RAJASTHAN AVAS VIKAS & INFRASTRUCTURE LIMITED, Jaipur V. ACIT, Jaipur

ITA 391/JPR/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2119 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 12-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P BHATEJA
• Assessee Lawyers: S K GOGARA; S S GOGARAADV
• Keywords: Earning of tax free income

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JHEKRH FNOK LG] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SMT. DIVA SINGH, JM & SHRI VIKRAM SINGH YAD AV, AM VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ VK;DJ VIHY LA- @ ITA NO. 391/JP/2016 FU/KZKJ.K O'K Z @ ASSESSMENT YEARS : 2011-2012 RAJASTHAN AVAS VIKAS & INFRASTRUCTURE LTD., 4 SA 24, JAWAHAR NAGAR, JAIPUR, RAJASTHAN, INDIA 302004 CUKE VS. ACIT, CIRCLE-6, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AABCA3281B VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA- @ ITA NO. 392/JP/2016 FU/KZKJ.K O'K Z @ ASSESSMENT YEARS : 2012-13 RAJASTHAN AVAS VIKAS & INFRASTRUCTURE LTD., 4 SA 24, JAWAHAR NAGAR, JAIPUR, RAJASTHAN, INDIA 302004 CUKE VS. ACIT, CIRCLE-6, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AABCA3281B VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI S.S. GOGARA(ADV.)& SHRI S.K. GOGARA (CA) JKTLO DH VKSJ LS @ REVENUE BY : SHRI O.P. BHATEJA LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 24/03/2017 MN?KKS'K .KK DH RKJH[ K@ DATE OF PRONOUNCEMENT : 12/05/2017 ITA NO. 391 & 392/JP/2016 RAJASTHAN AVAS VIKAS & INFRASTRUCTURE LTD VS ACIT 2 VKNS'K@ ORDER PER SH. VIKRAM SINGH YADAV, A.M. THESE ARE TWO APPEALS FILED BY THE ASSESSEE AGAINST TWO SEPARATE ORDERS PASSED BY LD. CIT(A)-2, JAIPUR OF EVEN DATE I.E, 29/01/2016 FOR A.Y. 2011-12 & 2012-13 RESPECTIVELY. SINCE COMMON I SSUES ARE INVOLVED, BOTH THE APPEALS WERE HEARD TOGETHER AND DISPOSED O FF BY THIS CONSOLIDATED ORDER. THE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE ARE AS UNDER:- ITA NO. 391/JP/2016: 1. THE LD. AO HAS ERRED IN WITHHOLDING TDS OF RS. 38,440/- DEDUCTED BY BANK ON INTEREST INCOME HELD BY THE ASSESSEE IN FIDUCIARY CAPACITY WHICH WAS NOT INCOME OF THE ASSESSEE. SINCE, THE FUNDS RECEIVED FROM HUDCO WERE HELD BY T HE ASSESSEE IN TRUST/IN FIDUCIARY CAPACITY ON BEHALF OF STATE G OVERNMENT FOR DISBURSEMENT, HENCE THE LD. AO ERRED IN TREATING TH E INCOME OF INTEREST ON SUCH FUNDS TEMPORARILY DEPOSITED IN BAN K AS TAXABLE INCOME AND FURTHER ERRED IN WITHHOLDING THE TDS OF RS. 38,440/-. THE INTEREST INCOME BEING NOT TAXABLE AND TDS THERE FORE IS ALLOWABLE TO ASSESSEE. THE ASSESSEE WAS ACTING AS NODAL AGENCY FOR AND ON BEHALF OF STATE GOVERNMENT IN RECEIVING AND REPAYING LOAN FRO M HUDCO AND AS SUCH INTEREST INCOME ON SUCH IDLE FUNDS WHICH WE RE HELD IN TRUST BY THE ASSESSEE WAS EXEMPT INCOME OF STATE GOVERNME NT, HENCE, THE LD. AO ERRED IN NOT ALLOWING THE TDS AMOUNT OF RS. 38,440/- 2. THAT THE APPLICATION OF SECTION 199 OF THE INCOM E TAX ACT OF RS. 38,440/- ON TDS AMOUNT IS ILLEGAL, UNJUSTIFIED AND WITHOUT ANY BASIS. ITA NO. 391 & 392/JP/2016 RAJASTHAN AVAS VIKAS & INFRASTRUCTURE LTD VS ACIT 3 ITA NO. 392/JP/2016: 1. THE LD. AO HAS ERRED IN WITHHOLDING TDS OF RS. 12,43,682/- DEDUCTED BY BANK ON INTEREST INCOME HELD BY THE ASS ESSEE IN FIDUCIARY CAPACITY WHICH WAS NOT INCOME OF THE ASSE SSEE. SINCE, THE FUNDS RECEIVED FROM HUDCO WERE HELD BY THE ASSESSEE IN TRUST/IN FIDUCIARY CAPACITY ON BEHALF OF STATE G OVERNMENT FOR DISBURSEMENT, HENCE THE LD. AO ERRED IN TREATING TH E INCOME OF INTEREST ON SUCH FUNDS TEMPORARILY DEPOSITED IN BAN K AS TAXABLE INCOME AND FURTHER ERRED IN WITHHOLDING THE TDS OF RS. 12,43,682/. THE INTEREST INCOME BEING NOT TAXABLE AND TDS THERE FORE IS ALLOWABLE TO ASSESSEE. THE ASSESSEE WAS ACTING AS NODAL AGENCY FOR AND ON BEHALF OF STATE GOVERNMENT IN RECEIVING AND REPAYING LOAN FRO M HUDCO AND AS SUCH INTEREST INCOME ON SUCH IDLE FUNDS WHICH WE RE HELD IN TRUST BY THE ASSESSEE WAS EXEMPT INCOME OF STATE GOVERNME NT, HENCE, THE LD. AO ERRED IN NOT ALLOWING THE TDS AMOUNT OF RS. 12,43,682/- 2. THAT THE APPLICATION OF SECTION 199 OF THE INCOM E TAX ACT OF RS. 12,43,682/- ON TDS AMOUNT IS ILLEGAL, UNJUSTIFI ED AND WITHOUT ANY BASIS. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE WAS APPOINTED AS A NODAL AGENCY BY THE GOVERNMENT OF RAJASTHAN FOR P OLICE HOUSING SCHEME AND FUNDS WERE RECEIVED BY THE ASSESSEE FROM HUDCO ON BEHALF OF STATE GOVERNMENT FOR DISBURSEMENT TO VARIOUS AGE NCIES FOR CONSTRUCTION OF HOUSES FOR THE POLICE DEPARTMENT. THE FUNDS SO RECEIVED FROM HUDCO TILL THE TIME THE SAME WAS DISBURSED TO THE VARIOUS AGENCIES WERE PLACED IN FDRS WITH THE BANK AND TDS WAS DEDUC TED BY THE BANK ON INTEREST EARNED ON SUCH FDRS. THE FUNDS SO RECEI VED BELONGED TO THE ITA NO. 391 & 392/JP/2016 RAJASTHAN AVAS VIKAS & INFRASTRUCTURE LTD VS ACIT 4 GOVERNMENT OF RAJASTHAN AND ANY INTEREST ON SUCH FU NDS PLACED IN THE FORM FDR ALSO BELONGS TO GOVERNMENT OF RAJASTHAN. AS A RESULT, THE ASSESSEE DID NOT OFFER THE INTEREST INCOME FOR TAX WHILE FILING ITS RETURN OF INCOME. AT THE SAME TIME, IT CLAIMED CREDIT OF TDS DEDUCTED ON SUCH INTEREST INCOME AGAINST ITS TAX LIABILITY WHILE FIL ING ITS RETURN OF INCOME. THE ASSESSING OFFICER AGREED WITH THE ASSESSEES CON TENTIONS THAT INTEREST ON FDR HAS BEEN RECEIVED BY THE ASSESSEE I N FIDUCIARY CAPACITY AND THE SAME WAS NOT BROUGHT TO TAX. HOWEVER, AS FA R AS THE CLAIM OF CREDIT OF TDS ON SUCH INTEREST INCOME WAS CONCERNED , THE SAME WAS NOT ALLOWED TO THE ASSESSEE FOLLOWING THE PROVISIONS OF SECTION 199 OF THE ACT AND THE RELEVANT I.T RULES. THE ASSESSING OFFICER ALSO MENTIONED THAT A SIMILAR ISSUE WAS INVOLVED IN THE A.Y 2010-11 WHERE IN CREDIT OF TDS WAS NOT ALLOWED TO THE ASSESSEE. 2.1 BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTE R IN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) AFTER NOTING THE FA CTS OF THE CASE REFERRED TO THE ORDER PASSED BY HIS PREDECESSOR FOR A.Y 2010 -11 AND CONFIRMED THE AOS ORDER IN NOT ALLOWING CREDIT OF TDS TO THE ASSESSEE. NOW, THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE SAID OR DER PASSED BY THE LD. CIT(A). 2.2 AT THE OUTSET, THE LD. AR DRAWN OUR ATTENTION T O THE DECISION PASSED BY THE COORDINATE BENCH IN ITA NO. 247 & 248 /JP/2014 DATED ITA NO. 391 & 392/JP/2016 RAJASTHAN AVAS VIKAS & INFRASTRUCTURE LTD VS ACIT 5 18.3.2016 IN ASSESSEES OWN CASE FOR A.Y 2009-10 AN D 2010-11 AND SUBMITTED THAT ISSUE WAS DECIDED IN FAVOUR OF THE A SSESSEE BY THE SAID DECISION PASSED BY THE COORDINATE BENCH AND HENCE, THE SAME SHOULD BE FOLLOWED IN RESPECT OF IMPUNGED MATTERS BEFORE US. 2.3 THE ISSUE UNDER CONSIDERATION BEFORE THE COORDI NATE BENCH FOR FOR A.Y 2009-10 AND 2010-11 ARE AS UNDER:- ITA NO. 247/JP/2014 (ASSESSMENT YEAR 2009-10): IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEA RNED COMMISSIONER (APPEALS) HAS ERRED IN NOT ALLOWING CR EDIT OF TDS OF RS. 4502798, DEDUCTED BY OUR BANK ON INTEREST AND DEPOS ITED TO THE INCOME TAX DEPARTMENT AND HOLDING THAT THE INTEREST BELONG S TO POLICE DEPARTMENT AND THE PROVISIONS OF SECTION 199 ARE AP PLICABLE. ITA NO. 248/JP/2014 (ASSESSMENT YEAR 2010-11) IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LE ARNED COMMISSIONER (APPEALS) HAS ERRED IN NOT ALLOWING CR EDIT OF TDS OF RS. 1741463, DEDUCTED BY OUR BANK ON INTEREST AND DEPOS ITED TO THE INCOME TAX DEPARTMENT AND HOLDING THAT THE INTEREST BELONG S TO POLCE DEPARTMENT AND THE PROVISIONS OF SECTION 199 ARE AP PLICABLE. THE FACTS UNDER CONSIDERATION BEFORE THE COORDINATE BENCH WERE THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESS EE DEPOSITED FUNDS RECEIVED FROM HUDCO IN FDRS WITH THE BANK AS THE SA ME WERE LYING IDLE AND GOT THE INTEREST OF RS. 2,18,15,365 AND ON THE SAID INTEREST THE BANK OF RAJASTHAN HAD DEDUCTED TDS OF RS. 45,02,798. THE ASSESSEE DID NOT ITA NO. 391 & 392/JP/2016 RAJASTHAN AVAS VIKAS & INFRASTRUCTURE LTD VS ACIT 6 OFFER THE INTEREST INCOME OF RS. 2,18,15,365 FOR TH E PURPOSE OF TAX IN THE RETURN OF INCOME AS THE ASSESSEE WAS MERELY ACTING AS A NODAL AGENCY FOR THE STATE OF RAJASTHAN AND HAS DEPOSITED THE AM OUNT WITH THE BANK FOR AND ON BEHALF OF STATE OF RAJASTHAN. IT WAS AL SO THE CASE OF THE ASSESSEE THAT THE INTEREST INCOME ACCRUED ON THE FD RS WAS NOT TAXABLE. THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE IS ENT ITLED TO THE REFUND OF ENTIRE AMOUNT OF RS. 45,02,798 IN THE ASSESSMENT YE AR 2009-10. IN THE CONTEXT OF ABOVE FACTS, THE COORDINATE BENCH RELIED ON THE DECISION OF HONBLE DELHI HIGH COURT IN CASE OF CIT VS. RELCOM (2015) 234 TAXMAN 693 (DELHI) AND ITS RELEVANT FINDINGS AR E AS UNDER:- IN THE PRESENT CASE THE AMOUNT WAS DEPOSITED AS FD RS BY THE ASSESSEE ON BEHALF OF STATE OF RAJASTHAN WITH THE B ANK OF RAJASTHAN AND ON THE FDRS DEPOSIT THE INTEREST HAS BEEN ACCRUED. THE TDS WAS DEDUCTED BY THE BANK ON THE INTEREST ACCRUED ON THE FDRS. IN OUR VIEW, THE REVENUE IS TAKING THE HYPER TECHNICAL PLEA OF N OT RETURNING THE TDS TO THE ASSESSEE ON THE PRETEXT THAT THE AMOUNT HAS BEEN DEPOSITED WITH THE BANK ON BEHALF OF STATE OF RAJASTHAN. SINCE TH E STATE OF RAJASTHAN IS NOT A TAXABLE ENTITY, THEREFORE, REFUND OF TDS CANN OT BE GIVEN TO THE STATE OF RAJASTHAN. IT IS NOT DISPUTED THAT THE AS SESSEE AFTER REALIZING THE INTEREST INCOME FROM THE BANK HAS GIVEN BACK TH E AMOUNT TO THE STATE OF RAJASTHAN. SIMILARLY IT IS ALSO UNDISPUTE D THAT THE REFUND OF TDS HAS NOT BEEN CLAIMED BY THE STATE OF RAJASTHAN AND IS ONLY CLAIMED BY THE ASSESSEE BEING THE NODAL AGENCY OF THE STATE OF RAJASTHAN FOR THIS PROJECT. IN OUR VIEW, NO PREJUDICE WILL BE CAUSED TO ANY PERSON IF THE TDS IS REFUNDED TO THE ASSESSEE BEING THE NODAL AGE NCY WITH THE UNDERTAKING TO RETURN THE AMOUNT TO THE STATE OF RA JASTHAN. IN VIEW OF THEREOF AND ALSO IN VIEW OF THE JUDGMENT REFERRED H EREINABOVE, THE TDS DEDUCTED BY THE INCOME TAX DEPARTMENT IS DIRECTED T O BE PAID TO THE ASSESSEE AND WE ACCORDINGLY HOLD THE SAME. IN THIS VIEW OF THE MATTER, THE APPEAL OF THE ASSESSEE IS ALLOWED ITA NO. 391 & 392/JP/2016 RAJASTHAN AVAS VIKAS & INFRASTRUCTURE LTD VS ACIT 7 2.4 THE FACTS OF THE INSTANT CASE ARE PARI MATERIA TO THE FACTS OF THE CASE BEFORE THE COORDINATE BENCH IN RESPECT OF ASSE SSEES OWN CASE FOR A.YS 2009-10 AND 2010-11. THE REVENUE HAS NOT BROU GHT TO OUR NOTICE ANY CONTRARY AUTHORITY ON THE SAID ISSUE. HENCE, W E DO NOT SEE A REASON TO DEVIATE FROM THE VIEW TAKEN BY THE COORDINATE BE NCH IN ASSESSEES OWN CASE. 2.5 UNDISPUTEDLY, THE INTEREST INCOME HAS NOT BEEN BROUGHT TO TAX BY THE REVENUE ACCEPTING THE ASSESSEES CONTENTION THA T THE RECEIPT OF FUNDS AND INTEREST THEREON IS IN THE FUDICIARY CAPA CITY ON BEHALF OF THE STATE OF RAJASTHAN. THE STATE OF RAJASTHAN BEING NO T A TAXABLE ENTITY, THERE SHOULD NOT BE ANY TDS AT FIRST PLACE. FOR REA SONS BEST KNOWN TO THE ASSESSEE AND THE BANK, THE TDS HAS BEEN DEDUCTED. GIVEN THAT INTEREST INCOME IS NOT TAXABLE EITHER IN THE HANDS OF THE AS SESSEE OR THE STATE OF RAJASTHAN, THE TDS HAS TO BE REFUNDED. SINCE THE A SSESSEE IS ACTING AS THE NODAL AGENCY AND ALL FUNDS HAVE BEEN ROUTED THR OUGH IT, THE REFUND OF TDS HAS TO BE ROUTED THROUGH IT TO THE STATE OF RAJASTHAN. ACCORDINGLY, WE DIRECT THE REVENUE TO REFUND THE TD S OF RS. 38440/- TO THE ASSESSEE WITH THE UNDERTAKING TO RETURN THE SAI D AMOUNT TO THE STATE OF RAJASTHAN. ITA NO. 392/JP/2016 ITA NO. 391 & 392/JP/2016 RAJASTHAN AVAS VIKAS & INFRASTRUCTURE LTD VS ACIT 8 2.6 IN ITA NO. 392/JP/2016, THE FACTS ARE PARI-MATE RIA TO THE FACTS OF THE CASE IN ABOVE APPEAL IN ITA NO. 391/JP/2016. A CCORDINGLY, OUR FINDINGS AND DIRECTIONS CONTAINED THEREIN SHALL APP LY MUTATIS MUTANDIS TO THIS APPEAL AS WELL. IN THE RESULT, BOTH THE APPEALS OF ASSESSEE ARE ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12/05/2017. SD/- SD/- ( DIVA SINGH ) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- 12/05 /2017 *GANESH VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- RAJASTHAN AVAS VIKAS & INFRASTRUCTURE LTD., 2. IZR;FKHZ@ THE RESPONDENT- ACIT,CIRCLE-6, JAIPUR. 3. VK;DJ VK;QDR@ CIT TDS, JAIPUR 4. VK;DJ VK;QDRVIHY@ THE CIT(A)-III, JAIPUR 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.391 & 392 /JP/2016) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR