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2012 (4) TMI 210 - AT - Income TaxNon deduction of TDS on the interest paid by the assessee bank to Rajasthan Rural Road Development Agency (RRRDA)- proceedings under section 201(1) and 201(1A) - AO levied interest and penalty - CIT (A) allowed the appeal on merit and was not liable to deduct tax - further appeal Department is challenging that assessee was not liable to deduct tax whereas assessee has challenged the legal ground raised that Additional CIT was not empowered to direct TDS ITO to pass order under section 201(1) and 201(1A) as rejected by ld. CIT (A) - assessee contented that the interest accrued on the funds was not liable to be taxed in the hands of the society as the interest was accrued on account of Ministry of Rural Development and a Notification under section 194A( 3)(iii)(f) was also issued by the Central Government by which various Agencies/Societies were exempted from deducting tax - Held that:- the interest income under consideration is belonging to the Ministry of Road Development / Central Government only, as clearly stipulated in the accounts manual making all arguments of the AO irrelevant, unwarranted and insignificant - provision of TDS sections are not applicable on project funds released by the central government and ownership of interest income belongs to Ministry of Road Development/ Central Government and therefore TDS is not required to be deducted u/s 196 - u/s 194A(3)(iii)(f) any income credited or paid to an institution, association or body which the Central Government notify in the Official Gazette is not liable of deduction of tax at source - rejected the grounds of appeal of the department.
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