appeal. As against the order of dismissal of the appeal, accused Nos. 1 and 2 have filed Crl. R. C. No. 849 of 1996 before this court challenging the conviction and sentence imposed upon them. Thus, these two revisions have come up before this court for consideration.
4. The first accused is a company to which the second accused and other accused, who have been acquitted by the trial court, are admittedly the directors. The prosecution case is that the first accused company was paying the remuneration and salary of the directors by making credits in their account books and the directors sometimes had received the remuneration straightaway, that in some years, they had invested the remuneration payable to them in the first accused company so that they were able to draw interest from the undrawn remuneration due to them, that under Section 192 of the Act, when once the remuneration or salary was paid by a person responsible for payment of such salary or remuneration, he has to deduct the income-tax on the amount so paid but the first accused, which was paying the remuneration to the directors, had not deducted the income-tax on the remuneration paid to them and, therefore, the first accused and the directors, who are also responsible for the transaction of the company, are liable to be punished under Section 192 of the Act. It is also the prosecution case that the creditors were withdrawing the interest on the amount invested by them in the first accused company but the first accused and the directors, who were bound to deduct the income-tax on such interest payable to the creditors under Section 194A of the Act, had failed to deduct the income-tax and, therefore, the first accused company and its directors are liable to be punished for the violation of Section 194A of the Act. Both the courts below have concurrently found that the charges under Section 192 and 194A of the Act have been proved against these revision petitioners/accused Nos. 1 and 2.
5. In these revisions, accused Nos. 1 and 2 will hereinafter be referred to as the revision petitioners and the Income-tax Department will be referred to as the respondent.
6. Mr. K. A. Panchapagesan, learned counsel for the revision petitioners, contended that the evidence before the court and the orders passed by the Income-tax Appellate Tribunal make it clear that these revision petitioners have not committed the offences, that the materials before the court are not adequate to find them guilty of the offences with which they have been charged and therefore, the conviction of these revision petitioners is bad in law. Learned counsel for the revision petitioners would further submit that the directors of the first accused, who are accused Nos. 2 to 5 before the trial court, were partners of Ashok Electrical Company and Kumar Brothers, which are partnership firms, that these partnership firms have shares in the first accused company, that on account of their position as partners of the said firms, the remuneration that was payable to the directors were actually payable only to the partnership firms as these directors were appointed as directors of the revision petitioner company only by virtue of their interest in those two partnership firms, that therefore, whatever remuneration was credited to the accounts was actually due only to Ashok Electrical Company and Kumar Brothers and the mere entry in the name of the directors cannot be taken that the directors were the assessees for the payment of such remuneration to them. Learned counsel for the revision petitioners further contended that actually no payment was made to the directors but the remunerations have been credited to the accounts of the directors and such entries of credit will not attract the provisions of Section 192 of the Act which requires payment and, therefore, the conviction and sentence imposed by the court below is clearly an error of law. In support of this contention, learned counsel relied upon a decision of the apex court in P. N. Krishna Iyer v. CIT : [1969]73ITR539(SC) , which relates to the assessment on the income. That was a case in which an undivided Hindu family invested the amounts in a company by name P. S. N. Motors (Private) Limited and in the books of account of the company, credit entries were posted only in the name of the Hindu undivided family. The assessee in that case was given remuneration and the company appreciating the valuable service rendered by the assessee therein in the promotion of the company and his large sacrifices made, allotted certain paid-up shares of the company to him. The Income-tax Officer who assessed the income of the assessee, who was the karta of the Hindu undivided family, assessed the remuneration, sitting fees, etc., as his separate income distinct from the dividend which was credited to the account of the Hindu undivided family. But the Commissioner of Income-tax took the view that the salary and sitting fees also were derived from the investment made by the Hindu undivided family and, therefore, such income also is to be clubbed with the income of the Hindu undivided family. The Appellate Tribunal restored the order of the Income-tax Officer treating the salary and sitting fees of the karta of the Hindu undivided family as the separate income. However, the High Court did not agree with that and, ultimately, it went up to the Supreme Court, which held that as the investment was made in the name of the Hindu undivided family and the services of the karta of the family were appreciated by the company by alloting certain fully paid-up shares in the name of the Hindu undivided family, the services of the karta, who was also a director of the company, were only on behalf of the undivided Hindu family and there fore, the remuneration earned by the member of the Hindu undivided family must be the income of the family itself. Learned counsel for the petitioners relying upon this decision, would contend that the remuneration credited by a company in the name of the karta of tbe undivided Hindu family was invested in the company and the apex court has treated the remuneration as the income of the family and the karta cannot be assessed to tax treating it as his separate income, and that here also the same analogy is applicable because Ashok Electrical Company and Kumar Brothers, partnership firms, were represented by the directors, who were accused Nos. 2 to 5 and the services rendered by them as directors were only on behalf of those two firms and, therefore, the remuneration credited to their account is actually the income of the said firms and when the income is payable to Ashok Electrical Company and Kumar Brothers, the accused cannot be prosecuted for the failure to deduct income-tax on the remuneration payable to the directors and, therefore, the charges must fail.
7. Learned counsel for the revision petitioners raised another contention that the Income-tax Appellate Tribunal, by its order in I. T. A. Nos. 19 to 24 of 92/93 dated August 9, 1994, has found that the tax was not deductible by the first accused company for the reason that the partnership firms, Ashok Electrical Company and Kumar Brothers, had invested their money in the first accused company and as the company contended that the remuneration was payable only to the partnership firms, the directors are not entitled to the remuneration and therefore, the failure to deduct income-tax on the remuneration credited to the accounts of the directors will not attract Section 192 of the Act. Learned counsel further contended that as the Tribunal has given this finding, the courts have to accept the finding when especially, it relates to matters of fact and, therefore, the prosecution of the revision petitioners is not proper.
8. On a perusal of the order of the Income-tax Appellate Tribunal, the Tribunal has simply accepted the contention of the accused applying the ratio laid down in P. N. Krishna Iyer v. CIT : [1969]73ITR539(SC) , holding that the partnership firms, Ashok Electrical Company and Kumar Brothers, are entitled to the remuneration and, therefore, the tax is not deductible by the first accused company for the credit entries in the name of the directors. Learned counsel relied upon a series of decisions to support his contention that the decision of the Income-tax Tribunal has to be accepted by the court. He refers to the decision in K. T. M. S. Mohd. v. Union of India : 1992CriLJ2781 , wherein the apex court has held that the result of the proceedings under the Act is one of the major factors to be considered and the resultant findings in the said proceedings will have some bearing in deciding the criminal prosecution in appropriate cases. It is not as if the apex court has held that every order passed by the Tribunal constituted under the Act is binding upon the court in the criminal prosecution. On the other hand, the observation is that in appropriate cases, in the sense in some of the cases, the resultant finding of the Tribunal will have some bearing though not in full, He relies upon another decision in Mohamed I. Unjawala v. Asst. CIT : [1995]213ITR190(Mad) , which also has observed that on the questions of fact, the courts have to give due weight to the orders passed by the authorities under the Act. As a matter of fact, in this decision this court has referred to the ratio laid down by the apex court in Patnaik and Co. Ltd. v. CIT : [1986]161ITR365(SC) , wherein the apex court would observe that the court has no jurisdiction to go behind the findings of facts made by the Tribunal in its appellate order, but the court may do so only if there is no evidence to support them or the Appellate Tribunal has misdirected itself in law in arriving at the finding of fact. In the same decision, this court has relied upon another decision of the apex court in P. Jayappan v. S.K. Perumal, First ITO : [1984]149ITR696(SC) , which also would observe that the criminal court has to give due regard to the result of any proceeding under the Act having a bearing on the question in issue and in an appropriate case, it may drop the proceedings passed under the Act, that it does not, however, mean that the result of a proceeding under the Act would be binding on the criminal court and the criminal court has to judge the case independently on the evidence placed before it. The apex court would further observe as follows (page 701 of 149 ITR) :
'Otherwise, there is a danger of a contention being advanced that whenever an assessee or any other person liable under the Act had failed to convince the authorities in the proceedings under the Act that he has not deliberately made any false statement or that he has not fabricated any material evidence, the conviction of such person should invariably follow in the criminal court . . .'
9. Therefore, it is not as if, as contended by learned counsel for the revision petitioners, every order of the Income-tax Appellate Tribunal is binding upon the court simply following what has been found by them. On the other hand, as observed above, in the question of facts, even if it was not disputed or the Tribunal was not misdirected or misguided, such facts found by the Tribunal can be accepted by the court. However, the criminal court has to judge the case independently on the evidence and materials placed before the court. Even though learned counsel for the revision petitioners has cited a decision of the Andhra Pradesh High Court, on the same aspect in M. A. Quddus v. ITO : [1997]227ITR665(AP) and some of the decisions of this court in Crl. R. C. Nos. 459 and 460 of 1995, dated July 22, 1997--Kothari and Sons (Industries) Pvt. Ltd. v. M. V. Subramaniam, Asst. CIT : [1998]233ITR294(Mad) , and C. A. Nos. 817 and 818 of 1987, dated February 7, 1997--S. Udayakumar, First ITO v. Abbas Ali and Co, : [1999]235ITR751(Mad) , more or less taking the view that in appropriate cases, the order of the Tribunal shall be given weight, in view of the observations of the Supreme Court, which I referred to above, it is needless to multiply the citations for the same principle, viz., that the criminal court has to arrive at the conclusion independently from the evidence and materials placed before the court though the finding of the Tribunal on the question of fact might be given some weight, that too in appropriate cases. Bearing these principles in mind, if we approach the controversy in this case, the fact of payment of the remuneration by the first accused company cannot be disputed from the documents placed before the court and most of them are the account books maintained by the first accused company and the returns submitted by the company through its auditors.
10. Before we go into the remuneration aspect, I have to observe that the principles laid down in P. N. Krishna Iyer v. CIT : [1969]73ITR539(SC) , cited before me and also the decision relied upon by the Income-tax Appellate Tribunal have no bearing on this case because in that case, the question arose as to who was entitled to the remuneration whether the karta of the Hindu undivided family in his capacity as representative of the undivided family or in his individual capacity as a person, who rendered service to the company in which huge investments were made by the Hindu undivided family. Taking into consideration the investments made by the Hindu undivided family, which were brought to the accounts of the company and also in appreciation of the services rendered by the karta of the Hindu undivided family to the company, for which certain fully paid-up shares were allotted to him, the apex court took the view that the remuneration credited in the accounts of the company was actually payable only to the Hindu undivided family and it was not the personal income of the karta. There the question was whether the amount credited by the company is to be taxed as the personal income of the karta of the family or as the income of the Hindu undivided family. But that is not the question in this case irrespective of the question as to who is entitled to the remuneration. Section 192 of the Act requires that when once the salary or remuneration was paid, the tax shall be deducted on such remuneration. In this case, the entries have been made for the payment of the remuneration. The court is not concerned as to who is entitled to draw this remuneration either the partnership firms Kumar Brothers and Ashok Electrical Company or the persons, who are described as directors. It is a matter as between them to decide who is entitled to claim that amount. But Section 192 of the Act is concerned only with the payment of the amount. If once that amount is paid, the person responsible for such payment has to deduct the income-tax and if there is failure in this duty, then Section 276B of the Act is attracted for punishment. Therefore, the question as to whether the directors of the first accused company are entitled to this remuneration or the so-called partnership firms are entitled to it, is beyond the scope of Section 192 of the Act. Unfortunately, the Tribunal has simply accepted the contention of the first accused company that the remuneration is payable only to the partnership firms and therefore, the first accused is not bound to deduct the income-tax. As mentioned above, even if it is treated that the salary was payable only to the partnership firms, when once the payment has been made, the tax ought to have been deducted by the company. But learned counsel for the revision petitioners contended that if it is accepted that the remuneration was payable to the partnership firms, the charge framed in this case, viz., that the remuneration was paid to the directors, will constitute the offence under Section 192 of the Act, is not proper and it will not make out an offence as no payment has been made to the directors. But the accounts maintained by the first accused company themselves reveal that the remunerations have been paid and also credited only in the accounts of the directors. Even though learned counsel for the petitioners contended that the directors were simply representing the partnership firms and amounts credited to the account of the directors will be transferred to the accounts of the partnership firms and, therefore, the charge alleging that payment to the directors will constitute an offence, is not correct. Even assuming that these directors have lent their names on behalf of their partnership firms and entries in the account books of the first accused continued only in the name of the directors, accused Nos. 2 to 4, the charges can be framed only against the persons in whose names the entries have been made. Absolutely, there is no entry anywhere in the account books of the first accused that the so-called firms, Ashok Electrical Company and Kumar Brothers, have received the remuneration at any point of time. Even though it was argued by learned counsel, Mr. Panchapagesan, that the partnership firms have submitted their income-tax returns paying the tax on the remuneration received from the first accused company, we are not concerned with the accounts maintained by the partnership firms. As the disbursing person is the first accused through its directors and the entries in the account books mention only the names of the directors, the first accused cannot contend contrary to the entries in their own accounts to the effect that the remuneration was payable only to the partnership firms. Even assuming for argument's sake that actually the remuneration was payable to the partnership firms, when the entries are in the names of the directors, it has to be treated that the payments were made only to the directors and, therefore, there is no defect in the charges against these accused for the contravention of Section 192 of the Act.
11. Even though learned counsel for the revision petitioners contended that under Section 192 of the Act, the deduction shall be made only when the payments were made, but in this case, there is no proof of payment of the remuneration and, therefore, the revision petitioners cannot be convicted for the violation of the said provision. On a perusal of the account book, exhibit P-89, which relates to the accounting year 1980-81, it shows in pages 196 and 197 that each of the directors had withdrawn Rs. 2,500 towards their remuneration. As debit entries have been made in these pages in exhibit P-89, it is futile to contend that the directors were not paid their remuneration. In so far as the other years are concerned, the income-tax returns submitted by the auditors of the first accused company show very clearly that the remuneration has been paid to the directors. Exhibit P-85 is the statement for the accounting year 1980-81 for the payment of Rs. 1,71,600 to the directors towards their remuneration. The debit entry has been made for the payment of the remuneration to the directors. Similarly, for the next accounting year, exhibit P-92, the statement of the auditor also shows the debit entry for the payment of the same amount, namely, Rs. 1,71,600. For the accounting year 1982-83, exhibit P-98 mentions the payment of the same amount towards the remuneration of the directors. Exhibits P-106 and P-112 also prove the payment of the remuneration to the directors. As a matter of fact in exhibit P-112, a consolidated statement has been given for the payment of Rs. 1,56,000 towards the remuneration for all the six years, starting from 1979-80 to 1984-85. Learned counsel for the Income-tax Department, Mr. K. Ramaswamy, clarified that actually the remuneration was only Rs. 1,56,000 but as 10 per cent, bonus was added to the remuneration, the total figure is entered as Rs. 1,71,600. As the entries in the statements are shown in the debit column, it is certain that either the payments have been withdrawn by them or as contended by learned counsel for the respondent, again the remuneration was invested in the company itself to enable them to draw interest on the undrawn salary. In these statements, which I referred to above, the drawing of interest on the unsecured loans also is referred to. It is also the evidence of P.W. 2 that the directors have drawn the interest on the undrawn remuneration. Therefore, it cannot be disputed that the remunerations were not paid to the directors. When it was argued by Mr. Panchapagesan that the partnership firms have paid income-tax on the remuneration received by it from the first accused company, it is contrary to his argument that the remuneration was not received by the directors. Anyhow, the documents referred to above are the statements and the account books of the first accused company proving the payment of the remuneration.
12. In exhibit P-116, the memorandum and Articles of association, Clause 45 reads,
'The remuneration of each of the directors including the chairman for attending meetings shall not exceed Rs. 250 as the directors may think fit for each meeting of the board attended by them. Such reasonable additional remuneration as may be fixed by the directors may be paid to any one or more of their number, monthly or otherwise for the services rendered by him or them as may be fixed from time to time.'
13. Therefore, this Clause also adds strength to the contention of the respondent that the remuneration was paid only towards the service rendered by the directors to the first accused company. Clause 38 of the Articles of association also reads that no share qualification shall be required to be held by any director and any person whether a member of the company or not, may be appointed and continue to be a director of the company. Therefore, from this Clause it is not as if only a person, who has shares in the company is entitled to become the director of the company. There is also no evidence on the side of the accused that the partnership firms Kumar Brothers and Ashok Electrical Company have any share in the first accused company and only by virtue of their partnership in the company owning the shares, the directors were appointed to represent the said partnership firms. Anyhow, from Clause 38 anybody, who is not having any share in the company also is eligible to be a director of the company and the remuneration is paid to the director only towards his service rendered to the company. In the light of these materials before the court and also from the entries which I referred to above, there is no doubt about the fact that the directors, viz., accused Nos. 2 to 5 before the trial court have been receiving the remuneration during the relevant period for which the first accused and the directors ought to have deducted the income-tax on the remuneration received by them and, therefore, certainly, it will attract the offence under Section 276B read with Section 192 of the Act.
14. Then coming to the other charge, viz., failure to deduct the income-tax on the interest credited to the accounts of the creditors, it is the prosecution case that the company had credited and also disbursed the interest to the creditors, but the company had not deducted the income-tax on the interest amount and, therefore, this will attract the offence under Section 194A and under Section 276B the penal Section against the first accused company and the second accused, who was responsible for managing the affairs of the company, are to be punished. The contention taken by the accused throughout is that the entries in the account books are mere 'interest payable' and that will not amount to credit entries which Section 194A would refer to and as the accounts do not show the credit entries, no offence is made out. Section 194A of the Act reads as follows :
'194A. (1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any income by way of interest other than income by way of interest on securities, 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 issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force.
Explanation.-- For the purposes of this section, where any income by way of interest as aforesaid is credited to any account, whether called 'interest payable account' or 'suspense account' or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this Section shall apply accordingly.'
15. Under this section, if the person responsible for payment, makes any credit entries in the accounts for payment or actually the amount was paid in cash or by cheque or draft, the income-tax on the said amount is to be deducted. The Explanation makes it clear that even if the entries are made such as 'interest payable account' or 'suspense account' or by any other name in the books of account, it is deemed that the entries for the credit of such income are made in the account of the payee.
16. Learned counsel for the revision petitioners contended that this Explanation to Section 194A(1) of the Act was inserted only on June 1, 1987, and this Explanation will amount to amendment of the Section which has no retrospective effect prior to the date of the amendment and, therefore, the clarification by this Explanation cannot be followed for the period prior to June 1, 1987. He also would contend that the entries in the accounts of the first accused company simply mention the 'interest payable' and this will not amount to the credit entry as the word 'payable' signifies only the amount that is payable on the future date and as the Section requires the credit entry for the purpose of the deduction of the interest, the interest payable account is not attracted for punishment under Section 194A of the Act. Learned counsel further contended that the Tribunal has found that the entries in the account books as 'interest payable' would not make liable the person responsible for payment of the interest to deduct the income-tax and the adjudication proceedings also has ended in favour of the revision petitioners and the revision petitioners cannot be convicted for the offence under Section 194A of the Act.
17. I have already discussed about the weight to be given for the orders of the Income-tax Appellate Tribunal and in this case exhibit P-7, the order of the Appellate Assistant Commissioner and the order of the Tribunal show that the Central Board of Direct Taxes has issued a circular to the effect that if the entries were made in the account books to the effect that the interest is payable, there was no obligation on the part of the person responsible to deduct the tax, at the time of making such entries and the crediting of the interest to the account of the payee is something different from crediting to the interest payable account and, therefore, the deduction of the income-tax will not arise. The Appellate Assistant Commissioner as well as the Appellate Tribunal mainly relying upon this circular issued by the Central Board of Direct Taxes has ordered that the first accused was not bound to deduct the income-lax and, therefore, the proceeding against the first accused was ordered to be dropped.
18. In State Bank of Travancore v. CIT : [1986]158ITR102(SC) , the Supreme Court has ruled that the circulars issued by the Central Board of Direct Taxes are executive in character and they cannot alter the provisions of the Act. In CIT v. Hero Cycles Pvt Ltd. : [1997]228ITR463(SC) , also the apex court would observe that the circulars issued by the Central Board of Direct Taxes can bind the Income-tax Officer but will not bind the appellate authority or the Tribunal or the court or even the assessee. This court also has considered this aspect in CIT v. O. M. S. S. Sankaralinga Nadar and Co. : [1984]147ITR332(Mad) , holding that the courts are not bound by the circulars issued by the Central Board of Direct Taxes on the subject. In Kerala Financial Corporation v. CIT : [1994]210ITR129(SC) , also once again the apex court has observed that the circular of the Central Board of Direct Taxes under Section 119 of the Act cannot override or detract from the provisions of the Act. The view of the apex court is reflected by this court also in Saroja Mills Ltd. v. CIT : [1996]220ITR626(Mad) , observing that the Central Board of Direct Taxes by its circulars cannot pre-empt a judicial interpretation of the provisions of the Act and the Tribunal, much less the High Court, is not bound by the circulars. The Tribunal by its order has simply found that the liability to deduct tax at source under Section 194A arises only when interest is credited to the creditors' account or when the interest is actually paid to the creditors, that credit of the interest to the account of the creditors is not the same thing as crediting the interest to the interest payable account. In view of the fact that the Board has directed the authorities not to insist on deduction of the income-tax at source at the time of crediting the interest to the interest payable account, the Tribunal was in full agreement with the order of the Appellate Assistant Commissioner of Income-tax. Unfortunately, the Appellate Assistant Commissioner as well as the Tribunal has failed to note the payments made by the accused towards the interest and entries in their accounts show the actual payment as the debit entries have been made in the accounts. In exhibit P-96, which relates to the period 1981-82, in page 147 even though the sentence starts, 'to interest payable' and names of the creditors Ramesh, Shanthilal, Suresh, etc., are mentioned, the entry is made in the debit column to the total amount of Rs. 1,24,173.94. When the debit entry is made in the accounts, there is no question of interest payable to the creditors as the actual interest itself has been paid to them. Similarly, in the account book, exhibit P-103 relating to 1982-83, also in page 147, the same type of entry is made specifically mentioning the names of the creditors but debiting the interest to the total sum of Rs. 1,37,753.02. In exhibit P-110, which is for 1983-84, in page 149, the same type of entry is repeated as interest payable but mentioning the creditors' names and also the actual interest due to them and the total interest debited in the debit column is Rs. 1,60,910.05. In spite of this fact, that the debit entries have been made in the accounts of the first accused, the Tribunal as welt as the Appellate Assistant Commissioner would observe that deduction should be made only when the interest is credited or payment was made. The debit entries prove the payments and somehow, this has not been taken note of by the Tribunal. For the years 1979-80 and 1980-81, the account books are exhibits P-79 and P-89, respectively. In page 21 of exhibit P-79, relating to the year 1979-80, in the ledger page of Kushal Chand Protap Chand Singhi, Rs. 1,485.40 is entered in the credit column, however, mentioning 'the interest payable 1978-79'. Similarly, in page 22, in the ledger page of Miss Rekha, a sum of Rs. 1,011.08 is entered in the credit column mentioning as interest payable. Similarly, in page 24, the ledger page of Mahendra Kumar, entries are made in the credit column for a sum of Rs. 2,623.13 though mentioning it as interest payable for 1978-79. In page 59, under the head 'Interest on unsecured loans', the debit entry is made to a total sum of Rs. 1,23,530.20. Apart from the named persons mentioned above in whose ledger pages credit entries have been made, another sum of Rs. 1,23,530.20 also had been disbursed towards the interest for the year 1979-80. In exhibit P-89, relating to the accounting year 1980-81, in the ledger page of Nirmal Kumar Kumbhat, the interest amount of Rs. 77,230.81 is credited to his account and in page 17, in the ledger page of Suresh Kumar Kothari, Rs. 1,251.50 is credited though mentioning it as interest payable and in page 22 in the ledger page of Miss Rekha, credit entry is made describing it as interest payable and in page 23, the ledger page of Mahendra Kumar, credit entry is made for the sum Rs. 3,174. In page 64, there is a debit entry for the payment of Rs. 90,381 under the head 'Interest payable'. Therefore, for all these six years, debit entries have been made for substantial amounts towards the interest amount and even though it is brought under the head 'Interest payable, when the amounts have been actually debited and in some cases, credited in the relevant ledger page of the creditors, it cannot be stated that the word 'payable' will nullify the effect of the credit in their relevant ledger pages. Some times, the accounts may be prepared in such a way, when the accounts were not settled, but certain amount is payable to a party and because of the unfinished work, the amount might be brought to the suspense account stating that the amount is payable to so and so. But in this case, the interest has actually been paid by making the debit entries and credit entries also have been made in the ledger pages of the concerned creditors. Hence, the words 'interest is payable' are introduced obviously to defeat the object of Section 194A of the Act to evade the deduction of the income-tax which is a liability on the part of the person responsible to deduct the tax, When the actual interest had been paid as seen from the accounts referred to above, it is not open to the revision petitioners/accused to contend that it was only an interest payable account and they were not bound to deduct the interest. The Explanation, therefore, has clarified that even the entries such as interest payable account or suspense account are to be treated as the entries credited to the account of the creditors.
19. Learned counsel for the revision petitioners would argue that this Explanation cannot be looked into as it has no retrospective effect prior to June 1, 1987, and he also relied upon certain decisions in support of his contention that this Explanation is only prospective in its operation. In Punjab Business and Supply Co. Pvt. Ltd. v. ITO , the Punjab and Haryana High Court has held that the Explanation to Section 194A of the Act has no retrospective effect and the explanatory note regarding the amendment shows that as there is a lacuna or loophole in the unamended provisions of Section 194A of the Act, the Explanation was introduced to prevent the dwindling of the tax collection. In CIT v. Oriental Power Cables Ltd. , the Rajasthan High Court has held that the inclusion of the Explanation to Section 194A is an amendment to the Section and it has no retrospective effect and, therefore, when the interest is credited to the suspense account in the assessment year 1978-79, the assessee is not liable to deduct the income-tax. Learned counsel also refers to another decision of the Rajasthan High Court in Laxmi Industries Ltd. v. ITO , wherein following the decision in CIT v. Oriental Power Cables Ltd. , it has held that prior to the afmendment for the interest that was credited either to the payable account or to the suspense account, the assessee could not be prosecuted. Mr. K. Ramasamy, learned counsel for the respondent, would contend that this Explanation, though inserted in the year 1987, will not amount to an amendment of the Section but it is an enabling provision to enlighten and clarify the scope of the existing provision and, therefore, there is no question of prospective effect to this Explanation as Section 194A, which is already there, is applicable in the light of the Explanation even for the accounts maintained prior to June 1, 1987. Mr. Ramasamy, learned counsel, had drawn support from the decision in Keshavji Ravji and Co, v. CIT : [1990]183ITR1(SC) . The apex court would observe as follows in pages 18 and 19 :
'An Explanation, depending on its language, might supply or take away something from the contents of a provision. It is also true that an Explanation may-this is what Sri Ramachandran suggests in this case--be introduced by way of abundant caution in order to clear any mental cobwebs surrounding the meaning of a statutory provision spun by interpretative errors and to place what the Legislature considers to be the true meaning beyond any controversy or doubt. Hypothetic ally, that such can be the possible purpose of an 'Explanation' cannot be doubted. But the question is whether, in the present case, Explanation 1 inserted into Section 40(b) in the year 1984 has had that effect... The express prospective operation and effectuation of the 'Explanation' might, perhaps, be a factor necessarily detracting from any evincement of the intent on the part of the Legislature that the Explanation was intended more as a legislative exposition or clarification of the existing law than as a change in the law as it then obtained . . .'
20. In S. Sundaram Pillai v. V.R. Pattabiraman, : [1985]2SCR643 , also, the same view has been expressed by the apex court while considering the Explanation incorporated to Section 10(2) of the Tamil Nadu Buildings (Lease and Rent Control) Act. At paragraph 52 (page 593), of this judgment, the apex court observes :
'Thus, from a conspectus of the authorities referred to above, it is manifest that the object of an Explanation to a statutory provision is--(a) to explain the meaning and intendment of the Act itself,
(b) where there is any obscurity or vagueness in the main enactment, to clarify the same so as to make it consistent with the dominant object which it seems to subserve,
(c) to provide an additional support to the dominant object of the Act in order to make it meaningful and purposeful,
(d) an Explanation cannot in any way interfere with or change the enactment or any part thereof but where some gap is left which is relevant for the purpose of the Explanation, in order to suppress the mischief and advance the object of the Act, it can help or assist the court in interpreting the true purport and intendment of the enactment, and
(e) it cannot, however, take away a statutory right with which any person under a statute has been clothed or set at naught the working of an Act by becoming a hindrance in the interpretation of the same.'
21. From what is expressed by the apex court, the Explanation cannot be treated as an amendment because the purpose of the Explanation is to explain or, in the words of the apex court, to clear any mental cobwebs surrounding the meaning of a statutory provision and to prevent the controversial interpretations without giving the true meaning of the provision. That is why the apex court further emphasised by saying that such Explanations were intended more as a legislative exposition or clarification of the existing law than as a change in it. When the Explanation serves the purpose of the clarification of the existing law, there is no question of any prospective or retrospective operation of the Explanation. Hence, in this case, in the year 1987, the Legislature has expressed the intention or scope of Section 194A of the Act by making it clear that even the suspense account or interest payable account has to be deemed only as the account with credit entries.
22. As mentioned above, even without the Explanation to Section 194A of the Act, for the reasons I have explained, the debit entries showing the actual payment of interest cannot be brought under the interest payable account when once the interest has been paid. Further, as elaborately described above, when a credit entry has been made specifically in the ledger account of the creditor, the word 'interest payable' seems to have been introduced deliberately and purposely to evade the obligation under the statute and, therefore, in this case, even without applying the Explanation, it is made clear that the credit entries have been made by the accused/revision petitioners towards the interest. As a matter of fact in Southern Brick Works Ltd. v. CIT : [1984]146ITR479(Mad) , there had been a credit to the interest in the accounts of the creditor but tax was not deducted and paid and it was contended that as the company was not good in its financial position and there was no intention of paying the interest but the entry was merely made in the account for the record purpose, the Bench of this court has held that the liability to deduct the tax arose at the time the credit entry was made in the accounts of the payee and it need not be the actual payment for deducting the tax. But once when the interest actually accrued and credited to the books of account, the liability will arise. In this case also as mentioned above, in the ledger pages of the respective creditors, the credit entries have been made to show that the interest became due to them and when once this liability arose, the accused was bound to deduct the income-tax. In State Bank of Travancore v. CIT : [1986]158ITR102(SC) , the State Bank of Travancore made certain entries for the interest payable by certain debtors in the suspense account for the reason that it was extremely doubtful of recovery of the interest due to the deteriorated financial condition of the parties concerned and the bank claimed exemption of the deduction of tax as there was no actual payment of interest. The Supreme Court held that when the accrual of the interest takes place and income accrues, the same cannot be defeated by any theory of real income by observing (page 145) :
'Suspended animation following inclusion of the amount in the suspense account does not negate accrual and after the event of accrual, corroborated by appropriate entries in the books of account, on a mere ipse dixit of the assessee, no reversal of the situation can be brought about.'
23. In page 147, the Supreme Court would observe :
'. . . The existence of the right to receive, i.e., accrual, is important and that is a matter of the reality of the situation keeping the terms and conditions and the conduct of the parties . . .'
24. Again at page 151, the Supreme Court would observe :
'Even if in a given circumstance, the amounts may be treated as interest suspense account for accountancy purpose, that would not affect the question of taxability as such. This must be determined by well-settled legal principles and principles of accountancy which have been referred to hereinbefore.'
25. Finally, at page 154, the apex court would observe :
'What has really accrued to the assessee has to be found out and what has accrued must he considered from the point of view of real income taking the probability or improbability of realisation in a realistic manner and dovetailing of these factors together but once the accrual takes place, on the conduct of the parties subsequent to the year of closing an income which has accrued cannot be made 'no income'.'
26. The apex court has clearly expressed specifically mentioning that even the suspense account maintained when the interest had accrued, cannot defeat the object of the provision to deduct the tax. As a matter of fact, this decision was rendered on January 8, 1986, one year prior to the inclusion of the Explanation, which was in the year 1987. What is clarified in the Explanation has been made clear by the apex court by this judgment. Following the above view, the apex court once again has repeated the same principle in Kerala Financial Corporation v. CIT : [1994]210ITR129(SC) , holding that the interest accrued and entered in the suspense account, has to be treated as income for the purpose of the assessment of the income. In the light of these decisions of the apex court, it cannot be contended that when the word 'payable' is suffixed in the ledger pages of the respective creditors it will not amount to the credit entry. The very purpose of suffixing the word is only to avoid deduction of tax and such mode or method in the accounting cannot defeat the object of Section 194A of the Act. Therefore, the courts below are perfectly correct in holding that the credit entries have been made in the accounts of the first accused making the revision petitioners liable for deduction of the income-tax. Therefore, certainly, the charges relating to the offences under Sections 192 and 194A are amply proved.
27. Even though now it is contended before me for the revision petitioners that when all the other directors of the company, accused Nos. 3 to 5, have been acquitted the accused No. 2/second revision petitioner also ought to have been acquitted by the lower court. The second accused himself at the time of the questioning (question No. 7) under Section 313 of the Code of Criminal Procedure, has stated that he alone was the principal officer of the first accused company. He has not stated in the statement that he had nothing to do with the transaction of the company but admits that he himself was the principal officer. In M. V. Javali v. Mahajan Borewell and Co. : [1998]230ITR1(SC) , the apex court has held that from the meaning of Section 278B of the Act, it is manifest that if an offence under the Act is committed by a company, the persons who are liable to be proceeded against and punished are : (i) the company (which includes a firm), (ii) every person, who, at the time the offence was committed, was in charge of, and was responsible to, the company for the conduct of the business, (iii) any director (who in relation to a firm means a partner), manager, secretary or other officer of the company with whose consent or connivance or because of neglect attributable to whom the offence has been committed. In ITO v. Dinesh K. Shah : [1997]223ITR68(Mad) , the Bench of this court has held (headnote) :
'... a person 'in charge' must mean a person in overall control of the day-to-day business of the company or firm or other association. Therefore, any person who at the time the offence was committed was in charge of and was responsible to the company, which includes a firm, for the conduct of the business, can be proceeded against under Section 278B of the Act notwithstanding the fact that the person proceeded against may not be either the 'principal officer' or the 'person responsible for paying'.'
28. In this case, admittedly, the second accused was the principal officer and, therefore, certainly, he is also liable to be punished under Section 278B of the Act.
29. The trial court has convicted the accused for the payment of fine of Rs. 200 on each count against each accused for the offence under Section 192 of the Act and Rs. 100 on each count against each accused for the offence under Section 194A without imposing any sentence of imprisonment though it is the minimum sentence prescribed under the Act against individuals. It is because of this, the Department has filed the revision Crl. R. C. No. 316 of 1989 to impose the minimum sentence as prescribed under the Act. Learned counsel for the revision petitioners would contend that though the Act prescribes a minimum sentence of three months, the failure on the part of the trial court in awarding this minimum sentence will not amount to dereliction of duty on the part of the trial court and, therefore, the minimum sentence need not be imposed. But learned counsel for the respondent refers to the view of the apex court in State of A. P. v. S.R. Rangadamappa, : 1982CriLJ2364 , wherein it is observed that when a minimum sentence is prescribed under a statute, the High Court cannot reduce the sentence below the minimum prescribed under the Act. But learned counsel for the revision petitioners has cited three decisions in support of his argument that at this stage, when especially the deduction of the income-tax itself is not an offence, the accused persons, though have committed the offence prior to such amendment, cannot now be convicted in view of the change of law, Learned counsel brings to my notice, the decision of the Allahabad High Court in Shyam Lal v. State [1968] Crl. L. J. 1461, wherein the Allahabad High Court has taken the view that when the Legislature has evinced its intention to modify the law so as to reduce the rigour of the law, due to changed social conditions, the court trying the accused has to take into consideration the existing law for awarding the punishment. This was with reference to amendment to Section 16(1)(a) of the Prevention of Food Adulteration Act, The decision in State of Maharashtra v. D.M. Kothari [1976] Crl. L. J. 1931, also relates to the amendment to the Prevention of Food Adulteration Act and the Bombay High Court has held that if there is a subsequent change in law, which would make the act if committed now innocent, it may be a mitigating circumstance to be taken into consideration for awarding the sentence. Learned counsel for the revision petitioners cited the decision of this court in K. V. Narasimhan v. ITO : [1994]209ITR797(Mad) , wherein the trial court did not award the minimum sentence of six months rigorous imprisonment for the offences under Sections 278 and 278A of the Income-tax Act. The High Court has found that the accused for his inability to pay the fine amount imposed on him, underwent the default sentence for seven months and thereafter, the entire fine amount also was paid. The court took the view that as the offence was committed about 4 1/2 years prior to the appeal, it felt that the minimum sentence need not be imposed on the accused. Learned counsel also argued on compassionate grounds submitting that the second petitioner is an aged man having ill-health and he also underwent surgery some time ago and still he is undergoing treatment in the hospital and therefore, the minimum sentence, which was not awarded by the trial court, need not he imposed by this court. He also cited a decision in Suhasini Baban Kate. v. State of Maharashtra [1986] Crl. L. J. 876, wherein a woman having three children when committed the offence under the Protection of Civil Rights Art, was dealt with compassionately though a minimum of one month imprisonment was prescribed under the Act. Therefore, not only on the ground of the change of law as on today but also on compassionate ground, he would submit that no minimum sentence is needed to he imposed upon the second accused.
30. On the other hand, Mr. K. Ramasamy, learned counsel for the respondent, refers to Sections 6 and 6A of the General Clauses Act which mention about the effect of repeal of the statutes and Section 6(d) and (e) which read as follows :
'6. Effect of repeal--Where this Act, or any Central Act or Regulation made after the commencement of this Act, repeals any enactment hitherto made or hereafter to be made, then, unless a different intention appears, the repeal shall not --. . .
(d) affect any penalty, forfeiture or punishment incurred in respect of any offence committed against any enactment so repealed ; or
(e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid. . .'
31. Therefore, learned counsel, Mr. Ramasamy, would submit that when the General Clauses Act is so clear that there shall not be any change in the punishment or penalty, even though such law was repealed, the court cannot go against this provision of law by exercising its discretion either on compassionate grounds or to the change of circumstances and, the court is bound to impose a minimum sentence when especially the apex court also has held in State of A. P. v. S. R. Rangadamappa, : 1982CriLJ2364 , that the minimum sentence has to be imposed on the accused.
32. In the decisions relied upon by learned counsel for the revision petitioners, Section, 6 of the General Clauses Act has not been referred to. When the apex court has hold that even the High Court has no power to sward a lesser sentence than the minimum sentence prescribed and Section 6 of the General Clauses Act reads that unless any contrary intention is expressed, the repealing of the provision will not take away the penalty or provision under that Act, taking into consideration these circumstances and the view of the apex court, certainly it has become necessary to impose the minimum punishment. But it was argued before me that before the amendment in 1989, Section 276B of the old Income-tax Act, as it existed, reads that if a person, without reasonable cause or excuse fails to deduct or after deducting, fails to pay the tax as required by or under the provisions of Sub-section (9) of Section 80E or Chapter XVIIB, he shall be punishable . . . indicating that only in cases where a person had deliberately failed to deduct the tax, he was punishable but if he had any reason or reasonable excuse and on that ground, he failed to deduct, he shall not be punished for the offence under Section 276B and in this case, in view of the circular issued by the Central Board of Direct Taxes, which read that for the account interest payable, no tax was deductible, the revision petitioners bona fide thought that they were not bound to deduct the tax and, therefore, when there is a reasonable cause for the non-deduction of the tax on the interest, these revision petitioners cannot be punished under Section 276B of the Act.
33. I have already discussed about the conduct of the accused persons, who though made actual payments of the interest by making debit entries, deliberately, for the purpose of evading the obligation under the statute, have added the word, 'payable' and this cannot be treated as a reasonable cause or excuse on the part of the accused persons. When actually, they have already paid the interest to the creditors preparing the account as interest payable, it is only a false account prepared deliberately to evade the responsibility cast on them by the statute. Therefore, this conduct of the accused persons cannot be considered as a reasonable excuse or reasonable cause on their part for their failure to deduct the income-tax. Therefore, I find that the non-deduction of the tax was a deliberate act on the part of the accused for which they cannot seek refuge under the Clause 'without reasonable excuse'.
34. Taking into consideration all the aspects in this case, as the offences against the revision petitioners are established, their revision Crl. R. C. No. 849 of 1996 is dismissed. Crl. R. C. No. 316 of 1989 is allowed. The minimum sentence of three months is imposed upon the second accused/principal officer of the first accused, in addition to the fine already imposed. The revisions are disposed of accordingly.