THE CANARA BANK, PAYYANNUR V. THE COMMISSIONER OF INCOME TAX

WP(C)/6914/2007

AI Insights

The case revolves around the Canara Bank, Branch Payyannur, which challenged the tax and interest demands under Sections 201 and 201(1A) of the Income Tax Act, 1961, related to ex-gratia payments made to employees who opted for a voluntary retirement scheme. The bank argued that these payments were made without tax deduction at source, citing Section 89(1) of the Income Tax Act. The Income Tax Department rejected the bank's claim for relief under Section 89(1) and imposed tax and interest, which the bank contested. The High Court's decision favored the bank, referencing a prior judgment that supported the bank's position, despite the ongoing challenge of that judgment before the Supreme Court.

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 755956 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 20-01-2012
• Assessment Year: misc
• Other Referred Cases: State Bank of Travancore & Ors. v. Central Board of Director Taxes & Anr. [(2006) 282 ITR 587 (Ker.)]
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: P K R MENON; JOSE JOSEPH
• Assessee Lawyers: T M SREEDHARAN; V P NARAYANAN
• Keywords: Assessment; Ex-gratia payment; Income Tax; Penalty; Revision petition; Tax deduction at source; Voluntary Retirement Scheme
• Section: 201; 201(1A); 89(1)

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT:- THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN FRIDAY, THE 20TH DAY OF JANUARY 2012/30TH POUSHA 1933 W.P.(C).No.6914 of 2007 (W) ---------------------------------------------------- PETITIONER:- --------------------- THE CANARA BANK, BRANCH PAYYANNUR, REPRESENTED BY ITS SENIOR MANAGER SHRI. K.V.NARAYANAN. BY SENIOR ADVOCATE SRI.T.M.SREEDHARAN ADVOCATE SRI.V.P.NARAYANAN. RESPONDENTS:- ------------------------- 1. THE COMMISSIONER OF INCOME TAX, SAHANA BUILDING, MELE CHOVVA, KANNUR. 2. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(1), KANNUR. 3. THE INCOME TAX OFFICER (TDS), RANGE 2, SAHANA AUDITORIUM, MELE CHOVVA KANNUR-670 006. 4. CENTRAL BOARD OF DIRECT TAXES, GOVERNMENT OF INDIA, MINISTRY OF FINANCE, DEPARTMENT OF REVENUE, NEW DELHI. R1 TO 4 BY SRI.P.K.R.MENON,SR.COUNSEL,GOI(TAXES) & SRI.JOSE JOSEPH, SC FOR I.T. THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 18-01-2012, THE COURT ON 20-012012 DELIVERED THE FOLLOWING:- W.P.(C).NO.6914 OF 2007-W APPENDIX PETITIONER'S EXHIBITS:- ------------------------------------- EXT.P1 - TRUE COPY OF THE ORDER DATED 12.11.2001 PASSED BY THE 2ND RESPONDENT. EXT.P2 - TRUE COPY OF NOTICE DATED 5.8.2005 ISSUED BY THE 3RD RESPONDENT. EXT.P3 - TRUE COPY OF ORDER OF THE APPELLATE TRIBUNAL DATED 18.6.2004 IN I.T.A.NOS.824 & 825/BANG/03 FOR 2001-02. EXT.P4 - TRUE COPY OF REPLY DATED 28.5.2005 SUBMITTED BY THE PETITIONER. EXT.P5 - TRUE COPY OF ORDER DATED 28.11.2005PASSED BY THE 3RD RESPONDENT. EXT.P6 - TRUE COPY OF THE REVISION PETITION ALONG WITH PETITION FOR CONDONATION OF DELAY SUBMITTED BY THE PETITIONER' BEFORE THE 1ST RESPONDENT. EXT.P7 - TRUE COPY OF THE ORDER DATED 8.1.2007 PASSED BY THE 1ST RESPONDENT. RESPONDENT'S EXHIBITS:- --------------------------------------- NIL. - TRUE COPY - K.Vinod Chandran, J. ---------------------------------------- W.P.(C).No.6914 of 2007-W ---------------------------------------- Dated this, the 20th day of January, 2012 JUDGMENT The petitioner, a branch of a Nationalized Bank, challenges the demand of tax and interest made under Sections 201 and 201(1A) of the Income Tax Act, 1961. The petitioner, on the implementation of the voluntary retirement scheme for its employees, granted ex-gratia to five of its employees who opted to retire under the scheme. While disbursing the amounts due to the employees who offered for voluntary retirement, as per the instructions received from the Head Office, the petitioner Branch made the payments as per the scheme, but without any tax deduction at source, based on Section 89(1) of the Income Tax Act. The dispute which is the subject matter of the above writ petition rose for the financial year 2000-2001. The 2nd respondent, however, rejected the claim of relief under Section 89(1) and assessed the same to tax and raised a demand of tax and interest by way of Exhibit P1. The 3rd respondent also issued notice proposing imposition of penalty by Exhibit P2. WP(C).6914 of 2007-W - 2 - 2. The petitioner's contentions were declined by the assessing officer and a modified order, Exhibit P5, was passed. The revision filed by the petitioner was also dismissed. The contention of the petitioner is that a Division Bench of this Court has in State Bank of Travancore & Ors. v. Central Board of Director Taxes & Anr. [(2006) 282 ITR 587 (Ker.)] allowed the claim of another Bank in a similar situation. The revision filed by the petitioner, however, was dismissed on the ground hat the said decision was challenged before the Supreme Court by way of Special Leave Petition and in such circumstances of the Department having not accepted the decision, the claim cannot be allowed. 3. It is strange that the authorities under the Act refuse to follow the binding judgments of a jurisdictional High Court merely on the ground that a Special Leave Petition has been filed before the Supreme Court. Evidently, there is no stay obtained from the Supreme Court, in which event, the situation would necessarily have been different. WP(C).6914 of 2007-W - 3 - 4. In the instant case, the issue raised being covered against the Department by the above referred Division Bench judgment, I am of the view that the writ petition is to be allowed and I do so respectfully following the above judgment. The order of assessment, Exhibit P1, as well as the revisional order, Exhibit P7, are hereby set aside and the writ petition is allowed with no costs. Sd/- K.Vinod Chandran, Judge. vku/- - true copy - "