The DCIT(TDS), Trivandrum, Trivandrum V. The Chief Manager, Dena bank, Trivandrum, Trivandrum

ITA 329/COCH/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5362 (ITAT-COCHIN)
• Duration Of Justice: 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 27-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A DHANARAJ
• Assessee Lawyers: T M SREEDHARAN
• Section: 201(1); 10; 139

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. NO.329/COCH/2017 ASSESSMENT YEAR : 2014 - 15 THE DEPUTY COMMISSIONER OF INCOME-TAX(TDS), TRIVANDRUM VS. M/S. DENA BANK, TRIVANDRUM BRANCH, TC 37/1392, RAJADHANI BUILDING, EAST FORT, TRIVANDRUM [PAN/TAN NO. TVDDO 0334F] (REV ENUE - APPELLANT) (ASSESSEE - RESPONDENT) REVENUE BY SHRI A. DHANARAJ, SR. DR ASSESSEE BY SHRI T.M. SREEDHARAN, SR.ADV. D ATE OF HEARING 13/06/2018 DATE OF PRONOUNCEMENT 13 / 06/2018 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AG AINST THE ORDER OF THE CIT(A), TRIVANDRUM DATED 12/04/2017 AND PERTAINS TO THE ASS ESSMENT YEAR 2014-15. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSES SEE CLAIMED TO HAVE PAID INTEREST TO THE KERALA TODDY WORKERS WELFARE FUND B OARD WITHOUT DEDUCTING TAX AT SOURCE AS PER THE PROVISIONS OF SECTION 194A OF THE ACT. THEREFORE, THE ASSESSING OFFICER TREATED THE ASSESSEE AS ASSESSEE IN DEFAULT FOR THE TAX TO BE DEDUCTED AT RS.24,96,094/- AND THEN CHARGED INTERES T OF RS.2,73,680/- FOR THE I.T.A. NO.329/C/2017 2 DEFAULT COMMITTED. THE ASSESSEE FILED A COPY OF TH E ORDER DATED 26.03.2014 PASSED BY THE CHIEF COMMISSIONER OF INCOME-TAX, TRI VANDRUM, ACCORDING APPROVAL U/S. 10(23C)(IV) OF THE ACT SUBJECT TO CER TAIN CONDITIONS TO KERALA TODDY WORKERS WELFARE FUND BOARD AND SUBMITTED THAT THE T AX WAS NOT DEDUCTED AS IT WAS UNDER THE BONA FIDE BELIEF THAT THE SAID WELFAR E FUNDS INCOME WAS EXEMPTED AND TAX NEED NOT BE DEDUCTED. THE ASSESSI NG OFFICER REJECTED THE ABOVE SUBMISSION OF THE ASSESSEE ON THE GROUND THAT TDS IS NOT REQUIRED TO BE MADE ONLY IN THE CASE OF THOSE FUNDS OR AUTHORITIES OR BONDS OR BODIES WHOSE INCOME IS UNCONDITIONALLY EXEMPTED U/S. 10 OF THE A CT AND WHO ARE STATUTORILY NOT REQUIRED TO FILE THE RETURN OF INCOME AS PER SE CTION 139 OF THE ACT. THE ASSESSING OFFICER RELIED ON THE CIRCULAR NO.4/2002 DATED 16/07/2002 ISSUED BY THE CBDT AND OPINED THAT IN THE OF KERALA TODDY WOR KERS WELFARE FUND BOARD, ITS INCOME WAS NOT UNCONDITIONALLY EXEMPTED AND THE REFORE, THE ASSESSEE WAS LIABLE TO DEDUCT TAX WHEN THE INTEREST WAS PAID. H ENCE, THE ASSESSING OFFICER INVOKED THE PROVISIONS OF SECTION 201(1) AND 201(1A ) FOR NOT DEDUCTING TAX AT SOURCE. 3. ON APPEAL, THE CIT(A) OBSERVED THAT THE ASSESS EE CANNOT BE TREATED AS ASSESSEE IN DEFAULT SINCE IT WAS REQUESTED BY THE K ERALA TODDY WORKERS WELFARE FUND BOARD NOT TO DEDUCT TAX AS THEIR INCOME WAS EX EMPTED FROM TAX BY VIRTUE OF THE PROVISIONS OF SECTION 10(23C)(IV) OF THE ACT . THE CIT(A) OBSERVED THAT IT IS NOT THE RESPONSIBILITY OF THE ASSESSEE TO PROBE AND FIND OUT WHETHER FOR I.T.A. NO.329/C/2017 3 CONTINUANCE OF EXEMPTION U/S. 10(23C)(IV), THE ASSE SSEE HAS FILED RETURN OR NOT. IN THESE CIRCUMSTANCES, THE CIT(A) HELD THAT THE AS SESSEE CANNOT BE TREATED AS ASSESSEE IN DEFAULT AND ONCE IT IS DECIDED THAT TH E ASSESSEE CANNOT BE TREATED AS ASSESSEE IN DEFAULT, THEN THE INTEREST LEVIED U/ S. 201(1) AND 201(1A) ALSO CANNOT BE LEVIED INDEPENDENTLY. HENCE, HE SET ASID E THE ORDER OF THE ASSESSING OFFICER ON THIS ISSUE. 4. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. THE LD. DR SUBMITTED THAT THE REASON GIVEN BY THE CIT(A) TO GRANT RELIEF IS N OT APPROPRIATE. 5. THE LD. AR SUBMITTED THAT CIRCULAR 7/2010 (F. NO.197/201/2010 DATED 27- 10-2010 IN A DIFFERENT CONTEXT HAS CLARIFIED THE PR OVISO ADDED TO SUB-SECTIONS (IV) & (V) OF SEC. 10(23C) AS AMENDED BY TAXATION LAWS A MENDMENT ACT, 2006 BY INSERTION OF A PROVISO TO THAT CLAUSE, WHICH READS AS UNDER: 'PROVIDED ALSO THAT ANY (NOTIFICATION ISSUED BY THE CENTRAL GOVERNMENT UNDER SUB CL. (IV) OR SUB CL.(V), BEFORE THE DATE O N WHICH THE TAXATION LAWS AMENDMENT) BILL, 2006 RECEIVES THE ASSENT OF T HE PRESIDENT, SHALL AT ANY ONE TIME, HAVE EFFECT FOR SUCH ASSESSMENT YEAR OR YEARS, NOT EXCEEDING THREE ASSESSMENT YEARS), INCLUDING AN ASS ESSMENT YEAR OR YEARS COMMENCING BEFORE THE DATE ON WHICH SUCH NOTI FICATION IS ISSUED) AS MAY BE SPECIFIED IN THE NOTIFICATION'. 5.1 THE LD. AR ALSO SUBMITTED THAT AS PER THE CIRCU LAR NO.7/2010 DATED 27.10.2010 WHICH IS PUBLISHED IN CTR (2010) 235 CTR (STATUTES) 61), THE 8 TH PROVISO TO SEC. 10(23C) HAS BEEN AMENDED SO AS TO P ROVIDE THAT THE ABOVE MENTIONED LIMIT OF EFFECTIVITY FOR THREE ASSESSMENT YEARS, SHALL BE APPLICABLE TO I.T.A. NO.329/C/2017 4 NOTIFICATIONS ISSUED BY THE CENTRAL GOVERNMENT UNDE R SUB CI. (IV) & BEFORE THE DATE OF WHICH TAXATION LAWS AMENDMENT BILL, 2006, R ECEIVED THE ASSENT OF THE PRESIDENT. IT WAS ALSO MADE CLEAR THAT THE INTENTIO N OF LEGISLATURE THAT THE PROCEEDINGS U/S 10(23) (IV) & (V), AFTER THE CUTOFF DATE MENTIONED ABOVE, WOULD BE A ONETIME APPROVAL WOULD BE VALID UNTIL WITHDRAW N, IS THUS SUFFICIENTLY CLEAR. 5.2 THE LD. AR SUBMITTED THAT THE ASSESSING OFFIC ER HAD REFERRED TO A SPOT INSPECTION CONDUCTED ON 24.07.2014. HOWEVER, HE HAD NOT VERIFIED WHETHER THE EXEMPTION GRANTED U/S 10(23C) STILL CONTINUED FOR T HE FINANCIAL YEAR 2013-14. HENCE, IT WAS SUBMITTED THAT HE SHOULD HAVE VERIFIE D AND ASCERTAINED, WHETHER THERE WAS VIOLATION OF EXEMPTION CERTIFICATE GRANTED BY THE CHIEF COMMISSIONER OF INCOME TAX U/S 10(23C) WHICH WAS EFFECTIVE FROM AY-2011-12 ONWARDS. 5.3 THE LD. AR RELIED ON THE CBDT NOTIFICATION S O-E VIDE ORDER DATED 29/03/2015 ISSUED U/S 10(46) OF THE INCOME TAX ACT, 1961 WHICH NOTIFIED THE 'KERALA TODDY WORKERS' WELFARE FUND BOARD', WHI CH IS ESTABLISHED UNDER THE KERALA TODDY WORKERS' WELFARE FUND ACT, 1 969 (KERALA ACT NO.22 OF 1969) IN RESPECT OF THE FOLLOWING SPECIFIE D INCOME ARISING TO THAT BOARD, NAMELY:- (A) SUMS RECEIVED UNDER KERALA TODDY WORKERS WELFA RE FUND ACT, 1969 (KERALA ACT NO. 22 OF 1969). (B) CONTRIBUTION FROM THE MEMBERS AS DEFINED IN CL. (B) OF SEC. 2 OF KERALA TODDY WORKERS' WELFARE FUND ACT. 1969 (KERALA ACT NO. 22 OF 1969); (C) INTEREST EARNED FROM DEPOSITS IN BANKS I.T.A. NO.329/C/2017 5 (2) THIS NOTIFICATION SHALL BE APPLICABLE FOR THE FINANCIAL YEARS 2013-14 TO 2017-18. 5.4 THE LD. AR SUBMITTED THAT IN THE NOTIFICATIO N, IT IS SPECIFIED THAT THE NOTIFICATION SHALL BE APPLICABLE FOR THE FINANCIAL YEARS 2013-14 TO 2017-18. THE NOTIFICATION REITERATES THAT THE ASSESSEE SHALL COM PLY WITH THE CONDITIONS STIPULATED IN SUB SEC. 10(46) OF THE ACT. THESE CONDITIONS SHOULD ALSO BE SATISFIED. THE ABOVE NOTIFICATION COVERS THE FINANC IAL YEAR 2013-14. 5.5 THE LD. AR ALSO REFERRED TO SEC.197A. SUB.C I.(1F) INSERTED BY FINANCE ACT, 2012, WITH EFFECT FROM 01.07.2012, WHICH STIPULATES THAT- ' 'NOTWITHSTANDING ANYTHING CONTAINED IN THIS CHAPTER , NO DEDUCTION OF TAX SHALL BE MADE FROM SUCH SPECIFIED PAYMENT TO SU CH INSTITUTION, ASSOCIATION OR BODY OR CLASSES OF INSTITUTIONS, ASS OCIATIONS OR BODIES, AS MAY BE NOTIFIED BY THE CENTRAL GOVERNMENT IN THE OFFICIAL GAZETTE IN THIS BEHALF. THE LD. AR SUBMITTED THAT THE ABOVE NOTIFICATION CO VERS THE FINANCIAL YEAR 2013- 14 RELEVANT TO THE ASSESSMENT YEAR 2014-15. HENCE, THERE WAS NO DEFAULT COMMITTED BY THE ASSESSEE IN REGARD TO DEDUCTION OF TAX U/S 201(1) FOR THE FINANCIAL YEAR 2013-14 : RELEVANT TO THE ASSESSMENT YEAR 2014-15. THEREFOR E, IT WAS SUBMITTED THAT THE CIT(A)'S ORDER WAS LEGAL AND VALID AND CANNOT BE ASSAILED. I.T.A. NO.329/C/2017 6 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. THE LD. AR SUBMITTED THAT THE KERALA TODDY WORKERS WELFARE FU ND BOARD IS NOT LIABLE TO PAY ANY INCOME TAX IN VIEW OF THE PROVISIONS OF SECTION 10(46) R.W.S 197A(1F) OF THE I.T. ACT. HE DREW OUR ATTENTION TO THE CBDT NOTIFI CATION NO. 26/2015 F.NO.196/08/2014-ITA.I) DATED 24 TH MARCH, 2015 WHEREIN IT WAS HELD THAT THE KERALA TODDY WORKERS WELFARE FUND BOARD IS RECOGNI ZED U/S. 10(46) OF THE I.T. ACT FOR THE FINANCIAL YEARS 2013-14 TO 2017-18. AC CORDING TO HIM, THE KERALA TODDY WORKERS WELFARE FUND BOARD IS NOT LIABLE FOR INCOME TAX AND AS SUCH THE ASSESSEE IS NOT LIABLE FOR DEDUCTION OF TDS ON THE INTEREST PAYABLE TO THE SAID BOARD. IN OUR OPINION, THIS FACT IS TO BE VERIFIE D BY THE CIT(A) AFTER GOING THROUGH THE NOTIFICATION CITED SUPRA AND DECIDE THE REUPON . ACCORDINGLY, WE REMIT THE ISSUE IN DISPUTE TO THE FILE TO THE CIT(A ) FOR FRESH CONSIDERATION IN THE LIGHT OF THE DOCUMENTS PRODUCED BY THE ASSESSEE. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THI S 13 TH JUNE, 2018. SD/- SD/- ( GEORGE GEORGE K.) (CHAN DRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: DATED: 13 TH JUNE, 2018 GJ COPY TO: I.T.A. NO.329/C/2017 7 1. M/S. DENA BANK, TRIVANDRUM BRANCH, TC 37/1392, R AJADHANI BUILDING, EAST FORT,TRIVANDRUM. 2. THE DEPUTY COMMISSIONER OF INCOME TAX(TDS), TRIV ANDRUM. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS), TRIVAND RUM. 4. THE PR. COMMISSIONER OF INCOME-TAX, TRIVANDRUM 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRA R) I.T.A.T. , COCHIN