The Jammu & Kashmir Bank Ltd, Srinagar V. The Addl. Commissioner of Icome-tax, Jammu

ITA 240/ASR/2014

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 1351 (ITAT-AMRITSAR)
• Duration Of Justice: 5 year(s) 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 11-06-2019
• Assessment Year: 2005-2006
• Appeal Filed On: 15-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M P SINGH
• Keywords: TDS
• Section: 40(a)(ia); 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE SH. VIKRAM SINGH YADAV , ACCOUNTANT MEMBER AND SH. N.K.CHOUDHRY, JUDICIAL MEMBER ITA NO.240(ASR)/2014 ASSESSMENT YEAR:2 005-06 THE JAMMU & KASHMIR BANK LTD., M.A. ROAD, SRINAGAR [PAN:AAACT6167G] VS. ADDL. COMMISSIONER OF INCOME TAX, RANGE-1, JAMMU (APPELLANT) (RESPONDENT) APPELLANT BY: SH. JOGINDER SINGH (C.A) RESPONDENT BY: SH. M. P. SINGH (CIT DR) DATE OF HEARING: 11.06.2019 DATE OF PRONOUNCEMENT: 12.06.2019 ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORD ER OF LD. CIT(A), JAMMU DATED 12.02.2014 WHEREIN THE ASSESSEE HAS TAKEN THE FOLLOWING SOLE GROUND OF APPEAL:- 1. THAT THE WORTHY CIT(A) IS NOT JUSTIFIED IN CONFIR MING THE ACTION OF THE LD. AO FOR MAKING A DISALLOWANCE OF RS. 45,11,287/ - U/S 40(A)(IA) OF THE INCOME TAX ACT, 1961 ON THE GROUND THAT PRESCRIB ED FORMS OBTAINED FROM DEPOSITORS IN RESPECT OF NON DEDUCTION OF TAX ON INTEREST ON THEIR DEPOSITS WERE NOT COMPLETELY FILLED. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ASKED THE ASSESSEE BANK TO FURNISH THE EVIDENCE IN SUPPORT OF ITS CLAIM FOR NON D EDUCTION OF TAX ON INTEREST ON DEPOSITS. IN RESPONSE, THE ASSESSEE FURNISHED D ETAILS BY WAY OF ITA NO.240 /ASR/2014 (A.Y.2005-06) THE JAMMU & KASHMIR BANK LTD. VS. ACIT 2 DECLARATION RECEIVED FROM THE CUSTOMERS IN FORM 15-H. T HE ASSESSING OFFICER, ON PERUSAL OF THESE FORMS, OBSERVED THAT THE FO RMS ARE NOT COMPLETE AND HAVE JUST BEEN FILED UP, LEAVING MOST OF THE RELEVANT PORTIONS BLANK AND THE CERTIFICATE NOWHERE CERTIFIED THAT THE CU STOMERS ARE NOT LIABLE TO BE ASSESSED TO TAX. ACCORDINGLY, THE ASSESSING OFFICER HEL D THAT THE CERTIFICATES CANNOT BE ACCEPTED AS VALID DOCUMENTS FOR NON D EDUCTION OF TAX AT SOURCE. THE CERTIFICATES SHOULD HAVE BEEN FILLED UP FU LLY AND COMPLETELY BEFORE THEY CAN BE CONSIDERED AS VALID DOCUMENTS FOR NON DEDUCTION OF TAX AT SOURCE. THEREFORE, INVOKING THE PROVISIONS OF SECTION 40(A)(IA), RS. 45,11,287/- WAS DISALLOWED IN RESPECT OF THREE BRANCH ES WHILE COMPUTING THE TOTAL INCOME OF THE ASSESSEE BANK. 3. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). IT WAS SUBMITTED BEFORE THE LD. CIT(A) THAT WHERE THE ASSESSEE BANK HAS ACCEPTED DECLARATIONS FROM ITS CUSTOMERS IN THE PR ESCRIBED FORMS, THEN NO TAX WAS PAYABLE BY THEM IN RESPECT OF THEIR TO TAL INCOME AND TAX NEED NOT BE DEDUCTED FROM INTEREST U/S 194A OF THE ACT . IT WAS FURTHER SUBMITTED THAT THE DEDUCTOR HAS NO OPTION BUT TO PAY I NTEREST WITHOUT DEDUCTION OF TAX IN SUCH CASES WHERE THE CUSTOMERS FURNISHE D THEIR DECLARATIONS. THE LD. CIT(A) HOWEVER WAS OF THE VIEW THAT THE DECLARATION FORMS ARE NOT PROPERLY FILLED UP AS PER THE REQUIREME NT OF THE ACT BY THE DEPOSITOR, THEN IN SUCH CASES, DEDUCTION OF TAX HAS TO B E MADE BY THE PAYER OF INTEREST AND THE DISALLOWANCE AMOUNTING TO RS. 45,11 ,287/- IN RESPECT OF THREE BRANCHES WAS CONFIRMED. BEING AGGRIEVED, THE ASSESSE E IS NOW IN APPEAL BEFORE US. 4. DURING THE COURSE OF HEARING, THE LD. AR REITERAT ED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. IT WAS SUBMITTED BY THE LD. AR THAT THE APPELLANT HAS ACCEPTED DECLARATIONS IN THE PRESCRIBED FO RMS FROM ITS CUSTOMERS AND SUBSEQUENTLY, THE SAME HAVE BEEN DULY FILE D WITH THE ITA NO.240 /ASR/2014 (A.Y.2005-06) THE JAMMU & KASHMIR BANK LTD. VS. ACIT 3 REVENUE AUTHORITIES AND IN SUCH A SITUATION, THE ASSESSEE I S NOT OBLIGED TO DEDUCT TAX AT SOURCE AND THE SAME THUS CANNOT BE THE BASI S FOR DISALLOWANCE FOR INTEREST U/S 40(A)(IA) OF THE ACT. IT WAS FURTHER SUBMITTED THAT EVEN WHERE IT IS HELD THAT THERE ARE CERTAIN DEFICIENCIES IN THE DECLARATIONS SO FILED BY THE CUSTOMERS, THE ASSESSEE BANK CANNOT BE HELD LIABLE AND ANY CAUSE OF ACTION LIES IN THE HANDS OF THE CUSTOMERS WHO HAVE MADE SU CH DECLARATIONS AND NOT THE ASSESSEE BANK. FURTHER, OUR REFERENCE WAS DRA WN TO THE CO-ORDINATE BENCH DECISION IN CASE OF ACIT VS. CHITTOOR DIST. CO- OPERATIVE CENTRAL BANK LTD., CHITTOOR (ITA NO. 1581-1582/HYD/2014 DATED 6.07.206) WHEREIN IT WAS HELD AS UNDER:- 11. WE HAVE ALSO EXAMINED THE IMPUGNED ISSUE FROM A D IFFERENT PERSPECTIVE, AS SOUGHT TO BE CANVASSED BY LEARNED AR. TH E QUESTION IS WHETHER S.40(A)(IA) CAN BE INVOKED WHEN THE REQUISITE FORMS AS PRESCRIBED UNDER STATUTE FOR NON-DEDUCTION HAS BEEN OBT AINED FROM THE DEDUCTEE ALTHOUGH NOT FILED BEFORE PROPER AUTHORITY. THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT IS REPRODUCED HEREUNDER TO EXAMINE THIS ASPECT OF THE MATTER. 40. AMOUNTS NOT DEDUCTIBLE NOTWITHSTANDING ANYTHING T O THE CONTRARY IN SECTIONS 30 TO 38 THE FOLLOWING MOUNTS SHALL NOT BE DEDUCTED IN COMPUTING THE INCOME CHARGE-ABLE UNDER THE HEAD PROFI TS AND GAINS OF BUSINESS OR PROFESSION,- (A) IN THE CASE OF ANY ASSESSEE (I) . (II) (IA) ANY INTEREST, COMMISSION OR BROKERAGE, RENT, ROYAL TY, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES PAYABLE T O A RESIDENT, OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB-CONTR ACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY O F LABOUR FOR CARRYING OUT ANY WORK), ON WHICH TAX IS DEDUCTIBLE AT S OURCE UNDER ITA NO.240 /ASR/2014 (A.Y.2005-06) THE JAMMU & KASHMIR BANK LTD. VS. ACIT 4 CHAPTER XVII-B AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION, [HAS NOT BEEN PAID..(ONLY RELEVANT PORTIO N EXTRACTED). THE PROVISION NOTED ABOVE SPELLS OUT THAT THE AMOUNT CANNOT BE ALLOWED AS DEDUCTION ONLY IN THE EVENT WHEN TAX IS DED UCTIBLE AT SOURCE CHAPTER XVII-B AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION HAS NOT BEEN PAID. IN THE PRESENT CASE, IT IS THE CASE OF ASSESSING OFFICER THAT THE ASSESSEE WAS REQUIRED TO DEDUCT TA X IN TERMS OF THE PROVISIONS OF SECTION 194A. WE NOTE THAT SECTION 194A IS FURTHER QUALIFIED BY SECTION 197A(1A) WHICH IS A NON-OBSTANTE CL AUSE. SECTION 197A(1A) PROVIDES THAT LIABILITY TO DEDUCT TAX UNDER SECTION 194A CEASES WHEN A DECLARATION IN WRITING IN DUPLICATE IN PR ESCRIBED FORM AND VERIFIED IN THE PRESCRIBED MANNER RECEIVED BY A RE SPONSIBLE FOR PAYING INCOME TO THE PAYEE. THE REMEDY TOWARDS DEFAUL T FOR NON- FURNISHING OF THE DECLARATION TO THE COMMISSIONER OF IN COME TAX AS PRESCRIBED HAS BEEN ADDRESSED UNDER SECTION 272A(2)(F) OF THE ACT BY IMPOSING SUITABLE PENALTY THEREON. HOWEVER, ONCE FORM N O. 15G/FORM 15H WERE RECEIVED BY THE PERSONS RESPONSIBLE FOR DEDUCTIN G TAX, THERE IS NO LIABILITY TO DEDUCT TAX AT SOURCE IN VIEW OF SECTIO N 194A R.W.S 197A. ONCE, IT IS HELD THAT TAX IS NOT DEDUCTIBLE AT SO URCE UNDER SECTION 194A ON RECEIPT OF PRESCRIBED FORM, THE MISCHIEF PROVID ED UNDER SECTION 40(A)(IA) IS NOT ATTRACTED. 5. THE LD. CIT DR IS HEARD WHO HAS RELIED ON THE ORD ER OF THE LOWER AUTHORITIES. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THRO UGH THE MATERIAL AVAILABLE ON RECORD. UNDISPUTEDLY, THE DECLARATIONS IN FORM 15H HAVE BEEN RECEIVED BY THE ASSESSEE BANK AND SUBSEQUENTLY FILED WITH REVENUE AUTHORITIES. THEREFORE, THERE IS NO DISPUTE THAT DECLAR ATIONS HAVE EITHER NOT ITA NO.240 /ASR/2014 (A.Y.2005-06) THE JAMMU & KASHMIR BANK LTD. VS. ACIT 5 BEEN RECEIVED OR ONCE RECEIVED, HAVE NOT BEEN FILED WITH THE REVENUE AUTHORITIES. ONLY DISPUTE RELATES TO CERTAIN DISCREPANCIES IN THE DECLARATIONS SO FILED BY THE CUSTOMERS WITH THE ASSESSEE BANK AND WHETH ER THE SAME CAN BE A BASIS FOR DISALLOWANCE OF INTEREST ON DEPOSITS INVOKI NG PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. 7. SECTION 194A PROVIDES FOR LIABILITY TO DEDUCT TAX O N INTEREST ON DEPOSITS. THE SAME HAVE TO BE READ ALONG WITH SECTION 197A(1A) WHICH PROVIDES THAT LIABILITY TO DEDUCT TAX UNDER SECTION 194 A CEASES IN SITUATIONS WHEN A DECLARATION IN WRITING IS RECEIVED BY A PERSON R ESPONSIBLE FOR PAYING INCOME TO THE PAYEE. THOUGH THE ASSESSEE BANK NEED TO BE VIGILANT WHILE ACCEPTING THE DECLARATIONS, AT THE SAME TIME, WHERE THE CUSTOMERS HAVE FILED THE DECLARATIONS, THE ASSESSEE BANK HAS TO ACCEPT THE SAID DECLARATIONS AND BASIS SUCH DECLARATIONS, NOT TO DEDUCT ANY TAX AT SOUR CE. THEREFORE, AS FAR AS THE LIABILITY TO DEDUCT TAX AT SOURCE IS CONCERNED, THE ASSESSEE IS NOT REQUIRED TO DEDUCT ANY TAX ON THE INTEREST PAYMENT IN RESPECT OF THE PERSONS WHO HAVE SUBMITTED THE SAID DECLARATIONS. THEREFORE, WE DO NOT FIND ANY FAULT ON THE PART OF THE ASSESSEE BANK IN TERMS OF NON-D EDUCTION OF TDS ON THE INTEREST PAYMENT IN RESPECT OF DECLARATION SO FILED BY THE CUSTOMERS. ONCE THE DECLARATIONS ARE FILED BY THE ASSESSEE BANK WITH THE REVENUE AUTHORITIES, THE REVENUE AUTHORITIES ARE WELL WITHIN THEIR POWERS AND AUTHORITY TO VERIFY THE CONTENTS AND AUTHENCITY OF SUCH DECLARATIONS AND WHERE ANY DISCREPANCIES ARE FOUND, THE SAME COULD BE A B ASIS FOR CAUSE OF ACTION IN THE HANDS OF THE CUSTOMERS AND NOT IN THE HA NDS OF THE ASSESSEE BANK BY WAY OF DISALLOWANCE OF INTEREST U/S 40(A)(IA) O F THE ACT. WE FIND THAT THE ASSESSEES CASE IS ON A STRONGER FOOTING THEN THE CASE OF CHITTOOR DIST. CO-OPERATIVE CENTRAL BANK LTD (SUPRA) WHEREIN THE ASSE SSEE HAS NOT EVEN FURNISHED THE DECLARATION TO THE REVENUE AUTHORITIES AND EVEN THEN, IT WAS HELD THAT DISALLOWANCE CANNOT BE MADE IN THE HANDS OF THE ASSESSEE. IN LIGHT OF SAME AND IN THE ENTIRETY OF FACTS AND CIRCUMSTANCES OF THE CASE, THE ITA NO.240 /ASR/2014 (A.Y.2005-06) THE JAMMU & KASHMIR BANK LTD. VS. ACIT 6 ADDITION SO MADE BY THE ASSESSING OFFICER U/S 40(A)(IA) I S HEREBY DIRECTED TO BE DELETED. 8. BEFORE WE PART, IT IS NOTED THAT THE ASSESSEE HAS TAK EN THE ADDITIONAL GROUND OF APPEAL AS UNDER:- THAT THE WORTHY CIT(A) IS NOT JUSTIFIED IN MAKING D ISALLOWANCE OF INTEREST PAID ON DEPOSITS AMOUNTING TO RS. 1,20,73,815/ - IN VIEW OF THE FACT THAT SEC. 40(A)(IA) IS APPLICABLE TO EXPENDITURE W HICH IS PAYABLE AS ON 31 ST MARCH EACH YEAR AND CANNOT BE INVOKED TO DISALLOW THE AMOUNTS WHICH HAVE ALREADY BEEN PAID DURING THE PREVI OUS YEAR WITHOUT DEDUCTION OF TAX AT SOURCE. HOWEVER, THE SAME WAS NOT PRESSED BY THE LD AR DURING THE COURSE OF HEARING. THEREFORE, THE SAME IS DISMISSED AS NOT PRESSED. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 12.06.2019. SD/- SD/- (N.K.CHOUDHRY) ( VIKRAM SINGH YADAV ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 12.06.2019 GANESH KR. PS COPY OF THE ORDER FORWARDED TO: THE JAMMU & KASHMIR BANK LTD., M.A. ROAD, SRINAGAR (2) THE ACIT, RANGE 1, JAMMU (3) THE CIT(A), JAMMU (4) THE CIT CONCERNED (5) THE SR DR, I.T.A.T., AMRITSAR TRUE COPY BY ORDER