M/s.Kinanur Service Co-op Bank Ltd, Kasargode V. The ITO (TDS), Kannur

ITA 338/COCH/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7306 (ITAT-COCHIN)
• Duration Of Justice: 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-03-2017
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Next Hearing Date: 02-03-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 05-08-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A DHANARAJ
• Keywords: Salary income; TDS
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 80C; 139; 92; 201(1); 201; 192

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI GEORGE GEORGE K., JUDICIAL MEMBER I.T.A. NO S . 335&336 / COCH/201 6 ASSESSMENT YEAR S : 2007 - 08 & 2008 - 09 M/S. KODAKKAD SERVICE CO-OPERATIVE BANK LTD., KANNADIPARA, CHERUVATHUR, KASARAGOD-671 313. [PAN: AAAAK 4345B] VS. THE INCOME TAX OFFICER (TDS), KANNUR. (ASSESSEE - APPELLANT) (RE VENUE - RESPONDENT) I.T.A. NO. 337&338 /COCH/201 6 ASSESSMENT YEAR S : 2007 - 08 & 2008 - 09 M/S. KINANUR SERVICE CO-OPERATIVE BANK LTD., CHAYYOM,CHOIMKODE, NILESHWAR, KASARAGOD-671 313. [PAN: AAAAK2 668K] VS. THE INCOME TAX OFFICER ( TDS), KANNUR. (ASSESSEE - APPELLANT) (REVENUE - RESPONDENT) ASSESSEE BY SHRI N. RAMANATHA PRABHU, CA REVENUE BY SHRI A DHANARAJ , SR. DR DATE OF HEARING 02 / 0 3 / 201 7 DATE OF PRONOUNCEMENT 03 / 0 3 /201 7 I.T.A. NOS.335-338/COCH/2016 2 O R D E R PER GEORGE GEORGE K.,JUDICIAL MEMBER: THESE ARE APPEALS OF TWO ASSESSEES AGAINST TWO OR DERS OF THE CIT(A), KOZHIKODE BOTH DATED 22/04/2016. THE RELEVANT ASSE SSMENT YEARS ARE 2007-08 AND 2008-09. THE ORDERS OF THE CIT(A) ARISE OUT OF THE ORDERS PASSED U/S. 201(1) AND 201(1A) OF THE I.T. ACT. 2. SINCE COMMON ISSUES ARE INVOLVED IN THESE APPEA LS, THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OF IN THIS CONSOLIDATED ORDE R. 3. IDENTICAL SEVERAL GROUNDS ARE RAISED IN THESE APPEALS. ALL THE GROUNDS RELATE TO THE ISSUE WHETHER THE ORDERS PASSED U/S. 201(1) AND 201(1A) ARE VALID OR NOT? 4. THE BRIEF FACTS OF THE CASE ARE AS FOLLOWS: FOR THE ASSESSMENT YEARS 2007-08 AND 2008-09 , THE ASSESSING OFFICER NOTICED THAT THE ASSESSEES WHILE MAKING TDS ON SALA RIES U/S. 192 OF THE ACT, THERE WERE SHORT DEDUCTIONS OF TAX. THE REASON FOR SHORT DEDUCTIONS OF TAX WAS THAT WHILE COMPUTING TAXABLE SALARY, THE ASSESSEES WERE DEDUCTING U/S. 80C OF THE ACT, CONTRIBUTIONS TO UNRECOGNIZED PROVIDENT FU ND. ACCORDING TO THE ASSESSING OFFICER, THE CONTRIBUTIONS TO UNRECOGNIZE D PROVIDENT FUND WERE NOT ELIGIBLE FOR DEDUCTION U/S. 80C OF THE ACT. FURTH ER, THE ASSESSING OFFICER HELD I.T.A. NOS.335-338/COCH/2016 3 THAT INTEREST ACCRUED ON EMPLOYEES CONTRIBUTION TO UNRECOGNIZED PROVIDENT FUND IS ALSO TAXABLE UNDER THE HEAD INCOME FROM OTHER S OURCES. THE ASSESSING OFFICER PASSED ORDERS U/S. 201(1) AND 201(1A) OF T HE ACT, MAKING THE ASSESSES IN DEFAULT FOR THE ABOVE TWO SHORT DEDUCTIONS AND M AKING IT LIABLE FOR INTEREST. 5. AGGRIEVED BY THE ORDERS PASSED U/S. 201(1) AND 201(1A) OF THE ACT, THE ASSESSEES FILED APPEALS BEFORE THE FIRST APPELLATE AUTHORITY. THE CIT(A), AFTER AN ELABORATE ANALYSIS OF THE RELEVANT PROVISIONS, DECI DED THE ISSUES AGAINST THE ASSESSEES AND DISMISSED THE APPEALS. 6. AGGRIEVED BY THE ORDERS OF THE CIT(A), THE ASSE SSES HAVE PREFERRED THE PRESENT APPEALS BEFORE THE TRIBUNAL. 7. THE LD. COUNSEL FOR THE ASSESSEES REITERATED T HE SUBMISSIONS MADE BEFORE THE I.T. AUTHORITIES. FURTHER, BY RELYING ON THE OR DER OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. HCL INFOSYSTEMS L TD. (24 JUNE, 2004), IT WAS CONTENDED THAT THE REQUIREMENT OF SECTION 192 STAND S COMPLIED IF THE ASSESSEE HAD MADE AN HONEST AND BONAFIDE ESTIMATION OF SALAR Y INCOME. HENCE, THE PROVISIONS OF SECTION 201(1) AND 201(1A) OF THE ACT CANNOT HAVE APPLICATION. 8. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT T HE ASSISTANT COMMISSIONER OF PROVIDENT FUND, KANNUR HAD CATEGORICALLY STATED THA T THE CONTRIBUTIONS MADE BY I.T.A. NOS.335-338/COCH/2016 4 THE ASSESSEES TO THE PROVIDENT FUND ARE NOT ESTABLI SHED UNDER A SCHEME FRAMED UNDER THE EMPLOYEES PROVIDENT FUNDS ACT, 1952 (19 O F 1952). 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 CONTRIBUT IONS TO PROVIDENT FUND ARE NOT RECOGNIZED U/S. 2(38) OF THE ACT AND WERE NOT ELIGI BLE FOR DEDUCTION U/S. 80C OF THE ACT, HENCE, THERE WERE SHORT DEDUCTIONS U/S. 19 2 OF THE ACT. 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. ACT 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:- I.T.A. NOS.335-338/COCH/2016 5 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 TH E 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 SCHEDUL E. 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 COMMISSIO NER OF PROVIDENT FUND VIDE HIS LETTER DATED 14/02/2017 (WHICH IS PLACED ON RECORD) VERY CATEGORICALLY STATES THAT THE PROVIDENT FUND OF THE ASSESSEES IS NOT ESTABLIS HED AS PER THE SCHEME FRAMED UNDER THE EMPLOYEES PROVIDENT FUNDS ACT, 1952. ASSE SSEE ALSO DOES NOT HAVE CASE THAT ITS PF IS ESTABLISHED UNDER A SCHEME FRAM ED UNDER THE EMPLOYEES PROVIDENT FUND ACT, 1952 (19 OF 1952). THAT BEING T HE CASE, ADMITTEDLY, THE ASSESSEES CONTRIBUTIONS TO THE PROVIDENT FUND ARE NOT RECOGNIZED PROVIDENT FUND U/S. 2(38) OF THE ACT AND THE CONTRIBUTIONS ARE NOT ENTITLED TO DEDUCTION U/S. 80C (2)(VI) OF THE I.T. ACT. IF THE CONTRIBUTIONS ARE N OT ELIGIBLE FOR DEDUCTION U/S. 80C OF THE ACT, THERE ARE RESULTANT SHORT DEDUCTIONS OF TAX U/S. 192 OF THE ACT. CONSEQUENTLY, THE INTEREST ACCRUED ON THE PROVIDENT FUND IS ALSO LIABLE TO BE TAXED AS INCOME FROM OTHER SOURCES. I.T.A. NOS.335-338/COCH/2016 6 9.4 SECTION 192(1) OF THE INCOME TAX ACT STATES THAT ANY PERSON RESPONSIBLE FOR PAYING ANY INCOME CHARGEABLE UNDER THE HEAD SA LARIES SHALL, AT THE TIME OF PAYMENT, DEDUCT INCOME TAX ON THE AMOUNT PAYABLE AT THE AVERAGE RATE OF INCOME-TAX COMPUTED ON THE BASIS OF THE RATES IN FO RCE FOR THE FINANCIAL YEAR IN WHICH THE PAYMENT IS MADE, ON THE ESTIMATED INCOME OF THE ASSESSEE UNDER THIS HEAD FOR THAT FINANCIAL YEAR. THE ABOVE SECTION MAKES ABUNDANTLY CLEAR THAT THE EMPLOYEES ARE BOUND TO DEDUCT TAX AT SOURCE AT THE TIME OF PAYMENT OF SALARIES. SINCE ADMITTEDLY, THE CONTRIBUTIONS OF THE ASSESSEE S TO THE PROVIDENT FUND ARE NOT A RECOGNIZED FUND, THE SAME ARE NOT ELIGIBLE FO R DEDUCTION U/S. 80C (2) (VI) OF THE I.T. ACT. THEREFORE, THE ESTIMATIONS MADE B Y THE ASSESSEES ARE NOT CORRECT AND SINCE THERE WERE SHORT DEDUCTIONS OF TA X, THE ASSESSING OFFICER HAD RIGHTLY PASSED THE ORDERS U/S. 201(1) AND 201(1A) O F 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 RET URNS 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) RELIED ON BY THE ASSESSEES IS OF NO HELP SINCE IN THE INSTANT CASE IT CANNOT BE STATED THAT ASSESSEES ESTIMATION IS BONAFIDE OR HONEST ESTIMATION OF SALARY INCOME OF I TS EMPLOYEES. ADMITTEDLY, THE I.T.A. NOS.335-338/COCH/2016 7 CONTRIBUTIONS MADE BY THE ASSESSEES TO THE PROVIDEN T 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 CONTENTIONS RAISED BY THE ASSESSEES AND DISMISS THE APPEALS OF THE ASSESSEES. IT IS ORDERED ACCORDINGLY. 10. IN THE RESULT, THE APPEALS OF THE ASSESSEES A RE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 03-03-2017. SD/- (GEORGE GEORGE K.) JUDICIAL MEMBER PLACE: KOCHI DATED: 3 RD MARCH, 2017 GJ COPY TO: 1. M/S. KODAKKAD SERVICE CO-OPERATIVE BANK LTD., KA NNADIPARA, CHERUVATHUR, KASARAGOD-671 313. 2. M/S. KINANUR SERVICE CO-OPERATIVE BANK LTD., CHA YYOM, CHOIMKODE, NILESHWAR, KASARAGOD-671 313. 3. THE INCOME TAX OFFICER (TDS), KANNUR. 4. THE COMMISSIONER OF INCOME-TAX(APPEALS) KOZHIKOD E. 5. THE COMMISSIONER OF INCOME-TAX (TDS), KOCHI. 6. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 7. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., COC HIN