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TMI Blog2010 (3) TMI 885X X X X Extracts X X X X X X X X Extracts X X X X ..... the action of the Assessing Officer of passing order under section 201 read with section 194A of the Act recovering TDS of Rs. 3,24,890 and interest of Rs. 1,21,834, treating your appellant as 'assessee in default'. Your appellant submits that provisions of section 1294A are not applicable in the case of your appellant. Your appellant has already deducted and paid the TDS on yearly basis in accordance with provisions of law. Therefore, the order passed by the Assessing Officer be held null and void ab initio and be cancelled. 3. The learned Assessing Officer and CIT(A) has erred in treating the proforma entry of 'provision of interest accrued' on 30-9-2001 made only for ascertaining bank's profit and loss for the half yearly ended on 30-9-2001 as being covered by proviso to section 194A of the Income-tax Act. 4. The learned Assessing Officer and CIT(A) has failed to appreciate that the entry passed by the bank was not for any 'interest due and payable' on any deposit and that entry was reversed on very next day, i.e., on 1-10-2001 nullifying the proforma entry made on 30-9-2001. 5. The learned Assessing Officer and CIT(A) has failed to follow the opinion of CBDT given to Indian ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted by the Finance Act, 1987 with effect from 1-6-1987. Prior to the insertion of the Explanation, deduction of tax at source was to be made at the time of payment or credit to the account of the payee. With a view to prevent postponement of liability relating to such deduction of tax at source, the amendments were made to these section. As section 194A stands today tax will be deducted at source on accrual of interest at the end of the accounting year, or at the time of payment, or at the time of credit to the account by whatever name called in the books of account of the payer, whichever is earlier. 7.3 By not deducting TDS at the time of making a provision, the appellant has violated the Explanation to section 194A of the Income-tax Act. I therefore, hold that the order passed by the Assessing Officer treating the appellant as an assessee in default, under section 201 read with section 194A of the Income-tax Act is correct and deserves to be sustained. The order is therefore, confirmed. However, the Assessing Officer is directed to give credit for TDS deducted at the year end after verification of accounts." 4. After hearing the rival contentions and going through the facts o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5538035 Fax : (020) 25533924 Email : bomcoacc@mahabank co.in AX1/AIFM/TDS/611/2006 August 4, 2006 The Branch Manager Bank of Maharashtra, Anand Branch Station Road ANAND (Gujarat) Dear Sir, Re : TDS on Half Yearly interest Provision on CDR With reference to your letter No. AG19/INCOME TAX/TDS/2006-07, dated 3-8-2006, we would like to inform you as under :- 1.As per the provisions of section 194A of the Income-tax Act, 1961, the tax is deductible at source at the time of credit or payment of interest over Rs. 5,000 on the Deposits. 2.As per the contract, the interest on CDR is payable to the Depositor only on the maturity date of CDR. Hence, as per the Rules, the TDS on interest on CDR is leviable only on the maturity of CDR. The interest provision on Cumulative Deposit is made at the end of each Quarter only for the purpose of arriving at the correct position of the profit of the Bank and it has nothing to do with payment of interest to the Depositor & the entry is reversed on the next day. 3.CBDT is, however, of the view that if Tax is deducted at source at the time of maturity, on payment basis only, it will amount to f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h interest amount exceeds specified limit. Further, Explanation to section 194A states that "for the purpose 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 income, 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. Representations have been received from Indian Banks Association (IBA) seeking clarification regarding deduction of tax at source from payment of interest on time deposits by banks using Core-Branch Banking Solutions (CBS) software. In case of banks using CBS software interest payable on time deposits is calculated generally on daily basis or monthly basis and is swept & parked accordingly in the provisioning account for the purposes of macro-monitoring only. However, constructive credit is given to the depositor's/payee's account either at the end of the financial year or at periodic intervals as per practice of the bank or as per the depositor's/payee's requirement or on maturity or o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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