Canara Bank, Rampur V. ITO (TDS), Shimla

ITA 1018/CHANDI/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5108 (ITAT-CHANDIGARH)
• Duration Of Justice: 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 19-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHANDRA KANTA
• Assessee Lawyers: HARDESH KANT SH AKHILESH KANT
• Section: 133A; 201(1); 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCHA, CHANDIGARH BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND DR. B.R.R. KUMAR, ACCOUNTANT MEMBER ITA NO.1017 & 1018/CHD/2017 ASSESSMENT YEAR: 2012-13 & 2013-14 CANARA BANK VS. THE ITO (TDS) C/O SAI ENCLAVE PANCHKULA RAMPUR, BHUSHAR, SHIMLA PAN NO. PTLC11986C (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. HARDESH KANT SH. AKHILESH KANT REVENUE BY : SMT. CHANDRAKANTA DATE OF HEARING : 17/01/2018 DATE OF PRONOUNCEMENT : 14/03/2018 ORDER PER B.R.R. KUMAR A.M. BOTH THE ABOVE APPEALS HAVE BEEN FILED BY THE ASSES SEE AGAINST THE COMMON ORDER OF LD. CIT(A) , SHIMLA DT. 30/03/2017. 2. SINCE THE GROUNDS RAISED IN BOTH THE ABOVE APPEA LS ARE COMMON THEREFORE WE TAKE GROUNDS OF APPEAL IN ITA NO. 1017 /CHD/2017 FOR A.Y. 2012-13 WHICH ARE AS UNDER: 1. THE LD. CIT(A) HAS ERRED DIN LAW AND FACTS OF THE C ASE WHILE NOT CONSIDERING THE AT THE ASSESSING OFFICER HAD NO POW ER OF SURVEY UNDER SECTION 133A. HENCE THE SURVEY SHOULD BE CONSIDERED ULTRAVI RES AND PROCEEDINGS OF SURVEY AND THE ORDER PASSED BY QUASHED. 2. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS OF THE CA SE WHILE NOT CONSIDERING THAT THE SECTIONS 201(1) AND 201(1A) AR E NOT THE SECTIONS TO PASS AN ORDER AND HENCE THESE ORDERS SHOULD NOT BE CONSIDER ED BINDING UPON THE ASSESSEE. 3. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS OF THE CA SE WHILE NOT CONSIDERING THAT THERE WAS NO VALID NOTICE SERVED U PON THE DEDUCTOR AND IN THE ABSENCE OF VALID NOTICE NO DEMAND BEING ENFORCED UP ON THE ASSESSEE. 4. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS OF THE CA SE WHILE REJECTING IMPLEMENTATION OF CIRCULAR NO. 03/2010 DT. 02/03/20 10 AND CHARGED INTEREST ON PAYMENTS MADE IN LATER QUARTERS. 2 3. THE ASSESSEE HAS NOT PRESSED GROUND NO. 1,2 & 3 HENCE REQUIRED NO ADJUDICATION. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A BRANCH OF CANARA BANK, A PUBLIC SECTOR BANK IN THE COUNTRY. IN THIS CASE, A SURVEY U/S 133A OF THE I.T. ACT WAS CONDUCTED ON 11.02.2014 AT THE PREMISE S OF THE AFOREMENTIONED BANK BRANCH NAMELY CANARA BANK, RAMPUR BHUSHAHR, DI STT. SHIMLA TO VERIFY COMPLIANCE OF TDS PROVISIONS. DURING THE SURVEY, CO MPLETE BOOKS OF ACCOUNTS, BILLS/VOUCHERS, INTEREST DETAILS & 15G/15H WERE NOT READILY AVAILABLE, HENCE, SUMMON U/S 131 OF THE I.T.ACT, 1961 WAS ISSUE TO FI LE THE SAME. DURING THE POST SURVEY PROCEEDINGS, THE A.O. NOTICED THAT THE TDS D EDUCTED ON THE INTEREST PAYMENTS MADE ON FDRS/KDRS WAS NOT AS PER THE PROVI SIONS OF SECTION 194A OF THE INCOME TAX ACT, 1961. THE A.O. HELD THAT THE PR OVISIONS OF SECTION 201(1)/201(1A) OF THE I.T. ACT HAVE BEEN VIOLATED. THE A.O. HELD THE BRANCH TO BE IN DEFAULT AS THE BANK BRANCH ITSELF HAS ADMITTE D THAT IT HAD BEEN DEDUCTING TDS ON QUARTERLY BASIS ON ALL THESE KDRS/FDRS TILL F.Y. 2011-12. THE CLAIM OF CHANGE FROM QUARTERLY DEDUCTION OF TDS TO ANNUAL DE DUCTION OF TDS IN VIEW OF THE PROVISIONS AS MENTIONED IN CBDT CIRCULAR AFTER MARCH 2012 WAS NOT ACCEPTED BY THE A.O. BY HOLDING THAT THE CIRCULAR W AS ISSUED TO HELP BONA FIDE DEDUCTORS TO HELP IMPLEMENT THE CBS SOFTWARE FOR TH E PURPOSE OF MACRO PROVISION ONLY. 5. THE LD. CIT(A) CONFIRMED THE ORDER OF THE ITO(TD S). 6. BEFORE US THE LD. AR ARGUED THAT THE TDS HAS BEE N DULY DEDUCTED WHEN THE INTEREST HAS BEEN PAID. HE HAS EXPLAINED WITH D OCUMENTARY EVIDENCES REGARDING DEDUCTION OF THE TDS AND ALSO RELIED ON T HE CBDT CIRCULAR NO. 3/10/2010 WHICH READS AS UNDER: SUB: TAX DEDUCTION AT SOURCE ON PAYMENT OF INTEREST ON T IME DEPOSITS UNDER SECTION 194A OF THE INCOME TAX ACT, 1961 BY BANKS FOLLOWING CORE- BRANCH BANKING SOLUTIONS (CBS) SOFTWARE REG. AS PER PROVISIONS OF SECTION 194A OF THE INCOME TAX ACT 1961, INCOME TAX HAS TO BE DEDUCTED AT SOURCE AT THE TIME OF CREDIT OF INTERES T 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, AT THE RATES IN FORCE IF SUCH IN TEREST AMOUNT EXCEEDS SPECIFIED LIMIT. FURTHER, EXPLANATION TO SECTION 194A STATES THAT FOR THE PURPOSE OF THIS SECTION, WHERE ANY INCOME BY WAY OF INTEREST AS AFORESAID IS CREDITED TO ANY ACCOUNT, WHETHER CALLED INTEREST PAYABLE ACCOUNT OR SUSPE NSE ACCOUNT OR BY ANY OTHER NAME, IN THE BOOKS OF ACCOUNT OF THE PERSON LIABLE TO PAY SUCH INCOME, SUCH 3 CREDITING SHALL BE DEEMED TO BE CREDIT OF SUCH INCO ME TO THE ACCOUNT OF THE PAYEE AND THE PROVISIONS OF THIS SECTION SHALL APPLY ACCO RDINGLY . 2. REPRESENTATIONS HAVE BEEN RECEIVED FROM INDIAN B ANKS ASSOCIATION (IBA) SEEKING CLARIFICATION REGARDING DEDUCTION OF TAX AT SOURCE FROM PAYMENT OF INTEREST ON TIME DEPOSITS BY BANKS USING CORE-BRANCH BANKING SOLUTIO NS (CBS) SOFTWARE. IN CASE OF BANKS USING CBS SOFTWARE, INTEREST PAYABLE ON TIME DEPOSITS IS CALCULATED GENERALLY ON DAILY BASIS OR MONTHLY BASIS AND IS SWEPT & PARK ED ACCORDINGLY IN THE PROVISIONING ACCOUNT FOR THE PURPOSES OF MACRO-MONITORING ONLY. HOWEVER, CONSTRUCTIVE CREDIT IS GIVEN TO THE DEPOSITORS / PAYEES ACCOUNT EITHER A T THE END OF THE FINANCIAL YEAR OR AT PERIODIC INTERVALS AS PER PRACTICE OF THE BANK O R AS PER THE DEPOSITORS / PAYEES REQUIREMENT OR ON MATURITY OR ON ENCASHMENT OF TIME DEPOSITS; WHICHEVER IS EARLIER. 3. THE MATTER HAS BEEN CONSIDERED BY THE BOARD. EXP LANATION TO SECTION 194A WAS INTRODUCED WITH EFFECT FROM 1.4.1987 BY THE FINANCE ACT, 1987 TO PLUG THE LOOPHOLE OF AVOIDING DEDUCTION OF TAX AT SOURCE BY CREDITING INTEREST IN THE BOOKS OF ACCOUNTS UNDER ACCOUNTING HEADS INTEREST PAYABLE ACCOUNT O R SUSPENSE ACCOUNT INSTEAD OF TO THE DEPOSITORS / PAYEES ACCOUNT. THEREFORE, THE EXPLANATION IS NOT MEANT TO APPLY IN CASES OF BANKS WHERE CREDIT IS MADE TO PRO VISIONING ACCOUNT ON DAILY/MONTHLY BASIS FOR THE PURPOSES OF MACRO MONIT ORING ONLY BY THE USE OF CBS SOFTWARE. 4. IN VIEW OF THE ABOVE POSITION, IT IS CLARIFIED T HAT SINCE NO CONSTRUCTIVE CREDIT TO THE DEPOSITORS / PAYEES ACCOUNT TAKES PLACE WHILE CAL CULATING INTEREST ON TIME DEPOSITS ON DAILY OR MONTHLY BASIS IN THE CBS SOFTW ARE USED BY BANKS, TAX NEED NOT BE DEDUCTED AT SOURCE ON SUCH PROVISIONING OF INTER EST BY BANKS FOR THE PURPOSES OF MACRO MONITORING ONLY. IN SUCH CASES, TAX SHALL BE DEDUCTED AT SOURCE ON ACCRUAL OF INTEREST AT THE END OF FINANCIAL YEAR OR AT PERIODI C INTERVALS AS PER PRACTICE OF THE BANK OR AS PER THE DEPOSITORS / PAYEES REQUIREMEN T OR ON MATURITY OR ON ENCASHMENT OF TIME DEPOSITS; WHICHEVER EVENT TAKES PLACE EARLIER; WHENEVER THE AGGREGATE OF AMOUNTS OF INTEREST INCOME CREDITED OR PAID OR LIKELY TO BE CREDITED OR PAID DURING THE FINANCIAL YEAR BY THE BANKS EXCEEDS THE LIMITS SPECIFIED IN SECTION 194A. 7. THE BACKDROP OF THE CBDT CIRCULAR THE ORDER OF T HE LD. CIT(A) IS PERUSED. IN VIEW-OF THE ABOVE CIRCULAR OF CBDT CLARIFYING T DS PROVISIONS BY BANKS USING 'CORE-BRANCH BANKING SOLUTIONS' SOFTWARE (CBS), THE POSITION IS VERY CLEAR THAT WHILE DEDUCTING TAX AT SOURCE FROM THE PAYMENTS OF INTERE ST ON TIME DEPOSITS BY BANK USING CBS SOFTWARE, INTEREST PAYABLE ON TIME DEPOSI TS USUALLY CALCULATED ON DAILY BASIS OR MONTHLY BASIS AND IS SWEPT AND PARKED IN P ROVISIONING ACCOUNT FOR THE PURPOSES OF MACRO-MONITORING. ACTUALLY, THE CREDIT IS GIVEN TO THE DEPOSITOR'S ACCOUNT EITHER AT THE END OF FINANCIAL YEAR OR ON A FIXED PERIODIC INTERVALS AS PER PRACTICE OR RULES FRAMED FOR THE SAME, OR AS PER TH E DEPOSITOR'S REQUIREMENT OR ON MATURITY OR ENCASHMENT OF TIME DEPOSITS, AS THE CAS E MAY BE. IN SUCH A SITUATION, THE TDS IS NOT DEDUCTED AT THE TIME OF CALCULATION OF INTEREST PAYABLE ON DAILY BASIS OR MONTHLY BASIS UNDER THE SCHEME OF SWEPT AND PARK ED IN PROVISIONING ACCOUNT FOR THE PURPOSES OF MACRO-MONITORING. THE BOARD HAS CLE ARLY CLARIFIED THE POSITION. WHILE CORRECTLY INTERPRETING THE CIRCULAR THAT TDS IS TO BE DEDUCTED WHENEVER THE AGGREGATE OF AMOUNTS OF INTEREST CREDITED OR PA ID OR LIKELY TO BE CREDITED OR PAID, THE LD. CIT(A) HELD THAT THE ASSESSEE COULD NOT ESTABLISH THAT NO INTEREST IS ACCRUED AND CREDITED TO THE SPECIFIC ACCOUNTS DURIN G THE YEAR, IN SPITE OF 4 FURNISHING OF COPY OF A FEW ACCOUNTS TO SUBSTANTIA TE THEIR CONTENTION BY THE ASSESSEE. HENCE BASED ON THE CIRCULAR CITED ABOVE AND THE DOC UMENTS FILED BY THE ASSESSEE WHICH GOES TO PROVE THAT THE ASSESSEE HAS DEDUCTED TDS WHENEVER INTEREST IS CREDITED OR PAID, WE HEREBY DELETE THE INTEREST LEVIED BY THE ITO(TDS). 8. IN THE RESULT, BOTH THE ABOVE APPEALS OF THE ASS ESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (DIVA SINGH) (B.R.R.KUMAR ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 14/03/2018 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR