ACIT (TDS), Chandigarh V. State Bank of India (PEC), Chandigarh

ITA 1084/CHANDI/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1592 (ITAT-CHANDIGARH)
• Duration Of Justice: 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 25-08-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 08-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNIL VERMA
• Section: 10; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MRS. ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER ITA NO.1084/CHD/2014 ASSESSMENT YEAR:2009-10 THE ACIT(TDS), VS. STATE BANK OF INDIA (PEC) CHANDIGARH SECTOR 12-B CHANDIGARH PAN NO. AAACS8577K (APPELLANT) (RESPONDENT) APPELLANT BY : SH. SUNIL VERMA RESPONDENT BY : NONE DATE OF HEARING : 25/08/2015 DATE OF PRONOUNCEMENT : 01/09/2015 ORDER PER ANNAPURNA A.M. THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORD ER OF LD. CIT(A)CHANDIGARH DT. 18/09/2014. 2. THE ONLY ISSUE IN THIS APPEAL IS AGAINST THE DEL ETION OF PENALTY LEVIED UNDER SECTION 271C OF THE INCOME TAX ACT 196 1. 3. BRIEFLY STATED DURING THE IMPUGNED AY THE ASSESS EE HAD NOT DEDUCTED TAX AT SOURCE UNDER SECTION 194A ON INTERE ST PAYMENT. THE AO LEVIED PENALTY U/S 271C OF THE INCOME TAX ACT,19 61, OF RS. 19,70,098/-, EQUAL TO THE AMOUNT OF TAX WHICH THE A SSESSEE HAD FAILED TO DEDUCT AS REQUIRED UNDER THE PROVISIONS T O CHAPTER XVII B OF THE ACT. 2 4. IN APPEAL BEFORE CIT(A) THE PENALTY WAS DELETED VIDE ORDER DT. 18/09/2014, BY HOLDING AT PARA 4 OF THE ORDER AS FO LLOWS: 4. THE LD. COUNSEL FOR THE APPELLANT HAS CLARIFIE D THAT THE INTEREST HAD BEEN PAID IN THIS CASE TO THE PEC UNIV ERSITY OF TECHNOLOGY AND AS PER THE PROVISIONS OF SECTION 194 A(III)(F), PROVISIONS OF SECTION 194A(1) ARE NOT APPLICABLE TO SUCH INSTITUTIONS ETC, WHICH INCLUDE SOCIETIES REGISTERED UNDER THE S OCIETIES REGISTRATION ACT, 1860 AND FINANCED WHOLLY BY THE G OVERNMENT AND SO THE INTEREST PAYMENT TO SUCH SOCIETIES IS NOT SU BJECT TO TAX DEDUCTION AT SOURCE. THE CONTENTION OF THE LD. COUN SEL IS CORRECT IN THIS REGARD. AS PER NOTIFICATION NO. SO 3489 DATED 22.10.1970, ANY UNDERTAKING OR BODY, INCLUDING A SOCIETY REGISTERED UNDER THE SOCIETIES REGISTRATION ACT, 1860, FINANCED WHOLLY B Y THE GOVERNMENT IS NOTIFIED FOR THE PURPOSES OF SECTION 194A(3)(III)(F) AND PEC UNIVERSITY OF TECHNOLOGY FALLS IN THIS CATE GORY OF UNDERTAKING. THEREFORE, TAX WAS NOT REQUIRED TO BE DEDUCTED AT SOURCE ON INTEREST PAID TO PEC UNIVERSITY OF TECHNO LOGY. MOREOVER, INCOME OF PEC UNIVERSITY OF TECHNOLOGY IS EXEMPT U/ S 10(23C)(IIIAB) OF THE ACT AND SO IN ANY CASE, PROVISIONS OF SECTIO N 194A WILL NOT BE APPLICABLE TO THIS INSTITUTION. IT IS, THEREFORE, H ELD THAT THE PR WAS NOT REQUIRED TO DEDUCT TAX AT SOURCE ON THE IMPUGNE D INTEREST AND IS, ACCORDINGLY NOT LIABLE FOR LEVY OF PENALTY U/S 271C OF THE ACT. THE PENALTY LEVIED U/S 271C IS ACCORDINGLY CANCELLE D. GROUNDS OF APPEAL TAKEN BY THE APPELLANT ARE ALLOWED. 5. AGGRIEVED AGAINST THE SAME THE DEPARTMENT HAS FI LED THIS APPEAL BEFORE US. 6. THE DR ARGUED THAT THE PENALTY HAS BEEN DELETED BY THE LD.CIT(A), FOR THE REASON THAT THE ASSESSE HAD PAID INTEREST TO A SOCIETY REGISTERED UNDER THE SOCIETIES REGISTRATION ACT 1860 AND FINANCED WHOLLY BY THE GOVT AND THEREFORE, AS PER S ECTION 194A(3)(III)(F) READ WITH NOTIFICATION NO. SO 3489 DT. 22/10/1970, IT WAS NOT REQUIRED TO DEDUCT TAX AT SOURCE ON THE INT EREST PAID TO THE SOCIETY. THE DR STATED THAT SINCE IT HAS NOT BEEN PROVED WHETHER THE SOCIETY IS WHOLLY FINANCED BY THE GOVT. OR NOT, IT IS NOT ELIGIBLE TO CLAIM THE BENEFIT OF THE NOTIFICATION AS STATED ABO VE. 7. WE HAVE HEARD THE REPRESENTATIVE OF DEPARTMENT A ND PERUSED THE ORDERS OF AUTHORITIES BELOW AND ALSO THE DOCUMENTS PLACED BEFORE US. 8. SECTION 271 C LEVIES PENALTY FOR FAILURE TO DED UCT TAX AT SOURCE. IN THE PRESENT CASE WE FIND THAT THE INTERE ST ON WHICH 3 ALLEGEDLY TAX WAS NOT DEDUCTED AT SOURCE WAS PAID B Y THE ASSESSE TO PEC UNIVERSITY OF TECHNOLOGY WHICH WAS CLAIMING EXEMPTION U/S 10(23C)(IIIAB) OF THE ACT. SECTION 197A OF THE INC OME TAX ACT,1961,LISTS CIRCUMSTANCES IN WHICH NO TAX HAS TO BE DEDUCTED AT SOURCE .CLAUSE (1F) OF THE SECTION ALLOWS CERTAIN I NSTITUTIONS AND ASSOCIATIONS FROM RECEIVING PAYMENTS WITHOUT TAX D EDUCTION AT SOURCE ,STATING AS FOLLOWS: NOTWITHSTANDING ANYTHING CONTAINED IN THIS CHAPTE R, NO DEDUCTION OF TAX SHALL BE MADE FROM SUCH SPECIFIED PAYMENT TO SUCH INSTITUTION, ASSOCIATION OR BODY OR CLASS OF I NSTITUTIONS, ASSOCIATIONS OR BODIES AS MAY BE NOTIFIED BY THE CE NTRAL GOVERNMENT IN THE OFFICIAL GAZETTE, IN THIS BEHALF. THE NOTIFICATION REFERRED TO IN THE ABOVE SECTION I N CIRCULAR NO. 4/2002 DT. 16/07/2002 WHICH STATES AS FOLLOWS: IT HAS BEEN DECIDED THAT IN CASE OF THOSE FUNDS OR AUTHORITIES OR BOARDS OR BODIES, BY WHATEVER NAME CALLED, WHOSE INCOME IS UN CONDITIONALLY EXEMPT UNDER SECTION 10 OF THE INCOME-TAX ACT AND WHO ARE STATUTORILY NOT REQUIRED TO FILE RETURN OF INCOME AS PER SECTION 139 OF THE INCOME-T AX ACT, THERE WOULD BE NO REQUIREMENT FOR TAX DEDUCTION AT SOURCE SINCE THEIR INCOME IS ANYWAY EXEMPT UNDER THE INCOME-TAX ACT. THE INSTITUTIONS WHOSE IN COME IS UNCONDITIONALLY EXEMPT UNDER SECTION 10 AND WHO ARE STATUTORILY NOT REQUIRED TO FILE RETURN OF INCOME AS PER THE PROVISIONS OF SECTION 139 ARE : (I) 'LOCAL AUTHORITY', AS REFERRED TO IN THE EXPL ANATION TO CLAUSE (20); (II) REGIMENTAL FUND OR NON-PUBLIC FUND ESTABLISHE D BY THE ARMED FORCES OF THE UNION REFERRED TO IN CLAUSE (23AA); (III) FUND, BY WHATEVER NAME CALLED, SET UP BY THE LIFE INSURANCE CORPORATION OF INDIA ON OR AFTER 1ST AUGUST, 1996, OR BY ANY OTHER INSUR ER REFERRED TO IN CLAUSE (23AAB); (IV) AUTHORITY (WHETHER KNOWN AS THE KHADI AND VIL LAGE INDUSTRIES BOARD OR BY ANY OTHER NAME) REFERRED TO IN CLAUSE (23BB); (V) BODY OR AUTHORITY REFERRED TO IN CLAUSE (23B BA); (VI) SAARC FUND FOR REGIONAL PROJECTS SET UP BY C OLOMBO DECLARATION REFERRED TO IN CLAUSE (23BBC); (VII) SECRETARIAT OF THE ASIAN ORGANISATION OF THE SUPREME AUDIT INSTITUTIONS REFERRED TO IN CLAUSE (23BBD) TILL ASSESSMENT YEAR 2003-2004; (VIII)INSURANCE REGULATORY AND DEVELOPMENT AUTHORIT Y REFERRED TO IN CLAUSE (23BBE); (IX) PRIME MINISTERS NATIONAL RELIEF FUND REFERR ED TO IN SUB-CLAUSE (I), PRIME MINISTERS FUND (PROMOTION OF FOLK ART) REFERRED TO IN SUB-CLA USE (II), PRIME MINISTERS AID TO STUDENTS FUND REFERRED TO IN SUB-CLAUSE (III), NATI ONAL FOUNDATION FOR COMMUNAL HARMONY REFERRED TO IN SUB-CLAUSE (IIIA), ANY UNIVE RSITY OR OTHER EDUCATIONAL INSTITUTION REFERRED TO IN SUB-CLAUSE (IIIAB) AND A NY HOSPITAL OR OTHER INSTITUTION FOR THE RECEPTION AND TREATMENT OF PERSONS AS REFERRED TO IN SUB-CLAUSE (IIIAC) OF CLAUSE (23C); (X) CREDIT GUARANTEE FUND TRUST FOR SMALL SCALE INDUSTRIES REFERRED TO IN CLAUSE (23EB) TILL ASSESSMENT YEAR 2006-2007; (XI) PROVIDENT FUND TO WHICH THE PROVIDENT FUNDS ACT, 1925 (19 OF 1925) REFERRED TO IN SUB-CLAUSE (I), RECOGNISED PROVIDENT FUND REFERRED TO IN SUB-CLAUSE (II), APPROVED 4 SUPERANNUATION FUNDS REFERRED TO IN SUB-CLAUSE (III ), APPROVED GRATUITY FUND REFERRED TO IN SUB-CLAUSE (IV) AND FUNDS REFERRED T O IN SUB-CLAUSE (V) OF CLAUSE (25); (XII) EMPLOYEES STATE INSURANCE FUND REFERRED TO I N CLAUSE (25A); (XIII)CORPORATIONS REFERRED TO IN CLAUSE (26BB); (XIV) BOARDS REFERRED TO IN CLAUSE (29A). POINT NO(IX) REFERS TO ANY UNIVERSITY OR OTHER EDUC ATIONAL INSTITUTION REFERRED TO IN SUB-CLAUSE (IIIAB) OF CLAUSE (23C) OF SECTION 10. PEC UNIVERSITY THE PAYEE IN THE PRESENT CASE BEING EXEMPT UNDER SECTION 10(23C) (IIIAB) IS THEREFORE ELIGIBLE TO RECEIVE ANY PAYMENT WITHOUT A NY TAX DEDUCTION AT SOURCE. IN SUCH CIRCUMSTANCES THE ASSESSE WAS NO T REQUIRED TO DEDUCT TAX AT SOURCE ON THE INTEREST PAYMENT MADE. FURTHER AS PER THE PROVISIONS OF SECTION 194A(3)(I II)(F) NO TAX IS TO BE DEDUCTED AT SOURCE ON INCOME BY WAY OF INTEREST WHI CH ARE CREDITED OR PAID SUCH OTHER INSTITUTIONS, ASSOCIATI ON OR BODY WHICH THE CENTRAL GOVT. MAY NOTIFY IN THIS BEHALF IN THE SPECIAL GAZETTE. FOR THE PURPOSE OF SECTION 194A(3)(III)(F) NOTIFICATION NO. SO 3489 DT. 22/10/1970, LISTS A NUMBER OF UNDERTAKINGS WHICH I NCLUDES ANY UNDERTAKING OR BODY INCLUDING A SOCIETY REGISTERED UNDER THE SOCIETIES REGISTRATION ACT 1860, FINANCED WHOLLY BY GOVT.PEC UNIVERSITY IS CLAIMING EXEMPTION U/S 10(23C)(IIIAB) OF THE ACT. SECTION 10(23C)(IIIAB), GRANTS EXEMPTION FROM TAX TO INCOME S OF EDUCATIONAL INSTITUTIONS WHICH ARE WHOLLY OR SUBSTANTIALLY FINA NCED BY GOVT. UNDISPUTEDLY THEREFORE PEC UNIVERSITY IS WHOLLY OR SUBSTANTIALLY FINANCED BY GOVT. THEREFORE EVEN AS PER THE PROVISI ONS OF SECTION 194A(3)III)(F) NO TAX WAS REQUIRED TO BE DEDUCTED A T SOURCE ON THE INTEREST PAID TO IT BY THE ASSESSE. SINCE BOTH AS P ER THE PROVISIONS OF SECTION 197A AND SECTION 194 A(3)(III)(F) THE IMPUG NED PAYMENT WAS NOT TO BE SUBJECTED TO TAX DEDUCTION AT SOURCE. NO PENALTY U/S 271C WAS THEREFORE LEVIABLE. 5 MOREOVER WE FIND THAT IN THE CASE OF ITO V THE STAT E BANK OF PATIALA ITA.NO.1306 & 1307/CHD/2012 ,THE CHANDIGARH BENCH O F THE TRIBUNAL HAS ON IDENTICAL FACTS AFFIRMED THE ABOVE VIEW . 9. IN VIEW OF THE SAME WE FIND NOTHING WRONG WITH T HE ORDER OF THE LD. CIT(A) AND WE CONFIRM THE SAME.. 10. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 01/09/2015 SD/- SD/- (BHAVNESH SAINI) (ANNAPURNA MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 01/09/2015 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR