M/s Sterling Urban Infra Projects Pvt. Ltd., Bangalore V. ITO, Bangalore

ITA 1198/BANG/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63754 (ITAT-BANGALORE)
• Duration Of Justice: 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 08-10-2012
• Assessment Year: 2010-2011
• Appeal Filed On: 02-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K AMBASTHA CIT DR I
• Assessee Lawyers: SRINIVASAN
• Keywords: Rectification of order
• Section: 201(1); 154

Judgement Text

PAGE 1 OF 11 ITA NO.1198 /BANG/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SHRI N BARATHVAJA SANKAR, VICE PRESIDENT AND SHRI GEORGE GEORGE K, J.M ITA NO.1198/BANG/2011 (ASSESSMENT YEAR 2010-11) M/S STERLING URBAN INFRA PROJECTS PVT. LTD., NO.8, LEVEL-5 PRESTIGE NUBULA, CUBBON ROAD, BANGALORE-52. TA NO. BLRS 26091 C VS THE INCOME TAX OFFICER, WARD-18(2), BANGALORE. (APPELLANT) (RESPONDENT) DATE OF HEARING : 08.10.2012 DATE OF PRONOUNCEMENT : 19.10.2012 APPELLANT BY : SHRI SRINIVASAN, C. A. RESPONDENT BY : SHRI S K AMBASTHA, CI T (DR-I), ITAT ORD ER PER GEORGE GEORGE K : THIS APPEAL INSTITUTED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-II, BANGALORE DATED 10/10/2011. THE RELEVANT ASSESSMENT YEAR IS 2010-11. 2. THE GROUNDS OF APPEAL RAISED READ AS FOLLOWS:- I) THE LEARNED CIT(A) IS NOT JUSTIFIED IN HOLDING THAT THE REFUSAL TO RECTIFY THE ORDER PASSED UNDER SECTION 20 1(1) AND 201(1A) OF THE ACT BY THE LEARNED ASSESSING OFF ICER WAS JUSTIFIED UNDER THE FACTS AND IN THE CIRCUMSTAN CES OF THE APPELLANTS CASE. II) THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT T HE ORIGINAL ORDER PASSED UNDER SECTION 201(1) AND 201( 1A) OF PAGE 2 OF 11 ITA NO.1198 /BANG/2011 2 THE ACT WAS IN HASTE AND WITHOUT ADVERTING TO ALL MATERIALS AND CALLING FOR THE EXPLANATION OF THE AP PELLANT AND THEREFORE, THE APPELLANT HAD POINTED OUT THAT T HERE WAS A CLEAR AND PATENT ERROR COMMITTED BY THE ASSESS ING OFFICER IN APPLYING THE RATE OF DEDUCTION AT 20% INS TEAD OF 10%, WHICH OUGHT TO HAVE BEEN ACCEPTED. III) THE LEARNED CIT(A) OUGHT NOT TO HAVE HELD THAT THE SUBSEQUENT AMENDMENT MADE TO THE TERMS OF THE AGREEMENT WITH REGARD TO THE PAYMENT OF INTEREST WAS NOT VALID ESPECIALLY, AS THE SAID FINDING HAS BEEN R ENDERED WITHOUT CONSIDERING THE EVIDENCE OF THE PARTIES TO THE AGREEMENT AND HENCE, THE ACTION SUSTAINED UNDER SEC TION 201(1) OF THE ACT STANDS VITIATED AND IS LIABLE TO BE CANCELLED. IV) THE APPELLANT DENIES ITSELF LIABLE TO INTEREST UNDE R SECTION 201(1A) OF THE ACT, WHICH UNDER THE FACTS AND IN TH E CIRCUMSTANCES OF THE APPELLANTS CASE IS LIABLE TO BE CANCELLED. 3. THE FACTS IN BRIEF ARE AS FOLLOWS:- THE ASSESSEE IS A COMPANY. IT IS ENGAGED IN THE B USINESS OF DEVELOPMENT OF INFRASTRUCTURE PROJECTS, NAMELY, RESI DENTIAL FLATS. THE ASSESSING OFFICER CONDUCTED SURVEY IN THE BUSINESS P REMISES OF THE ASSESSEE ON 22/3/2010. THE ASSESSING OFFICER NOTICED DURING THE COURSE OF SURVEY THAT THE ASSESSEE COMPANY HAD MADE CERTAIN DELAYED RE MITTANCES IN RESPECT OF TAX DEDUCTED FOR THE ASSESSMENT YEARS 2008-09, 20 09-2010 AND 2010-11; THEREFORE, THE ASSESSING OFFICER CALLED UPON THE AS SESSEE COMPANY TO MAKE GOOD THE DEFAULTS WITH REGARD TO NON PAYMENT OF TAX DEDUCTED. COMMON ORDER DATED 9/4/2010 WAS PASSED UNDER SECTION 201(1 ) AND 201(1A) OF THE ACT COVERING THE ASSESSMENT YEARS, NAMELY, 2008-09, 2 009-10 AND 2010-11. IN SO FAR AS THE TAX DEMAND RAISED FOR THE ASSESSME NT YEARS 2008-09 AND PAGE 3 OF 11 ITA NO.1198 /BANG/2011 3 2009-10 IS CONCERNED, THERE WAS NO DISPUTE AND THE ASSESSEE COMPANY HAD MADE THE PAYMENT OF THE SAID YEARS AND THE MATTER ATT AINED FINALITY. 3.1 IN RESPECT OF ASSESSMENT YEAR 2010-11, THE ASS ESSING OFFICER RAISED A DEMAND UNDER SECTION 201(1A) OF THE ACT CO NSIDERING THE SAME TO BE THE TAX DEDUCTIBLE AT SOURCE ON INTEREST PAYMENT IN TERMS OF SECTION 194A OF THE ACT. THE ASSESSEE COMPANY HAD FILED AN APPLICAT ION DATED 9/5/2010 BEFORE THE ASSESSING OFFICER SEEKING RECTIFICATION OF ORDER PASSED UNDER SECTION 201(1) AND 201(1A) FOR ASSESSMENT YEAR 2010- 11 ON THE GROUND THAT THE RATE OF TDS MENTIONED IN THE ORDER SHOULD BE 10 % INSTEAD OF 20% BY VIRTUE OF AMENDMENT MADE BY FINANCE ACT, 2009 W.E.F. 1/10/2009. 3.2 THE ASSESSEE COMPANY HAD OBTAINED INTER CORPO RATE DEPOSIT (ICD) FROM M/S URBAN INFRASTRUCTURE TRUSTEES LIMITE D AMOUNTING TO RS.116.80 CRORES AND ACCORDING TO THE ASSESSEE COMP ANY, THE INTEREST DUE ON ICD WERE PAYABLE ON 31/3/2010. IT WAS STATED IN THE RECTIFICATION APPLICATION THAT PART II OF THE FINANCE ACT PRESCRI BES THE DEDUCTION FOR INTEREST PAYABLE UNDER SECTION 194A AT THE RATE OF 1 0% W.E.F. 1/10/2009 AS AGAINST 20% BEFORE THE SAID DATE. IT WAS FOR THIS REASON THE ASSESSEE COMPANY HAD MOVED APPLICATION UNDER SECTION 154 SEEK ING RECTIFICATION AS THE ASSESSING OFFICER HAD COMPUTED THE TAX DEDUCTIBLE I N TERMS OF THE RATES THAT WERE IN FORCE BEFORE 1/10/2010 AND HAD NOT CON SIDERED THE RATES IN FORCE AS PER THE AMENDMENT MADE BY FINANCE ACT, 2009 . 3.3 THE ASSESSING OFFICER REJECTED THE RECTIFICATI ON APPLICATION STATING THAT SINCE THE ASSESSEE COMPANY FOLLOWS MERC ANTILE SYSTEM OF ACCOUNTING FOR COMPOUNDING THE INTEREST IT SHOULD H AVE PROVIDED FOR THE SAME PAGE 4 OF 11 ITA NO.1198 /BANG/2011 4 IN THE BOOKS OF ACCOUNTS AS PER LAW AND ACCOUNTING CONCEPTS AND SINCE THIS WAS FOUND TO HAVE BEEN NOT DONE, THE PROVISIONS OF SECTION 194A STOOD ATTRACTED AND ORDER UNDER SECTION 201(1) AND 201(1A ) WAS IN ACCORDANCE WITH LAW. 4. AGGRIEVED BY THE ASSESSING OFFICERS ACTION IN R EJECTING THE RECTIFICATION APPLICATION, THE ASSESSEE COMPANY CARR IED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 5. ELABORATE WRITTEN SUBMISSIONS WERE FILED BEFORE THE CIT(A), WHICH ARE EXTRACTED AT PAGES 3 TO 7 OF THE IMPUGNED ORDER OF THE CIT(A). THE CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE . THE CIT(A) HELD THAT IN RESPECT OF INTEREST PERTAINING TO QUARTER SUBSEQ UENT TO THE AMENDMENT OF ACT (1/10/2010), THE TDS WAS TO BE DEDUCTED ONLY AT 10% INSTEAD OF 20% CALCULATED BY THE ASSESSING OFFICER. ACCORDINGLY THE DEMAND RAISED UNDER SECTION 201(1) AND 201(1A) WAS REDUCED. THE REASON ING OF THE CIT(A) IN REJECTING THE APPEAL READS AS FOLLOWS:- 3. I HAVE CAREFULLY CONSIDERED THE APPELLANTS SUBMISSIONS AND PERUSED THE ORDER UNDER SECTION 154 AS WELL AS THE ASSESSING OFFICERS REPORT. IT IS SEEN THAT THE APPELLANT HAS POINTED OUT THAT FOR THE FINANCIAL YEAR 2009-10, TDS WAS REQUIRED TO BE DEDUCTED AT 10% AS AGAINST 20% AS THE RELEVANT PROVISION WAS AMENDED WITH EFFECT FROM 1/10/2009. THE APPELLANTS CLAIM THAT THE RATE AT 10% IS CORRECT CANNOT BE ACCEPTED BECAUSE OF THE FOLLOWING TWO REASONS: I) FIRSTLY, THE CLAIM OF THE APPELLANT THAT THERE IS A MODIFIED RESOLUTION FOR PAYMENT OF INTEREST PAGE 5 OF 11 ITA NO.1198 /BANG/2011 5 ANNUALLY INSTEAD OF QUARTERLY CANNOT BE ACCEPTED AS CLEARLY BROUGHT OUT BY THE AO IN THE RECTIFICATION ORDER UNDER SECTION 154, WHICH IS THE SUBJECT MATTER OF APPEAL. THE AO HAS POINTED OUT AS FOLLOWS: CONSIDERING THE FACTS THAT THIS DOCUMENT WAS NOT AVAILABLE AT THE TIME OF SURVEY PROCEEDINGS, CERTAIN SUPPORTING DOCUMENTS WERE CALLED FOR INCLUDING A WORKING STATEMENT ON HE INTEREST CALCULATION. THE DOCUMENTS WERE FILED ON 14.10.10 WHEREIN IT IS SEEN THAT RESOLUTION WAS PASSED BY THE BOARD ON 25.08.2008 FOR ACCEPTING INTERCORPORATE DEPOSITS AS PER THE TERMS AND CONDITIONS CONTAINED IN THE DRAFT AGREEMENT. THERE IS APPARENTLY NO SUCH RESOLUTION PASSED AFTER THE SAID DATE OF 25.6.2009, THE DATE ON WHICH THE NEW DOCUMENTS IS STATED TO BE MADE. THEREFORE, ANY SUCH DOCUMENTS WHICH IS NOT RATIFIED BY THE BOARD WOULD BE ULTRAVIRES AND WILL NOT HAVE ANY IMPACT ON THE EXISTING LIABILITY OF THE DEDUCTOR. A) IT IS CLEAR, THEREFORE, THAT THE AGREEMENT SAID TO BE DATED 25/6/2009 IS APPARENTLY NOT RATIFIED BY THE BOARD AS IS EVIDENT FROM THE FACT THAT, AS PER THE DOCUMENTS FILED ON 14/10/2010 BEFORE THE AO, THE RESOLUTION FOR ACCEPTING INTER-CORPORATE DEPOSITS AND THE TERMS AND CONDITIONS THEREFORE WAS PASSED BY THE BOARD ON 25/8/2008. APPARENTLY, THERE HAS BEEN NO SUCH RESOLUTION AFTER THE DATE OF THE SO-CALLED NEW AGREEMENT SAID TO BE DATED 25/6/2009. B) MOREOVER, THE SAID NEW AGREEMENT IS MERELY A LETTER DATED 25/6/2009 FROM M/S STERLING URBAN INFRASTRUCTURE (P) LTD. SIGNED BY A DIRECTOR INDICATING THE CHARGES, INTER ALIA, WHICH HAS BEEN ACCEPTED BY M/S PAGE 6 OF 11 ITA NO.1198 /BANG/2011 6 STERLING URBAN INFRA PROJECTS PVT. LTD. ON THEIR BEHALF BY AUTHORISED SIGNATORY. THE ENTIRE PROCESS WAS APPARENTLY EXECUTED ON THE SAME DAY THROUGH SIGNATURES ON A SINGLE SHEET OF PAPER. EVEN DURING THE COURSE OF APPELLATE PROCEEDINGS, THE APPELLANT HAS NOT SHOWN THAT THIS AGREEMENT IS RATIFIED THROUGH A MEETING OR THAT ANY MINUTES THEREOF HAVE BEEN DRAWN/RECORDED. C) THE RELIABILITY AND GENUINENESS OF THIS NEW AGREEMENT SAID TO BE DATED 25/6/2009 IN THE FACTS AND CIRCUMSTANCES OF THE CASE CANNOT BE ACCEPTED. NO SUCH AGREEMENT WAS FOUND OR MENTIONED AT THE TIME OF SURVEY ON 22/3/2010 OR UP TO 9/4/2010, THE DATE OF PASSING THE ORDER UNDER SECTION 201(1) AND 201(1A) AS PER WHICH THE APPELLANT HAD AGREED TO THE DEFAULT COMMITTED AND AGREED TO DISCHARGE THE TDS LIABILITIES. THEREFORE, THE NEW PLEA VIDE THE RECTIFICATION APPLICATION BRINGING FORTH THE NEW AGREEMENT WITH MODIFIED TERMS AND CONDITIONS THROUGH A LETTER WITH ANY RESOLUTION/RECORDING OF MINUTES TO BACK IT THEREOF CAN ONLY BE TREATED AS AN AFTERTHOUGHT TO SUIT THE PARTIES CONCERNED AND CANNOT BE ACCEPTED. II) SECONDLY, EVEN IF INTEREST WAS PAID ANNUALLY AS PER THE SAID MODIFIED AGREEMENT AND NOT QUARTERLY AS PER THE ORIGINAL AGREEMENT RATIFIED BY THE BOARD, IN BOTH THE AGREEMENTS THE INTEREST WAS TO BE COMPOUNDED QUARTERLY AND, THEREFORE, FOR CALCULATION AND PROVISION FOR QUARTERLY INTEREST SECTION 194A IS CLEARLY ATTRACTED AT THE STAGE OF EACH QUARTER. AS SUCH, IN PAGE 7 OF 11 ITA NO.1198 /BANG/2011 7 RESPECT OF INTEREST PERTAINING TO QUARTERS PRIOR TO THE AMENDMENT IN THE ACT I.E. UP TO 1/10/2010, TDS WAS REQUIRED TO BE DEDUCTED AT THE RATE OF 20% AS PER LAW IRRESPECTIVE OF WHEN IT HAS BEEN PAID OR SHOWN TO HAVE ACCOUNTED. HOWEVER, IN RESPECT OF INTEREST PERTAINING TO THE PERIOD AFTER 1/10/2010, TDS AT THE RATE OF 10% UNDER SECTION 194A OF THE ACT IS REQUIRED TO BE MADE ON ACCOUNT OF THE AMENDMENT IN THE ACT. 3.1 IN VIEW OF THE FOREGOING THE ASSESSING OFFICER S ACTION IN DEMANDING DEDUCTION OF TAX AT SOURCE AT 20% FOR INTEREST PERTAINING TO PERIOD UP TO 30/9/2009 IS UPHELD. HOWEVER, WITH REGARD TO INTEREST PERTAINING TO THE PERIOD FROM 1/10/2009 THE LIABILITY UNDER SECTION 194A CAN ONLY BE AT 10% AS PER LAW AND IS ORDERED ACCORDINGLY. THE ASSESSING OFFICER IS DIRECTED TO RECALCULATE THE LIABILITY OF THE APPELLANT ACCORDINGLY. 6. THE ASSESSEE BEING AGGRIEVED IS IN APPEAL BEFOR E US. 7. A PAPER BOOK HAS BEEN FILED ENCLOSING WRITTEN S UBMISSIONS FILED BEFORE THE CIT(A) ALONG WITH THE ANNEXURES. THE L EARNED AR SUBMITTED THAT THE INTEREST PAYMENT ON ICD THOUGH COMPOUNDED Q UARTERLY, WAS PAYABLE ONLY 31 ST MARCH OF EACH FINANCIAL YEAR. THE RESOLUTION OF PA YMENT OF INTEREST ON31ST MARCH OF EACH OF THE FINANCIAL YEAR WAS ACCEP TED BY M/S URBAN INFRASTRUCTURE TRUSTEES LIMITED AND THE SAME IS EVI DENT BY THE LETTER DATED 25.6.2009 OF THE ASSESSEE COMPANY WRITTEN TO THE M/S URBAN INFRASTRUCTURE TRUSTEES LIMITED (SOURCE PAGE 20 OF THE PAPER BOO K). IT WAS CONTENDED THAT SINCE THE INTEREST IS PAYABLE ONLY ON 31 ST MARCH, THE RATE FOR TDS PAGE 8 OF 11 ITA NO.1198 /BANG/2011 8 SUBSEQUENT TO THE PERIOD 1/9/2009 WAS ONLY AT 10%. IT WAS FURTHER CONTENDED BY REFERRING TO SECTION 194A OF THE ACT TH AT THE INTEREST INCOME WAS CREDITED TO THE ACCOUNT OF THE PAYEE ONLY ON 31 ST MARCH, 2010 AND THE PAYMENTS WERE MADE BY ISSUANCE OF CHEQUE ONLY THEREAFT ER. SO THE CORRECT RATE FOR DEDUCTION FOR TDS PURPOSE IN RESPECT OF PA YMENTS MADE ON INTEREST TO M/S URBAN INFRASTRUCTURE TRUSTEES LIMITED WAS AT THE RATE OF 10% AND NOT 20%. LASTLY IT WAS CONTENDED THAT THE INTEREST INCOME WAS DISCLOSED BY PAYEE IN ITS RETURN OF INCOME AND HENCE, THE ASSESSE E COMPANY COULD NOT MAKE LIABLE UNDER SECTION 201(1) OF THE ACT. FOR T HE ABOVE PROPOSITION, THE LEARNED AR RELIED ON THE HONBLE APEX COURTS JUDGM ENT IN THE CASE OF HINDUSTAN COCO COLA BEVERAGES LTD. V CIT REPORTED I N 293 ITR 226 (SC). 8. THE LEARNED DR STRONGLY SUPPORTED THE ORDERS OF THE INCOME TAX AUTHORITIES. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. THE ASSESSEE COMPANYS PROPOSAL TO ACCEP T INTER CORPORATE DEPOSITS FROM M/S URBAN INFRASTRUCTURE TRUSTEES LIM ITED WAS APPROVED BY THE BOARD OF DIRECTORS OF THE ASSESSEE COMPANY AND T HE SAME IS EVIDENT FROM THE MINUTES OF THE BOARD MEETING HELD ON 21/1/ 2009 (SOURCE : PAGE 7 OF THE PAPER BOOK). FURTHER IT WAS RESOLVED BY THE BOA RD THAT MR. RAMANI SASTRI, ONE OF THE DIRECTORS OF THE ASSESSEE COMPAN Y WAS AUTHORIZED TO EXECUTE THE INTER CORPORATE DEPOSIT AGREEMENT AND A LL OTHER INCIDENTAL DOCUMENTS ON BEHALF OF THE ASSESSEE COMPANY WITH THE M/S URBAN INFRASTRUCTURE TRUSTEES LIMITED. IN PURSUANCE TO T HE BOARDS RESOLUTION, INTER CORPORATE DEPOSIT AGREEMENT EXECUTED BY THE AS SESSEE COMPANY WITH PAGE 9 OF 11 ITA NO.1198 /BANG/2011 9 M/S URBAN INFRASTRUCTURE TRUSTEES LIMITED WAS SIGNE D BY MR. RAMANI SASTRI FOR AND BEHALF OF THE ASSESSEE COMPANY. AS PER THE ABOVE DEPOSIT AGREEMENT, THE INTEREST ON ICD WAS PAYABLE AT THE RA TE OF 14% QUARTERLY I.E. ON 31 ST MARCH, 30 TH JUNE, 30 TH SEPTEMBER AND 31 ST DECEMBER. HOWEVER, THE TERMS OF THE PAYMENT OF INTEREST WAS MODIFIED BY LETTER DATED 25/6/2009 OF THE ASSESSEE COMPANY, WHICH WAS ACCEPTE D BY THE AUTHORIZED SIGNATORY OF M/S URBAN INFRASTRUCTURE TRUSTEES LIMIT ED. UNDER THE MODIFIED/AMENDED CLAUSE OF INTEREST PAYMENT (CLAUSE 1.4 OF THE DEPOSIT AGREEMENT), INTEREST WAS PAYABLE AT SBI PLR +3% COMP OUNDED QUARTERLY WHICH IS PAYABLE ON 31 ST MARCH OF EACH OF THE FINANCIAL YEAR. THE DEPARTMEN T DOUBTS THE AUTHENTICITY OF THE AMENDED/MODIFIED CLAU SE OF THE INTEREST PAYMENT, FOR THE REASON THAT THE SAME IS NOT RATIFIE D BY THE BOARD. THIS REASON OF THE REVENUE, ACCORDING TO US, IS NOT ON A SOUND FOOTING. AS STATED EARLIER, THE BOARD RESOLVED TO ACCEPT ICD AND ALSO AUTHORIZED MR. RAMANI SASTRI TO EXECUTE THE DEPOSIT AGREEMENT AND ALL OTH ER INCIDENTAL DOCUMENTS REQUIRED TO BE EXECUTED FOR AND BEHALF OF THE ASSES SEE COMPANY. DUE TO RECESSION IN THE MARKET, THE INTEREST CLAUSE WHICH STIPULATED THAT INTEREST WAS PAYABLE QUARTERLY, WAS MODIFIED AND THE SAME WAS MADE PAYABLE ON 31 ST MARCH OF EACH OF THE FINANCIAL YEAR. THE MODIFICATI ON/AMENDMENT OF THE INTEREST CLAUSE TO THE FAVOUR OF THE ASSESSEE IS DO NE BY FORWARDING A LETTER DATED 25/6/2009 BY THE ASSESSEE COMPANY. THE SAID LE TTER IS SIGNED BY SHRI RAMANI SASTRI, WHO IS AUTHORIZED BY THE BOARD OF THE DIRECTORS VIDE ITS MEETING HELD ON 31/1/2009. THE MODIFIED/AMENDED CL AUSE WAS ACCEPTED BY M/S URBAN INFRASTRUCTURE TRUSTEES LIMITED. WHEN TH E PARTIES TO THE AGREEMENT MODIFIED INTEREST CLAUSE IN THE DEPOSIT A GREEMENT, THE INTEREST PAYMENT ARISES ONLY ON 31/3/2010. IT IS PERTINENT TO MENTION HERE THAT THE PAGE 10 OF 11 ITA NO.119 8/BANG/2011 10 ASSESSEE COMPANY HAD GIVEN A COPY OF THE LEDGER ACCOU NT OF INTEREST PAID, WHICH WAS ENCLOSED TO THE LETTER DATED 13/7/2010 AD DRESSED TO THE ASSESSING OFFICER. IT CAN BE SEEN FROM THE LEDGER ACCOUNT THAT THE ASSESSEE COMPANY HAD CREDITED THE INTEREST PAYABLE ON THE ICD ONLY ON 31 ST MARCH, 2010; THUS THE CLAIM OF THE ASSESSEE COMPANY THAT IT WAS LIABLE TO DEDUCT TAX AT SOURCE AT THE RATE OF 10%, WHICH WAS THE RATE IN FORCE ON THE DATE OF CREDIT TO THE ACCOUNT OF THE PAYEE, WAS SUBS TANTIATED WITH REFERENCE TO THE TERMS OF THE AMENDED AGREEMENT AND THE ENTRI ES PASSED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE RELATING TO THE CREDIT OF INTEREST WHICH IS NOT IN DISPUTE. 9.1 THE REASONING OF THE REVENUE AUTHORITIES THAT EVEN AS PER THE TERMS OF AMENDED CLAUSE, THE INTEREST WAS ACCRUING QUARTERLY AND THEREFORE, THE TAX HAS TO BE DEDUCTED AS THE RATE IN FORCE IN QUARTERLY BASIS, IS NOT CORRECT. THE INTEREST ON ICD WAS PAYABLE ON 31 ST MARCH, ALTHOUGH THE INTEREST WAS COMPOUNDED WITH QUARTERLY RESTS. MER ELY BECAUSE THE INTEREST IS COMPOUNDED QUARTERLY DOES NOT MEAN THAT THE INTER EST IS PAYABLE ON QUARTERLY BASIS. 9.2 SINCE WE DECIDED THE ISSUE THAT THE LIABILITY O F THE ASSESSEE TO DEDUCT TAX AT SOURCE WITH REFERENCE TO THE INTEREST PAYMENT IS ONLY AT THE RATE OF 10%,WE DO NOT ADJUDICATE/CONSIDER THE ASSES SEES SUBMISSION THAT THE ASSESSEE CANNOT BE MADE LIABLE UNDER SECTION 20 1(1) OF THE ACT, SINCE THE PAYEE HAD DISCLOSED THE INTEREST INCOME IN ITS RETUR N OF INCOME (PLACING RELIANCE ON THE APEX COURT JUDGMENT IN THE CASE OF HINDUSTAN COCO COLA BEVERAGES LTD. V CIT HINDUSTAN COCO COLA BEVERAGES LTD. V CIT) (SUPRA). PAGE 11 OF 11 ITA NO.119 8/BANG/2011 11 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED. THE ORDER PRONOUNCED ON THE 19 TH DAY OF OCTOBER, 2012 AT BANGALORE. SD/- SD/- (N BARATHVAJA SANKAR) (GEORGE GEORGE K) VICE PRESIDENT JUDICIAL MEMBER COPY TO : 1. THE REVENUE 2. THE ASSESSEE 3. THE CIT CONCERNED. 4. THE CIT(A) CONCERNED. 5. DR 6. GF MSP/ BY ORDER SENIOR PRIVATE SECRETARY, ITAT, BAN GALORE.