The Income Tax Officer, TDS Ward-2, Visakhapatnam V. Visakhapatnam Industrial Water Supply Company. Limited, Visakhapatnam

ITA 359/VIZ/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 5235 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 04-06-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K SONAWAL
• Keywords: Non-deduction of tax; TDS
• Section: 201(1); 201; 194A; 13; 6; 12; 10; 2; 11; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI N.K. CHOUDHRY, HONBLE JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH, HON'BLE ACCOUNTANT MEMBER I.T.A. NO. 359 /VIZ/2019 (ASST. YEAR : 20 07 - 08 ) ITO, TDS, WARD - 2, VISAKHAPATNAM. VS. M/S. VISAKHAPATNAM INDUSTRIAL WATER SUPPLY CO. LTD., ROOM NO. 204, TENNETI BHAVAN, ASILMETTA JUNCTION, VISAKHAPATNAM. (APPELLANT) PAN NO. AABCV 2240 H (RESPONDENT) I.T.A. NO. 553/VIZ/2019 AND C.O.NO. 126/VIZ/2019 (ARISING OUT OF ITA NO. 359/VIZ/2019) (ASST. YEAR : 2007 - 08 ) M/S. VISAKHAPATNAM INDUSTRIAL WATER SUPPLY CO. LTD., ROOM NO. 204, TENNETI BHAVAN, ASILMETTA JUNCTION, VISAKHAPATNAM. VS. ITO, TDS, WARD - 2, VISAKHAPATNAM. PAN NO. AABCV 2240 H (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI C.SUBRAHMANYAM , FC A DEPARTMENT BY : SHRI D.K. SONAWAL , CIT - DR DATE OF HEARING : 13 / 09 /2021 . DATE OF PRONOUNCEMENT : 24 / 0 9 /2021 . 2 ITA NO S . 359 & 553/VIZ/2019 C.O.NO. 126/VIZ/2019 ( M/S. VISAKHAPATNAM INDUSTRIAL WATER SUPPLY CO. LTD. ) O R D E R PER BENCH BOTH THE CROSS APPEALS HA VE BEEN PREFERRED BY THE REVENUE DEPARTMENT AND THE ASSESSEE AGAINST THE ORDER DATED 18 /03 /2019 IMPUGNED HEREIN PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 2 [FOR SHORT , LD. COMMISSIONER] , VISAKHAPATNAM U/SEC. 250(6) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'ACT') FOR THE A.Y. 20 07 - 08 . CROSS OBJECTION HAS BEEN FILED BY THE ASSESSEE IN ITA NO. 359/VIZ/2019 . ITA NO. 359/VIZ/ 2019 2. IN THIS CASE, THE ASSESSEE MADE PAYMENT TO THE APIIC WITHOUT DEDUCTING TAX AT SOURCE. THEREFORE, IN FIRST ROUND, THE AO MADE THE ADDITION S OF RS. 29,72,42,976/ - U/SEC. 201(1) AND RS. 17,83,45,620/ - U/SEC. 201(1A) OF THE ACT, WHILE OBSERVING THAT SECTION 201(1) & 201(1A) PROVIDES CONSEQUENCES OF FAILURE TO DEDUCT TAX AT SOURCE TO THE EFFECT THAT ANY PERSON WHO FAILS TO DEDUCT TAX AT SOURCE SHALL BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF SUCH TAX , H ENCE, THE ASSESSEE IS DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF TAX OF RS. 29,72,42,976/ - . FURTHER THAT AS PER SUB - S ECTION (1 A ) OF SECTION 201, WHERE A PERSON FAILS TO REMIT THE TAX DEDUCTED INTO GOVERNMENT ACCOUNT WITHIN THE DUE DATES, THE PERSON RESPONSIBLE FOR DEDUCTING TAX SHALL BE LIABLE TO PAY SIMPLE INTEREST AT THE PRESCRIBED RATE ON THE AMOUNT OF SUCH TAX FROM THE DATE ON SUCH TAX IS DEDUCTIBLE TO THE DATE ON WHICH SUCH TAX IS ACTUALLY PAID. SINCE THE ASSESSEE HAS FAILED TO DEDUCT THE TAX OF RS. 29,72,42,976/ - IT IS ALSO LIABLE TO PAY INTEREST U/SEC. 201(1A) AMOUNTING TO RS. 17,83,45,620/ - FOR THE PERIOD FROM 01/04/2006 TO 31/03/2011 . 3 ITA NO S . 359 & 553/VIZ/2019 C.O.NO. 126/VIZ/2019 ( M/S. VISAKHAPATNAM INDUSTRIAL WATER SUPPLY CO. LTD. ) 3 . THE ASSESSEE IN FIRST ROUND OF LITIGATION, CHALLENGED THE SAID ADDITION BEFORE THE L D. COMMISSIONER AND IN RESPONSE TO THE REMAND PROCEEDINGS SUBMITTED SPECIFICALLY BY WAY OF WRITTEN SUBMISSIONS DATED 31/08/2012 THAT IT IS ALSO BROUGHT TO YOU R NOTICE THAT ANY INTEREST PAYMENT TO APIIC IS ALSO EXEMPT FROM TDS PROVISIONS , AS APIIC IS HELD BY GOAP AS STATE GOVERNMENT UNDERTAKING, THEREBY COVER ED AS PER SECTION 194 A (3)(III)( F ) OF THE ACT . HOWEVER THE LD. COMMISSIONER WITHOUT CONSIDERING THE SAID FACTS THAT APIIC IS A STATE GOVERNMENT UNDERTAKING AND THEREBY COVERED AS PER SECT ION 194(3)(III)(F) OF THE ACT, VIDE ITS ORDER DATED 02/09/2013 DELETED THE SAID ADDITIONS ON THE OTHER REASONS BY HOLDING THAT NO TDS WITH RESPECT TO INTEREST PAYMENT OF RS. 11,55,83,000/ - PAID TO APIIC IS APPLICABLE AS PER THE PROVISIONS OF SECTION 194 A (3)(III)( B ) AS ANY INTEREST PAID TO ANY FINANCIAL CORPORATION ESTABLISHED BY OR UNDER A CEN TRAL, STATE OR PROVINCIAL ACT IS EXEMPT FROM TDS. ACCORDINGLY, NO TDS IS LEVIABLE ON THE PAYMENT MADE TO APIIC . THE LD. COMMISSIONER FURTHER HELD T H A T SINCE THE INCOME OF THE PAYEE I.E. APIIC IS EXEMPT U/SEC. 11 OF THE ACT AS HAS BEEN HELD BY THE HON'BLE ITAT IN ITA N O. 1471/HYD/2010 DATED 22/11/2011 , THEREFORE THERE IS NO NEED TO DEDUCT TDS ON PAYMENT MADE TO SUCH EXEMPT ENTITY . 4. THE REVENUE DEPARTMENT PREFERRED SECOND APPEAL BEFORE THE TRIBUNAL AGAINST THE SAID ORDER DATED 02/09/2013 PASSED BY THE LD. CIT(A) - II, HYDERABAD . 4. 2 THE COORDINATE BENCH OF THE TRIBUNAL AT HYDERABAD VIDE ITS ORDER DATED 24/08/2016 PASSED IN ITA NO. 1707/HYD/2013 , WHILE CONSIDERING THE ASPECT AS TO WHETHER THE APIIC IS COVERED U/SEC. 194A(3)(III)(B) OF ACT , REMANDED THE ISSUE BACK TO THE FILE OF THE AO TO DETERMINE THE STATUS AS TO WHETHER APIIC IS A FINANCIAL 4 ITA NO S . 359 & 553/VIZ/2019 C.O.NO. 126/VIZ/2019 ( M/S. VISAKHAPATNAM INDUSTRIAL WATER SUPPLY CO. LTD. ) CORPORATION OR NOT , F URTHER DIRECTED THAT IN CASE IT IS FOUND THAT IT IS A FINANCIAL CORPORATION, THE EXEMPTION MAY BE GRANTED. FOR READY REFERENCE, THE CONCLUSION PART OF THE HON'BLE TRIBUNAL IS REPRODUCED HEREIN BELOW: - 9.2 WITH REGARD TO GROUND NO. 3, APIIC IS A CORPORATION ESTABLISHED BY STATE GOVT. OF AP AND NOT BY CENTRAL GOVT., TO ENJOY EXEMPTION U/S 196(III). THERE IS NO DISPUTE THAT APIIC ESTABLISHED UNDER STATE ACT. IN THE PRESENT CASE, CIT(A) HAS ALLOWED THE EXEMPTION BY TREATING THE APIIC AS A CONCERN U/S 194A(III)(B) OF THE ACT. ON CAREFUL OBSERVATION, THE CONCERN WHICH IS EXEMPT U/S 194A(III)(B) SHOULD BE A FINANCIAL CORPORATION ESTABLISHED BY OR UNDER CENTR AL, STATE OR PROVINCIAL ACT. ON THE RECORD SUBMITTED BEFORE US DOES NOT CLARIFY THAT APIIC IS A FINANCIAL CORPORATION. SINCE WE ARE NOT SURE ABOUT THE TYPE OF FINANCIAL CORPORATION, WE REMIT THIS ISSUE BACK TO THE FILE OF THE AO TO DETERMINE THE STATUS. IN CASE IT IS FOUND THAT IT IS A FINANCIAL CORPORATION, THE EXEMPTION MAY BE GRANTED. 5. THE LD. AR AND LD. DR SUBMITTED THAT THE ASSESSEE ALSO FILED APPEAL AGAINST THE ORDER DATED 24/08/2016 PASSED IN ITA NO. 1707/HYD/2013 BY THE ITAT, BEFORE THE HONBLE H IGH COURT OF ANDHRA PRADESH, WHICH IS PENDING FOR ADJUDICATION, HOWEVER NO STAY IS GRANTED BY THE HONBLE COURT QUA FURTHER PROCEEDINGS IN PURSUANCE TO THE ITAT ORDER. 6. AS NO STAY WAS GRANTED BY T HE HONBLE HIGH COURT QUA FURTHER PROCEEDINGS IN PURSUANCE TO THE ITAT ORDER, T HE AO WHILE FOLLOWING THE DIR ECTIONS OF THE HON'BLE TRIBUNAL, VIDE ITS ORDER DATED 14/12/2017 U/SEC. 254 OF THE ACT CONCLUDED THAT ON VERIFICATION IT IS FOUND THAT THE SAID APIIC DOES NOT COVER U/SEC . 194A(3)(III)(B) OF THE ACT , S INCE IT IS A COMPANY INCORPORATED FOR THE PURPOSE 5 ITA NO S . 359 & 553/VIZ/2019 C.O.NO. 126/VIZ/2019 ( M/S. VISAKHAPATNAM INDUSTRIAL WATER SUPPLY CO. LTD. ) OF THE DEVELOPMENT OF THE INFRASTRUCTURE FOR INDUSTRIES IN THE STATE OF ANDHRA PRADESH . CONSEQUENTLY, THE AO MADE THE ADDITION OF RS. 25,93,12,825/ - AND RS. 35,06,31,083/ - . 7 . THE ASSESSEE IN 2ND ROUND OF LITIGATION CHALLENGED THE SAID ORDER DATED 14/12/2017 PASSED BY THE AO BEFORE THE LD. COMMISSIONER. THE LD. COMMISSIONER DELETED THE ADDITION MADE BY THE AO U/SEC. 201(1) & 201(1A) OF THE ACT BY ACCEPTING THE CLAIM OF THE ASSESSEE RAISED VIDE GROUND NO. 7 SPECIFICALLY, TO THE EFFECT THAT WITHOUT PREJUDICE, THE AO FAILED TO CONSIDER THE SUBMISSION OF THE APPELLANT THAT THE INTEREST PAID TO APIIC I N WHICH ALL THE SHARES ARE HELD BY THE GOVERNMENT OF ANDHRA PRADE SH IS AN ENTITY COVERED U/S 194A (3)(III)(F ) IS EXEMPTED FROM TDS VIDE CENTRAL GOVERNMENT NOTIFICATION NO. SO 3489 , DATED 22/10/1970 . FOR READY REFERENCE, THE FI N DING OF THE LD. COMMISSIONER IS REPRODUCED HEREIN BELOW: - IN VIEW OF THE SPECIFIC EXEMPTION GRANTED TO INSTITUTIONS AS NOTIFIED BY THE GOVERNMENT FROM THE OPERATION OF THE PROVISIONS OF SEC.194A(1) BY VIRTUE OF THE PROVISIONS OF SEC.194A(3)(III)(F) AND ON A PERUSAL OF THE NOTIFICATION NO. SO 3489 AND FORM 20B, A CONCLUSION CAN BE DRAWN THAT APIIC , THE PAYEE HEREIN, IS A COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956 WHEREIN THE ENTIRE SHARE HOLDING IS HELD BY THE GOVERNMENT OF ANDHRA PRADESH AND THEREFORE THE PROVISIONS OF SEC.194A(1) ARE NOT APPLICABLE TO INTEREST PAID/PAYABLE BY THE APPELLAN T TO APIIC AS PER THE PROVISIONS OF SEC.194A(3)(II) (F). CONSEQUENTLY, NO TAX NEED TO BE DEDUCTED AT SOURCE FROM IF INTEREST PROVIDED BY THE APPELLANT ON THE LOANS OUTSTANDING TO APIIC. FURTHER APIIC IS AN ORGANIZATION WHOSE INCOME IS EXEMPT FROM TAX. FOR T HE RELEVANT ASST. YEAR I.E. ASST. YEAR 2007 - 08, THE ASSESSMENT IN THE CASE OF APIIC WAS COMPL E TED AT NIL TAXABLE 6 ITA NO S . 359 & 553/VIZ/2019 C.O.NO. 126/VIZ/2019 ( M/S. VISAKHAPATNAM INDUSTRIAL WATER SUPPLY CO. LTD. ) INCOME AFTER TAKING INTO CONSIDERATION THAT IT WAS EXEMPT U/S. 11 OF THE INCOME TAX ACT, 1961. IN A SITUATION WHERE THE PAYEE IS NOT LIABLE TO TAX, NO ORDER IS TO BE PASSED TREATING THE DEDUCTOR AS AN APPELLANT IN DEFAULT FOR NON - DEDUCTION OF TAX AT SOURCE AS HELD BY SPECIAL BENCH OF HON'BLE ITAT IN THE CASE OF MAHINDRA & MAHINDRA LTD VS DCIT (2009 ) 122 TTJ (MUM BAI) (SB) 577. BY TAKING INTO CONSIDERATION THE ABOVE FACTS, IT IS HEREBY HELD THAT THE ORDER PASSED BY THE DCIT, CIRCLE - 15(2)(TDS), HYDERABAD DT. 31/03/2011 IS AGAINST THE PROVI SI ONS OF INCOME - TAX ACT AND THE SAME IS HEREBY QUASHED. ACCORDINGLY, THE ASSESSING OFFICER IS HEREBY DIRECTED TO DELETE THE ADDITION ON ACCOUNT OF TAX OUGHT TO HAVE DEDUCTED U/S 201 (1) AMOUNTING TO RS. 25,93,12,825/ - AND INTEREST U/S 201(1A) OF THE I.T. ACT OF RS. 35,06,31,083/ - . THEREFORE, THE APPEAL MADE BY THE APPELLANT ON THIS GROUND IS ALLOWED. 8 . THE REVENUE DEPARTMENT , BEING AGGRIEVED AGAINST THE IMPUGNED ORDER UNDER CHALLENGE , PREFERRED THE INSTANT APPEAL ON THE FOLLOWING GROUNDS OF APPEAL: - 1. THE ORDER OF THE LD. CIT(A) IS ERRONEOUS BOTH ON FACTS AND IN LAW. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS FAILED TO NOTE TH A T THE ITAT VIDE IT ORDER DATED 24/08/2016 ADJUDICATED THE MATTER AND REMITTED THE LIMITED ISSU E TO THE FILE OF THE ASSESSING OFFICER TO FIND OUT WHETHER M/S.APIIC (ANDHRA PRADESH INDUSTRIAL INFRASTRUCTURE CORPORATION LIMITED) IS A FINANCIAL CORPORATION OR NOT WITHIN THE MEANING OF SECTION 194(3)(III)(B) OF THE ACT. 3. THE LD. CIT(A) HAS ERRED IN GRANTING RELIEF HOLDING THAT M/S. APIIC IS AN EXEMPTED ENTITY U/SEC. 194A(3)(III)(F) OF THE ACT IGNORING THE FACT THAT AS PER THE SAID PROVISIONS, IN ORDER TO 7 ITA NO S . 359 & 553/VIZ/2019 C.O.NO. 126/VIZ/2019 ( M/S. VISAKHAPATNAM INDUSTRIAL WATER SUPPLY CO. LTD. ) AVAIL THE EX E MPTION FROM TDS, SUCH INSTITUTION SHOULD BE NOTIFIED BY THE CENTRAL GOVERNMENT IN THE OFFICIAL GAZETTE AFTER RECORDING REASONS WHEREAS THE ASSESSEE COMPANY ITSELF HAS ADMITTED THAT THERE IS NO SUCH NOTIFICATION FOR APIIC. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS ERRED IN QUASHING THE OR IGINAL ORDER DAT E D 31/03/2011 OF THE DCIT, TDS CIRCLE - 15(2), HYDERABAD AS THE APPEAL WAS FILED AGAINST THE CONSEQUENTIAL ORDER DATED 14/12/2017. 5. ANY OTHER GROUND THAT MAY BE URGED AT ATHE TIME OF HEARING. 9 . HAVING HEARD THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. GRO U ND NOS. 1 & 5 ARE GENERAL IN NATURE, HENCE, DO NOT REQUIRE ANY ADJUDICATION SPECIFICALLY. AS THE GROUND NO.3 GOES TO THE ROOT OF THE CASE, THEREFORE BEFORE PROCEEDING TO GROUND NOS. 2 & 4, WE DEEM IT APPROPRIATE TO ADJUDICATE GROUND NO.3 FIRST, WHICH IS REPRODUCED HEREIN AGAIN: - 3. THE LD. CIT(A) HAS ERRED IN GRANTING RELIEF HOLDING THAT M/S. APIIC IS AN EXEMPTED ENTITY U/SEC. 194A(3)(III)(F) OF THE ACT IGNORING THE FACT THAT AS PER THE SAID PROVISIONS, IN ORDER TO AVAIL THE EXEMPTION FROM TDS, SUCH INSTITUTION SHOULD BE NOTIFIED BY THE CENTRAL GOVERNMENT IN THE OFFICIAL GAZETTE AFTER RECORDING REASONS WHEREAS THE ASSESSEE COMPANY ITSELF HAS ADMITTED THAT THERE IS NO SUCH NOTIFICATION FOR APIIC. 9 . 1 FOR READ Y REFERENCE WE ARE ALSO REPRODUCING THE RELEVANT PROVISIONS OF SECTION 194A OF THE ACT : - 194A. (1) ANY PERSON, NOT BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, WHO IS RESPONSIBLE FOR PAYING TO A RESIDENT ANY INCOME BY WAY OF INTEREST OTHER THAN 8 ITA NO S . 359 & 553/VIZ/2019 C.O.NO. 126/VIZ/2019 ( M/S. VISAKHAPATNAM INDUSTRIAL WATER SUPPLY CO. LTD. ) INCOME BY WAY OF INTEREST ON SECURITIES, SHALL, AT THE TIME OF CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT INCOME - TAX THEREON AT TH E RATES IN FORCE : PROVIDED THAT AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, WHOSE TOTAL SALES, GROSS RECEIPTS OR TURNOVER FROM THE BUSINESS OR PROFESSION CARRIED ON BY HIM EXCEED 49 [ONE CRORE RUPEES IN CASE OF BUSINESS OR FIFTY LAKH RUPEES IN CASE OF PROFESSION] DURING THE FINANCIAL YEAR IMMEDIATELY PRECEDING THE FINANCIAL YEAR IN WHICH SUCH INTEREST IS CREDITED OR PAID, SHALL BE LIABLE TO DEDUCT INCOME - TAX UNDER THIS SECTION.] EXPLANATION. FOR THE PURPOSES OF THIS SECTION, WHERE ANY INCOME BY WAY OF INTEREST AS AFORESAID IS CREDITED TO ANY ACCOUNT, WHETHER CALLED 'INTEREST PAYABLE ACCOUNT' OR 'SUSPENSE ACCOUNT' OR BY ANY OTHER NAME, IN THE BOOKS OF ACCOUNT OF THE PERSON LIABLE TO PAY SUCH INCOM E, SUCH CREDITING SHALL BE DEEMED TO BE CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE AND THE PROVISIONS OF THIS SECTION SHALL APPLY ACCORDINGLY. (2) [ OMITTED BY THE FINANCE ACT, 1992, W.E.F. 1 - 6 - 1992. ] (3) THE PROVISIONS OF SUB - SECTION (1) SHALL NO T APPLY ( I ) .............................................................................................................. .............................................................................................................. ...................... .......................... ( II ) [***] ( III ) TO SUCH INCOME CREDITED OR PAID TO ( A ) ANY BANKING COMPANY TO WHICH THE BANKING REGULATION ACT, 1949 (10 OF 1949), APPLIES, OR ANY CO - OPERATIVE SOCIETY ENGAGED IN CARRYING ON THE BUSINESS OF BANKING (INCLUDING A CO - OPERATIVE LAND MORTGAGE BANK), OR ( B ) ANY FINANCIAL CORPORATION ESTABLISHED BY OR UNDER A CENTRAL, STATE OR PROVINCIAL ACT, OR ( C ) THE LIFE INSURANCE CORPORATION OF INDIA ESTABLISHED UNDER THE LIFE INSURANCE CORPORATION ACT, 1956 (31 OF 1956), OR ( D ) THE UNIT TRUST OF INDIA ESTABLISHED UNDER THE UNIT TRUST OF INDIA ACT, 1963 (52 OF 1963), OR ( E ) ANY COMPANY OR CO - OPERATIVE SOCIETY CARRYING ON THE BUSINESS OF INSURANCE, OR 9 ITA NO S . 359 & 553/VIZ/2019 C.O.NO. 126/VIZ/2019 ( M/S. VISAKHAPATNAM INDUSTRIAL WATER SUPPLY CO. LTD. ) ( F ) SUCH OTHER INSTITUTION, ASSOCIATION OR BODY OR CLASS OF INSTITUTIONS, ASSOCIATIONS OR BODIES WHICH THE CENTRAL GOVERNMENT MAY, FOR REASONS TO BE RECORDED IN WRITING, NOTIFY IN THIS BEHALF IN THE OFFICIAL GAZETTE: [ PROVIDED THAT NO NOTIFICATION UNDER THIS SUB - CLAUSE SHALL BE ISSUED ON OR AFTER THE 1ST DAY OF APR IL, 2020;] (IV) . .. 9.2 THE CONTENTS OF SECTION 194 A (3)(III)(B) RE F LECTS THAT ANY FINANCIAL CORPORATION ESTABLISHED BY OR UNDER A CENTRAL, STATE OR PROVINCIAL ACT, IS NOT LIABLE FOR DEDUCTION OF TAX U/SEC. 194A(1) OF THE ACT. FURTHER SECTION 194A(3)(III)(F) ALSO EXEMPTED SUCH OTHER INSTITUTION, ASSOCIATION OR BODY OR CLASS OF INSTITUTIONS, ASSOCIATIONS OR BODIES WHICH THE CENTRAL GOVERNMENT MAY, FOR REASONS TO BE RE CORDED IN WRITING, NOTIFY IN THIS BEHALF IN THE OFFICIAL GAZETTE . WE MAY OBSERVE THAT T HE PROVISION OF SUCH 194A(3)(III)(F) HAVING VIDE SPECTRUM AND COVERING THE OTHER SUCH IN S TI TU TION , ASSOCIATION OR BODY WHICH ARE NOTIFIED BY RECORDING THE REASONS IN W RITING BY THE CENTRAL GOVERNMENT . AS IT APPEARS FROM NOTIFICATION NO. SO 348 9 , DATED 22/10/1970 W HEREIN I N PURSUANCE OF SUB - CLAUSE (F) OF CLAUSE (III) OF SUB - SECTION (3) OF SECTION 194A OF THE INCOME - TAX ACT, 1961 (43 OF 1961), THE CENTRAL GOVERNMENT NOTIFIED THE FOLLOWING INSTITUTIONS FOR THE PURPOSES OF THE SAID SUB - CLAUSE : - (I) ANY CORPORATION ESTABLISHED BY A C ENTRAL, STATE OR PROVINCIAL ACT 10 ITA NO S . 359 & 553/VIZ/2019 C.O.NO. 126/VIZ/2019 ( M/S. VISAKHAPATNAM INDUSTRIAL WATER SUPPLY CO. LTD. ) ( II ) ANY COMPANY IN WHICH ALL THE SHARES ARE HELD (WHETHER SINGLY OR TAKEN TOGETHER) BY THE GOVERNMENT OR THE RESERVE BANK OF INDIA OR A CORPORATION OWNED BY THAT BANK FROM THE SAID NOTIFICATION IT APPEARS THAT THE C ENTRAL GOVERNMENT HAS COVERED CORPORATION S ESTABLISHED BY A CENTRAL, STATE OR PROVINCIAL ACT WHICH ARE EXEMPTED UNDER SUB - CLAUSE (F) OF CLAUSE (III) OF SUB - SECTION (3) OF SECTION 194A OF THE ACT. FURTHER ANY COMPANY IN WHICH ALL THE SHARES ARE HELD (WHETHER SINGLY OR TAKEN TOGETHER) BY THE GOVERNMENT OR THE RESERVE BANK OF INDIA OR A CORPORATION OWNED BY THAT BANK . WH I LE COMING TO THE INSTANT CASE, IT IS UNDISPUTED FACT THAT APIIC , THE PAYEE COMPANY HAS BEEN INCORPORATED UNDER THE COMPANIES ACT, 1966 HOLDING OF WHICH IS ENTIRELY HELD BY THE GOVERNMENT OF ANDHRA PRADESH AND, T HEREFORE, THE PROVISIONS OF SECTION 194(A) (1) OF THE ACT ARE NOT APPLI CABLE QUA INTEREST PAID/PAYABLE BY THE ASSESSEE TO THE SAID ORGANIZATION APIIC AS PER SECTION 194(3)(III)(F ) OF THE ACT. 9.3 CONSIDERING THE PECULIAR FACTS AND CIRCUMSTANCES IN TOTALITY , WE ARE IN CONCURRENCE WITH THE CONCLUSION OF THE LD. COMMISSIONER FOR COVERING THE APIIC U/SEC. 194 A (3)(III)(F) OF THE ACT AND TO THE EFFECT AS WELL THAT APIIC IS AN ORGANIZATION EXEMPTED U/SEC. 11 OF THE ACT HAVING FILED NIL TAXABLE INCOME, IS NOT LIABLE TO TAX AND, THEREFORE, DEDUCTION OF TAX AT SOURCE QUA APIIC IS NOT ATTRACTED. CONSEQUENTLY, THE CONCLUSION DRAWN BY THE LD. COMMISSIONER, WHEREBY DELETED THE ADDITION MADE BY THE AO U/SEC. 201(1) & 201(1A) OF THE ACT IS LIABLE TO BE AFFIRMED. IN THE 11 ITA NO S . 359 & 553/VIZ/2019 C.O.NO. 126/VIZ/2019 ( M/S. VISAKHAPATNAM INDUSTRIAL WATER SUPPLY CO. LTD. ) RESU LT, GROUND NO.3 FILED BY THE REVENUE DEPARTMENT STAND DISMISSED. 1 0 . NOW COMING TO THE GROUND NO.2 WHEREIN THE REVENUE DEPARTMENT HAS RAISED THE ISSUE THAT THE LD. COMMISSIONER HAS FAILED TO NOTE THAT THE ITAT VIDE ITS ORDER DATED 24/08/2016 ADJUD I CATED THE MATTER AND REMITTED THE LIMITED ISSUE TO THE FILE OF THE AO TO FIND OUT WHETHER APIIC IS A FINANCIAL CORPORATION OR NOT WITHIN THE M E ANING OF SECTION 194A(3)(III)(B) OF THE ACT . NO DOUBT THE COORDINATE BENCH REMITTED THE ISSUE TO THE FILE OF THE AO FOR DETERMINATION AS TO WHETHER THE APIIC IS A FINANCIAL CORPORATION OR NOT WITHIN THE MEANING OF SECTION 194A(3)(III)(B) OF THE ACT AND THE AO WHILE FOLLOWING THE DIRECTIONS OF THE HON'BLE TRIBUNAL DETERMINED THE S TATUS OF APIIC AS NON - FINANCIAL CORPORATION AND CONSEQUENTLY MADE THE ADDITION S U/SEC. 201(1) & 201(1A) OF THE ACT WHICH WERE CHALLENGED BEF ORE THE LD. COMMISSIONER. 10.1 THE L D. COMMISSIONER WHILE ADJUDICATING SPECIFIC GROUND 7 BY WHICH THE ASSESSE E HAS RAISED THE ISSUE THAT APIIC IS AN ENTITY COVERED UNDER THE PROVISIONS OF SECTION 194 A (3)(III)(F) OF THE ACT AND THEREFORE EXEMPTED FROM TDS AS PER NOTIFICATION NO. SO 3489 , DATED 22/10/1970 ISSUED BY CENTRAL GOVERNMENT , ACCEPTED THE CLAIM OF THE ASSESSEE AND CONSEQUENTLY DELETED THE ADDITION MADE BY THE AO. 10.2 T HE QUESTION EMERGE AS TO WHETHER THE LD. COMMISSIONER WAS EMPOWERED TO ADJUDICATE THE ISSUE WHICH WAS NOT THE SUBJECT MATTER OF THE APPEAL AND/OR THE ORIGINAL CLAIM OF THE ASSESSEE. 12 ITA NO S . 359 & 553/VIZ/2019 C.O.NO. 126/VIZ/2019 ( M/S. VISAKHAPATNAM INDUSTRIAL WATER SUPPLY CO. LTD. ) 10.3 THE HONBLE APEX COURT IN THE CASE OF D.I.T VS. POORAN MALL & SONS, 96 ITR, P.390 (SC) HELD THAT A PERSON CANNOT BE TAX ED ON THE PRINCIPLE OF ESTOPPEL . FURTHER ARTICLE 265 OF THE CONSTITUTION OF INDIA PRESCRIBES THAT NO TAX SHALL BE LEVIED EXCEPT WHEN AUTHORIZED BY LAW. 10.4 THE HON'BLE SUPREME COURT IN THE CASE OF NTPC LTD. VS. CIT [(1998) 229 ITR 383] CLEARLY HELD THAT THE RAISING OF ADDITIONAL LE GAL GROUND DURING THE APPELLATE STAGE/PROCEEDINGS IS NOT BARRED BY LAW. 10.5 T HE HON'BLE APEX COURT IN THE CASE OF JUTE CORPORATION OF INDIA LTD. VS. CIT & ANOTHER (187 ITR 688), ALSO HELD THAT THE APPELLATE ASSISTANT COMMISSIONER HAS JURISDICTION TO P ERMIT THE APPELLANT TO RAISE THE ADDITIONAL GROUND. 10.6 THE HON'BLE APEX COURT IN THE CASE OF CIT VS. KANPUR COAL SYNDICATE [(1964) 53 ITR 225)] HAS HELD THAT APPELLATE ASSISTANT COMMISSIONER ALSO HAS CO - TERMINUS POWER WITH THAT OF THE INCOME - TAX OF FICER AND IF THAT SO THERE APPEARS TO BE NO REASON AS TO WHY THE APPELLATE AUTHORITY CANNOT MODIFY THE ASSESSMENT ORDER ON AN ADDITIONAL GROUND EVEN IF NOT RAISED BEFORE THE ITO. THE HON'BLE APEX COURT FURTHER HELD THAT IN ABSENCE OF ANY STATUTORY PROVISI ON, THE APPELLATE AUTHORITY IS VESTED WITH ALL THE PLENARY POWERS WHICH SUB - ORDINATE AUTHORITY MAY HAVE IN THE MATTER. 10.7 THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF PT. SHEO NATH PRASAD SHARMA VS. C.I.T., 66 ITR, P.647 (ALL.) REMINDED THAT T H E LAW EMPOWERS THE INCOME - TAX OFFICER TO ASSESS THE INCOME OF AN ASSESSEE AND DETERMINE THE TAX PAYABLE THEREON IN ACCORDANCE WITH LAW. THE HONBLE COURT FURTHER OBSERVED THAT JUST BECAUSE THE ASSESSEE HAS SHOWN THE RECEIPT AS INCOME IN HIS RETURN, IT DOES NOT MAKE HIM LIABLE TO TAX THEREON. IF THE INCOME - TAX OFFICER ASSESS AN ASSESSEE UPON A RECEIPT, WHICH IS NOT TAXABLE IN LAW, IT IS ALWAYS OPEN TO THE ASSESSEE TO 13 ITA NO S . 359 & 553/VIZ/2019 C.O.NO. 126/VIZ/2019 ( M/S. VISAKHAPATNAM INDUSTRIAL WATER SUPPLY CO. LTD. ) TAKE THE CASE IN APPEAL OR IN REVISION THEREAFTER. FURTHER THE ASSESSEE IS WITHIN HIS RIGHTS IN REQUIRING THE APPELLATE OR THE REVISIONAL AUTHORITY TO EXAMINE THE VALIDITY OF THE ASSESSMENT TO TAX A RECEIPT WHICH, THOUGH ADMITTED BY HIM, IS NOT TAXABLE IN LAW . 10.8 FROM THE VERDICTS OF THE APEX COURT AND HIGH COURT , IT IS CLEAR THAT THE V ERY PURPOSE OF INCOME TAX PROCEEDINGS IS TO CORRECTLY ASSESS THE TAX LIABILITY OF AN ASSESSEE IN ACCORDANCE WITH LAW, MAY BE THE ASSESSEE HAS CLAIMED MISTAKENLY AND/OR INADVERTENTLY AND /OR NOT CLAIMED UNDER PROPER PROVISIONS OF LAW AS HAPPENED IN THIS CASE . FURTHER THE LEGAL AS WELL AS FACTUAL ADDITIONAL /NEW GROUND ( S ) AND FRESH CLAIM CAN BE RAISED AT ANY TIME BEFORE THE APPELLATE AUTHORITIES AND THE APPELLATE AUTHORITIES ARE EMPOWERED TO DECIDE THE ADDITIONAL /NEW GROUND ( S ) AND FRESH CLAIM, RAISED BY THE PAR TIES DURING THE COURSE OF APPELLATE PROCEEDINGS FOR THE JUST AND PROPER DECISION OF A CASE. 10. 9 WHILE COMING TO THE INSTANT CASE, AS I T IS UNDISPUTED FACT THAT THE ASSESSEE IN THE FIRST ROUND OF LITIGATION BEFORE THE LD. COMMISSIONER VIDE ITS WRITTEN SUBMISSIONS DATED 31/08/2012 IN RESPONSE TO THE REMAND REPORT PROCEEDINGS IN ITA NO . 0394/CIT(A) - II, HYD/2011 - 12 DATED 02/09/2013 CLEAR L Y SUBMITTED THAT APIIC IS ALSO EXEMPT FROM TDS PROVISIONS AS APIIC IS HELD BY GOAP AND IS THE STATE GOVERNMENT UNDERTAKING THEREBY COVERED AS PER SECTION 194(3)(III)( F ) OF THE ACT, HOWEVER, THIS FACT WAS NOT CONSIDERED BY THE LD. COMMISSIONER . IN APPEAL BEFORE THE HON'BLE TRIBUNAL I N THE FIRST ROUND OF LITIGATION, THE SAID FACT WAS NOT BROUGHT TO THE KNOWLEDGE OF THE BENCH AND THEREFORE THE SAME REMAINED UN - NOTICED, WHICH RESULTED INTO REMANDING THE ISSUE TO THE FILE OF THE AO BY THE HON'BLE TRIBUNAL TO FIND OUT THE APPLICABILITY OF SECTION 194(3)(III)(B) INSTEAD OF SECTION 14 ITA NO S . 359 & 553/VIZ/2019 C.O.NO. 126/VIZ/2019 ( M/S. VISAKHAPATNAM INDUSTRIAL WATER SUPPLY CO. LTD. ) 194(3 )(III)(F) OF THE ACT. THEREFORE, ALL SEQUENCES RESULTED INTO MULTI AND PROLONGED LITIGATIONS. HOWEVER AS THE CON TROVERSY HAS BEEN SETTLED BY THE LD. COMMISSIONER WHILE CONSIDERING AND ALLOWING THE ALTERNATIVE CLA IM OF THE ASSESSEE RAISED BY GROUND NO. 7 WHEREIN IT WAS CLAIMED THAT WITHOUT PREJUDICE, THE AO FAILED TO CONSIDER THE SUBMISSION OF THE APPELLANT THAT THE INTEREST PAID TO APIIC IN WHICH ALL THE SHARES ARE HELD BY THE GOVERNMENT OF ANDHRA PRADESH IS AN ENTITY COVERED U/S 1 94A(3)(III)(F) IS EXEMPTED FROM TDS VIDE NOTIFICATION NO. SO 3489, DATED 22/10/1970 , THEREFORE T HERE IS NO NEED TO ADJUD I CATE GROUND NOS. 2 SPECIFICALLY AS THE SA ME BECOME INFRUCTUOUS HENCE DISMISSED. 11. VIDE GROUND NO. 4. T HE REVENUE DEPARTMENT RAISED T HE ISSUE TO THE EFFECTS O N THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS ERRED IN QUASHING THE ORIGINAL ORDER DATED 31/03/2011 OF THE DCIT, TDS CIRCLE - 15(2), HYDERABAD AS THE APPEAL WAS FILED AGAINST THE CONSEQUENTIAL ORDER DATED 14/12/2017 . WE MAY OBSERVE THAT T HE LD. COMMISSIONER INSTEAD OF MENTIONING THE DATE OF IMPUGNED ORDER AS 14/12/ 2017 MENTIONED 31/03/2011 . THE SAID MISTAKE SEEMS TO BE INADVERTENT OR BY OVERLOOKING AND HAS NOT MUCH RELEVANCE AND EFFECTS ON THE IMPUGNED ORDER HEREIN BECAUSE ADMITTEDLY THE CONSEQUENTIAL ORDER DATED 14/12/2017 WAS UNDER CHALLENGE AND ALL THE FACTS AND CIRCUMSTANCES INVOLVED IN THE SAME HAVE BEEN TAKEN INTO CONSIDERATION WHILE ADJUDICATING THE APPEAL BY THE LD. COMMISSIONER, HENCE THE GROUND NO.4 IS UNTENABLE FOR QUASHING OF IMPUGNED ORDER . 15 ITA NO S . 359 & 553/VIZ/2019 C.O.NO. 126/VIZ/2019 ( M/S. VISAKHAPATNAM INDUSTRIAL WATER SUPPLY CO. LTD. ) 12. ON OVERALL CONSIDERATIONS AND ANALYZATIONS, THE APPEAL FILED BY THE REVENUE DEPARTM ENT IS LIABLE TO BE DISMISSED, HENCE O RDERED ACCORDINGLY. ITA NO.553/VIZ/2019 1 3 . THOUGH, THERE IS A DELAY OF 116 DAYS IN FILING THE INSTANT APPEAL, HOWEVER, THE ASSESSEE THROUGH LD. AR HAS WITHDRAWN THE SAID APPEAL VIDE ITS ENDORSEMENT ON GROUNDS OF APPEAL DATED 07/09/2021 , CONSEQUENTLY STAND DISMISSED IN LIMINI. C.O.NO. 126/VIZ/2019 1 4 . THE CROSS OBJECTION FILED BY THE ASSESSEE IS IN SUPPORT OF THE IMPUGNED ORDER OF THE LD. COMMISSIONER . AS WE HAVE DISMISSED THE AP PEAL OF THE REVENUE DEPARTMENT, THE CROSS OBJECTION FILED BY THE ASSESSEE HAS BECOME INFRUCTUOUS AND HENCE DISMISSED. 1 5 . IN THE RESULT, I.T.A. NO. 359/VIZ/2019 FILED BY THE REVENUE DEPARTMENT AND I.T.A. NO. 553/VIZ/2019 AND CO NO. 126/VIZ/ 2019 FILED BY THE ASSESSEE STAND DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON TH IS 2 4 T H DAY OF SEP. , 2021 . S D / - S D / - (D.S. SUNDER SINGH) ( N.K. CHOUDHRY ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 2 4 T H SEP. , 20 2 1 . VR/ - 16 ITA NO S . 359 & 553/VIZ/2019 C.O.NO. 126/VIZ/2019 ( M/S. VISAKHAPATNAM INDUSTRIAL WATER SUPPLY CO. LTD. ) COPY TO: 1. THE ASSESSEE - M/S. VISAKHAPATNAM INDUSTRIAL WATER SUPPLY CO. LTD., ROOM NO. 204, TENNETI BHAVAN, ASILMETTA JUNCTION, VISAKHAPATNAM. 2. THE REVENUE ITO, TDS, WARD - 2, VISAKHAPATNAM. 3. THE CIT (TDS) , VIJAYAWADA. 4. THE CIT(A) - 2 , VISAKHAPATNAM. 5. THE D.R . , VISAKHAPATNAM. 6. GUARD FILE. BY ORDER (VUKKEM RAMBABU) SR. PRIVATE SECRETARY, ITAT, VISAKHAPATNAM.