DEPUTY DIRECTOR OF INCOME TAX and ANOTHER V. STATE BANK OF INDIA

SPA/80/2013

AI Insights

The case involves the State Bank of India (SBI) contesting a tax demand related to the non-deduction and non-deposit of tax at source concerning interest credited to a Site Restoration Fund account of ONGC. The fund, under Section 33ABA of the Income Tax Act, 1961, was maintained by SBI, which argued that the interest credited should not be treated as income and thus not subject to tax deduction at source. The Assessing Authority's demand for tax deduction and deposit was challenged by SBI, leading to a writ petition for a stay on the demand. The High Court, while not addressing the legality of the demand directly, provided temporary relief by setting aside the demand and allowing SBI to seek a stay through the appropriate appellate channels.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 727906 (HC-UTTARAKHAND)
• Appeal Type: Others
• Pronouncement Date: 01-04-2013
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: BISHWAJIT BHATTACHARYYA; P R MULLICK
• Assessee Lawyers: HARI MOHAN BHATIA
• Keywords: Assessment Order; Income Tax; Stay of demand; Tax deduction at source; Site Restoration Fund; Interest Credit
• Section: 194A; 156; 220; 33ABA

Judgement Text

"IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL Special Appeal No. 80 Of 2013 The Deputy Director of Income Tax (TDS) and another. ……Appellants. Versus The State Bank of India …….Respondent. Mr. Hari Mohan Bhatia, Advocate for the appellants. Mr. Bishwajit Bhattacharyya, Senior Advocate assisted by Mr. P.R. Mullick, Advocate for the respondent. Coram : Hon’ble Barin Ghosh, C. J. Hon’ble Servesh Kumar Gupta, J. Barin Ghosh, C.J. (Oral) According to respondent State Bank of India, ONGC deposited with it certain amount of money as and by way of Site Restoration Fund covered by Section 33ABA of the Income Tax Act, 1961. No doubt, State Bank of India credited interest accrued on such deposit in the selfsame Account, where the deposit was kept and maintained. According to State Bank of India, the interest, thus credited, is deposit as provided in the third proviso to Sub-Section (1) of Section 33ABA. It is the contention of State Bank of India that any withdrawal from the said Account will be deemed to be income, under Sub-Section 5 of Section 33ABA, of ONGC. It is the contention of State Bank of India that, inasmuch as, interest, thus credited in the Account, is to be treated as deposit, the same cannot be treated as income by way of interest as dealt with in Section 194A of the Income Tax Act. It is the further contention of State Bank of India that since the deposit, thus credited in the Account, cannot be treated as income by way of interest, there is no obligation on the part of State Bank of India to deduct tax at source and, thereupon, to deposit the same with the Revenue. It is the contention of State Bank of India that upon totally ignoring the contentions raised by State Bank of India, the Assessing Authority has inappropriately assessed 2 tax liability of State Bank of India for not deducting tax at source and for its alleged failure to deposit the same with the Revenue. It is its contention that an inappropriate demand under Section 156 of the Income Tax Act has been raised in respect of alleged failure to deduct tax at source and to deposit the same with Revenue and though under Sub-Section (1) of Section 220 of the Income Tax Act, the time to meet the demand is 30 days, by taking recourse to proviso to Sub-Section (1) of Section 220, the said time limit has been reduced to 7 days, when, in fact, there is no basis for the demand. There is no dispute that State Bank of India had 30 days’ time to prefer Appeal against the order of assessment and that time was expiring on 6th April, 2013. Before that, abridging 30 days’ time to 7 days, steps were being taken to settle the demand, which according to State Bank of India is an illegal demand, and that forced State Bank of India to approach the Writ Court, where while it undertook to prefer an Appeal against the assessment order or Appeals against the assessment orders, it wanted breathing time of at least for 30 days so as to take appropriate steps for obtaining a stay in the Appeal. 2. While the writ petition was dealt with, instead of going into the question, whether a prima facie case had been made out by State Bank of India as regards its contention that the demand was illegal and whether, in the facts and circumstances of the case, it was just and appropriate to abridge the time from 30 days to 7 days, a learned Single Judge felt that the appellants should not have taken steps to realize the amount under demand until expiry of the time statutorily granted to State Bank of India to prefer appeal. We think that the order under Appeal is interferable on that score. However, having regard to the fact that State Bank of India was aware of the fact that its challenge to the legality of the demand can only be assailed by preferring an appropriate Appeal and it approached the writ Court only for a limited protection until such time the Appellate Authority considers its Appeal and the connected application for stay of the demand and having regard to the fact that an Appeal has been 3 preferred by State Bank of India against the assessment orders and, along with that, it has also applied for stay of the demand pursuant to the assessment, we dispose of this Appeal and, thereby, while set aside the order under Appeal, permit State Bank of India to press its application for stay before the Appellate Forum, where it is pending with a request to the appellants not to enforce the demand before that application is heard and decided, one way or the other. (Servesh Kumar Gupta, J.) (Barin Ghosh, C.J.) 01.04.2013 01.04.2013 Rathour "