The Chirakkal Service Co-op bank Ltd, Kannur V. The ITO (TDS), Kannur

ITA 231/COCH/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 4404 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 13-05-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M V RUDRAN
• Section: 80C; 201(1)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI CHANDRA POOJARI , AM & GEORGE GEORGE K., JM I.T.A. NOS. 231 & 232 /COCH/2016 ASSESSMENT YEAR S : 2007 - 08 & 2008 - 09 M/S. CHIRAKKAL SERVICE CO - OPERATIVE BANK LTD., CHIRAKKAL P.O., KANNUR- 670 011. [PAN:AAAAC 0458M] VS. THE INCOME TAX OFFICER (TDS), KANNUR. (ASSESSEE - APPELLANT ) (REVENUE - RESPONDENT) A SSESSEE BY SHRI GEORGE THOMAS, CA REVENUE BY SHRI M.V. RUDRAN, ADDL. CIT, DR D ATE OF HEARING 21 / 0 3 /2018 DATE OF PRONOUNCEMENT 22 / 0 3 /2018 O R D E R PER GEORGE GEORGE K., JM: THESE APPEALS AT THE INSTANCE OF THE ASSESSEE A RE DIRECTED AGAINST THE CONSOLIDATED ORDER OF THE CIT(A), KOZHIKODE DATED 1 1/02/2016. THE RELEVANT ASSESSMENT YEARS ARE 2007-08 AND 2008-09. 2. SINCE COMMON ISSUES ARE RAISED IN THESE APPEAL S, HENCE THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLID ATED ORDER. I.T.A. NOS. 231 & 232./C/2016 2 3. IDENTICAL GROUNDS ARE RAISED IN THESE APPEALS WHICH READ AS FOLLOWS: I) THE ORDER OF THE INCOME TAX OFFICER (TDS), KAN NUR IS AGAINST THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE AND HENCE OPPOSED TO THE PROVISIONS OF THE INCOME TAX ACT, 1961. II) THE LEARNED INCOME TAX OFFICER (TDS) OUGHT TO HAVE CONSIDERED THE FACT THAT THE APPELLANT IS CONTRIBUTING TO A PROVID ENT FUND RECOGNIZED BY THE GOVERNMENT OF KERALA AND AS PER THE GUIDELINES ISSUED BY THE STATE CO-OPERATIVE DEPARTMENT. III) WITHOUT PREJUDICE TO THE ABOVE, THE APPELLANT IS NOT LIABLE TO DEDUCT TAX ON THE INTEREST ACCRUED ON PF DEPOSITS OF THE E MPLOYEES U/S. 192 OF THE INCOME TAX ACT AS SECTION 192 IS NOT APPLICABLE TO INTEREST. MOREOVER THE PF AMOUNT IS DEPOSITED IN THE APEX BANK ON WHIC H THE EMPLOYER HAS NO CONTROL. IV) ON THE ABOVE GROUNDS AND SUCH OTHER GROUNDS AS MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT JUSTICE BE D ONE TO THE APPELLANT BY SQUASHING THE SAID ORDER. 4. BRIEFLY STATED THE FACTS OF THE CASE ARE AS FOLLOWS : THE ASSESSEE IS A CO-OPERATIVE SOCIETY. FOR THE ASSESSMENT YEARS 2007-08 AND 2008-09, IT WAS NOTICED BY THE AO THAT THE AS SESSEE WHILE MAKING TDS ON SALARIES U/S. 192 OF THE ACT, THERE WERE SHORT DEDU CTIONS OF TAX. THE REASON FOR SHORT DEDUCTIONS OF TAX WAS THAT WHILE COMPUTING TA XABLE SALARY, THE ASSESSEE WAS DEDUCTING U/S. 80C OF THE ACT, CONTRIBUTIONS TO UNRECOGNIZED PROVIDENT FUND. ACCORDING TO THE ASSESSING OFFICER, THE CONTRIBUTIO NS TO UNRECOGNIZED PROVIDENT FUND WERE NOT ELIGIBLE FOR DEDUCTION U/S. 80C OF TH E ACT. FURTHER, THE ASSESSING OFFICER HELD THAT INTEREST ACCRUED ON EMPLOYEES CO NTRIBUTION TO UNRECOGNIZED PROVIDENT FUND IS ALSO TAXABLE UNDER THE HEAD INCO ME FROM OTHER SOURCES. THE ASSESSING OFFICER PASSED ORDERS U/S. 201(1) AND 20 1(1A) OF THE ACT, MAKING THE I.T.A. NOS. 231 & 232./C/2016 3 ASSESSE IN DEFAULT FOR THE ABOVE TWO SHORT DEDUCTIO NS AND MAKING IT LIABLE FOR INTEREST. 5. AGGRIEVED BY THE ORDERS PASSED U/S. 201(1) AND 201(1A) OF THE ACT, THE ASSESSEE FILED APPEALS BEFORE THE FIRST APPELLATE A UTHORITY. THE CIT(A), AFTER AN ELABORATE ANALYSIS OF THE RELEVANT PROVISIONS, DECI DED THE ISSUES AGAINST THE ASSESSEE AND DISMISSED THE APPEALS. 6. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSES SEE HAS PREFERRED THE PRESENT APPEALS BEFORE THE TRIBUNAL. 7. THE LD. COUNSEL FOR THE ASSESSEE FAIRLY ADMITT ED AS REGARDS THE ISSUE OF CONTRIBUTIONS TO UNRECOGNIZED PF, THE TRIBUNAL IN THE CASE OF KODAKKAD SERVICE CO-OPERATIVE BANK LTD. VS. INCOME TAX OFFICER(TDS) IN ITA NOS. 335 & 336/COCH/2016 DATED 03/03/2017 HAD DECIDED THE ISSU E AGAINST THE ASSESSEE. 7.1 AS REGARDS THE ISSUE OF DEDUCTION OF INTEREST ON PF DEPOSITS FOR THE PURPOSE OF TDS U/S. 192 OF THE ACT, IT WAS SUBMITTED THAT A S PER THE PROVISIONS OF SEC. 192 SUB-SEC. (2B) OF THE ACT, IT IS FOR THE ASSESSE ES EMPLOYEE TO REPORT TO THE ASSESSEE-EMPLOYER FOR ANY INCOME THAT HE IS IN RECE IPT OF FOR INCLUSION IN TOTAL FOR THE PURPOSE OF DEDUCTION U/S. 192 OF THE I.T. ACT. THEREFORE, IT WAS SUBMITTED I.T.A. NOS. 231 & 232./C/2016 4 THAT THE ASSESSEE-EMPLOYER CANNOT BE COMPELLED TO M AKE DEDUCTION U/S. 192A OF THE ACT WITH RESPECT TO THE INTEREST EARNED ON THE PF DEPOSITS. 8. THE LD. DR ON THE OTHER HAND SUBMITTED THAT BO TH THE ISSUES ARE SQUARELY COVERED BY THE ORDER OF THE TRIBUNAL IN THE CASE OF KODAKKAD SERVICE CO- OPERATIVE BANK LTD. VS. INCOME TAX OFFICER(TDS) IN ITA NOS. 335 & 336/COCH/2016 DATED 03/03/2017. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL ON RECORD. AN IDENTICAL ISSUE WAS CONSIDERED BY THE TRIBUNAL IN T HE CASE OF KODAKKAD SERVICE CO-OPERATIVE BANK LTD. VS. INCOME TAX OFFICER(TDS) (SUPRA) WHEREIN IT WAS HELD THAT THE CONTRIBUTION TO THE PF FUND THAT WAS NOT R ECOGNIZED BY THE CHIEF COMMISSIONER OR COMMISSIONER IN ACCORDANCE WITH THE RULES CONTAINED IN THE PART A OF THE FOURTH SCHEDULE OR UNDER A SCHEME FRA MED UNDER THE EMPLOYEES PROVIDENT FUND ACT, 1952, IS NOT ENTITLED TO DEDUC TION U/S. 80C OF THE ACT. IT WAS FURTHER HELD BY THE TRIBUNAL THAT THE INTEREST ACCRUED TO THE ASSESSEE ON THE CONTRIBUTIONS TO SUCH UNRECOGNIZED PF WAS ALSO LIAB LE FOR TAX DEDUCTION U/S. 192 OF THE ACT. THE RELEVANT FINDING OF THE TRIBUNAL R EADS AS FOLLOWS: 9. I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEES WHILE MAKING TDS ON SALARIES U/S. 192 OF THE ACT HAD CLAIMED CONTRIBUTIONS TO THE PROVIDENT FUND AS ELIGIBLE DED UCTION U/S. 80C (2) (VI) OF THE ACT. THE ASSESSING OFFICER HELD THAT THE CONTR IBUTIONS TO PROVIDENT FUND ARE NOT RECOGNIZED U/S. 2(38) OF THE ACT AND WERE N OT ELIGIBLE FOR DEDUCTION U/S. 80C OF THE ACT, HENCE, THERE WERE SHORT DEDUCT IONS U/S. 192 OF THE ACT. I.T.A. NOS. 231 & 232./C/2016 5 FURTHER, IT WAS HELD BY THE ASSESSING OFFICER THAT INTEREST ON THE PROVIDENT FUND WAS LIABLE TO BE TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES. TO UNDERSTAND THE ISSUE IN A CORRECT PERSPECTIVE, THE RELEVANT PROVISIONS NAMELY, SECTIONS 80C (2) (VI), 2(38) AND 192 OF THE I.T. AC T NEED TO BE ANALYSED. 80C(1) IN COMPUTING THE TOTAL INCOME OF AN ASSESSE E, BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, THERE SHALL BE DEDUCTED, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, THE WHOLE OF THE AMOUNT PAID OR DEPOSITED IN THE PREVIOUS YEAR, BEING THE AGGREGATE OF THE SUMS REFERRED TO IN SUB- SECTION (2), AS DOES NOT EXCEED ONE LAKH RUPEES. (2) (I)XXXX- . (VI) AS A CONTRIBUTION BY AN EMPLOYEE TO A RECOGNIZ ED PROVIDENT FUND. 9.1 SECTION 2(38) OF THE INCOME TAX ACT WHICH DEF INES A RECOGNIZED PROVIDENT FUND READS AS FOLLOWS:- RECOGNIZED PROVIDENT FUND MEANS A PROVIDENT FUND WHICH HAS BEEN AND CONTINUES TO BE RECOGNIZED BY THE CHIEF COMMISSIONE R OR COMMISSIONER IN ACCORDANCE WITH THE RULES CONTAINED IN THE PART A O F THE FOURTH SCHEDULE, AND INCLUDES A PROVIDENT FUND ESTABLISHED UNDER A SCHEM E FRAMED UNDER THE EMPLOYEES PROVIDENT FUNDS ACT, 1952 (19 OF 1952). 9.2 ADMITTEDLY, THE ASSESSEES CONTRIBUTIONS TO T HE PROVIDENT FUND ARE NOT RECOGNIZED BY THE CHIEF COMMISSIONER OR COMMISSIONE R IN ACCORDANCE WITH THE RULES CONTAINED IN THE PART A OF THE FOURTH SCH EDULE. IT IS TO BE FURTHER EXAMINED WHETHER THE PROVIDENT FUND IS ESTABLISHED UNDER A SCHEME FRAMED UNDER THE EMPLOYEES PROVIDENT FUND ACT, 1952 (19 OF 1952) OR NOT. 9.3 IN THE INSTANT CASE, THE ASSISTANT COMMISSION ER OF PROVIDENT FUND VIDE HIS LETTER DATED 14/02/2017 (WHICH IS PLACED ON REC ORD) VERY CATEGORICALLY STATES THAT THE PROVIDENT FUND OF THE ASSESSEES IS NOT ESTABLISHED AS PER THE SCHEME FRAMED UNDER THE EMPLOYEES PROVIDENT FUNDS AC T, 1952. ASSESSEE ALSO DOES NOT HAVE CASE THAT ITS PF IS ESTABLISHED UNDER A SCHEME FRAMED UNDER THE EMPLOYEES PROVIDENT FUND ACT, 1952 (19 OF 1952). THAT BEING THE CASE, ADMITTEDLY, THE ASSESSEES CONTRIBUTIONS TO T HE PROVIDENT FUND ARE NOT RECOGNIZED PROVIDENT FUND U/S. 2(38) OF THE ACT AND THE CONTRIBUTIONS ARE I.T.A. NOS. 231 & 232./C/2016 6 NOT ENTITLED TO DEDUCTION U/S. 80C (2)(VI) OF THE I .T. ACT. IF THE CONTRIBUTIONS ARE NOT ELIGIBLE FOR DEDUCTION U/S. 80C OF THE ACT, THERE ARE RESULTANT SHORT DEDUCTIONS OF TAX U/S. 192 OF THE ACT. CONSEQUENTL Y, THE INTEREST ACCRUED ON THE PROVIDENT FUND IS ALSO LIABLE TO BE TAXED AS INCOME FROM OTHER SOURCES. 9.4 SECTION 192(1) OF THE INCOME TAX ACT STATES TH AT ANY PERSON RESPONSIBLE FOR PAYING ANY INCOME CHARGEABLE UNDER THE HEAD SALARIES SHALL, AT THE TIME OF PAYMENT, DEDUCT INCOME TAX ON THE AMOUNT PAYABLE AT THE AVERAGE RATE OF INCOME-TAX COMPUTED ON THE BASI S OF THE RATES IN FORCE FOR THE FINANCIAL YEAR IN WHICH THE PAYMENT IS MADE , ON THE ESTIMATED INCOME OF THE ASSESSEE UNDER THIS HEAD FOR THAT FIN ANCIAL YEAR. THE ABOVE SECTION MAKES ABUNDANTLY CLEAR THAT THE EMPLOYEES A RE BOUND TO DEDUCT TAX AT SOURCE AT THE TIME OF PAYMENT OF SALARIES. SINC E ADMITTEDLY, THE CONTRIBUTIONS OF THE ASSESSEES TO THE PROVIDENT FUN D ARE NOT A RECOGNIZED FUND, THE SAME ARE NOT ELIGIBLE FOR DEDUCTION U/S. 80C (2) (VI) OF THE I.T. ACT. THEREFORE, THE ESTIMATIONS MADE BY THE ASSESS EES ARE NOT CORRECT AND SINCE THERE WERE SHORT DEDUCTIONS OF TAX, THE ASSES SING OFFICER HAD RIGHTLY PASSED THE ORDERS U/S. 201(1) AND 201(1A) OF THE I. T. ACT. 9.5 IT IS ALSO TO BE NOTED THAT THE ASSESSEES WER E NOT ABLE TO SHOW THAT ANY OF THE EMPLOYEES OF THE ASSESSEE-SOCIETY HAD FILED RETURNS AND HAD PAID TAX CORRECTLY TO THE GOVERNMENT ACCOUNT. THEREFORE, THE CASE LAWS RELIED ON BY THE ASSESSEES CANNOT COME TO THEIR AID. 9.6 FURTHER, THE ORDER PASSED BY THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. HCL INFOSYSTEMS LTD. (SUPRA) RELIE D ON BY THE ASSESSEES IS OF NO HELP SINCE IN THE INSTANT CASE IT CANNOT BE S TATED THAT ASSESSEES ESTIMATION IS BONAFIDE OR HONEST ESTIMATION OF SALA RY INCOME OF ITS EMPLOYEES. ADMITTEDLY, THE CONTRIBUTIONS MADE BY T HE ASSESSEES TO THE PROVIDENT FUND WERE NOT A RECOGNIZED FUND AND WERE NOT ELIGIBLE FOR DEDUCTION U/S. 80C OF THE ACT WHICH HAD RESULTED IN SHORT DEDUCTIONS OF TAX. FOR THE ABOVE SAID REASONS, I REJECT THE CONTENTION S RAISED BY THE ASSESSEES AND DISMISS THE APPEALS OF THE ASSESSEES. IT IS ORD ERED ACCORDINGLY. 10. IN THE RESULT, THE APPEALS OF THE ASSESSEES AR E DISMISSED. I.T.A. NOS. 231 & 232./C/2016 7 9.1 IN VIEW OF THE ORDER OF THE TRIBUNAL IN THE CASE OF KODAKKAD SERVICE CO- OPERATIVE BANK LTD. VS. INCOME TAX OFFICER(TDS) (SU PRA) WHICH IS IDENTICAL TO THE FACTS OF THE INSTANT CASES, WE HOLD THAT THE CIT(A) IS JUSTIFIED IN CONFIRMING THE ORDERS PASSED U/S. 201 AND 201(1) OF THE I.T. ACT. IT IS ORDERED ACCORDINGLY. 10. IN THE RESULT, THE APPEALS FILED BY THE ASSES SEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THI S 22 ND MARCH, 2018. SD/- SD/- (CHANDRA POOJARI) ( GEORGE GEORGE K.) ACCOUNTANT MEMBER JUDICIAL MEMBER PLACE: DATED: 22 ND MARCH, 2018 GJ COPY TO: 1. M/S. CHIRAKKAL SERVICE CO-OPERATIVE BANK LTD., C HIRAKKAL P.O., KANNUR- 670 011. 2. THE INCOME TAX OFFICER(TDS), KANNUR. 3. THE PR. COMMISSIONER OF INCOME-TAX(APPEALS), KOZ HIKODE. 4. THE PR. COMMISSIONER OF INCOME-TAX, KOZHIKODE. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRA R) I.T.A.T. , COCHIN