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2017 (5) TMI 1817 - AT - Income TaxCredit of TDS - TDS deducted by Bank on Interest income held by the assessee in fiduciary capacity - assessee was appointed as a nodal agency by the Government of Rajasthan for Police Housing Scheme and funds were received by the assessee from HUDCO on behalf of State Government for disbursement to various agencies for construction of houses for the Police department - HELD THAT:- Undisputedly, the interest income has not been brought to tax by the Revenue accepting the assessee’s contention that the receipt of funds and interest thereon is in the fudiciary capacity on behalf of the State of Rajasthan. The State of Rajasthan being not a taxable entity, there should not be any TDS at first place. For reasons 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 assessee or the state of Rajasthan, the TDS has to be refunded. Since the assessee is acting as the nodal agency and all funds have been routed through it, the refund of TDS has to be routed through it to the State of Rajasthan. Accordingly, we direct the Revenue to refund the TDS to the assessee with the undertaking to return the said amount to the State of Rajasthan.
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