TMI Blog2014 (11) TMI 412X X X X Extracts X X X X X X X X Extracts X X X X ..... redited to that account nor the interest accruing - the Registrar General cannot be considered as a “payee” for the purposes of Section 194A of the Act - The credit by the petitioner bank in the name of the Registrar General would, thus, not attract the provisions of Section 194A of the Act - Section 190(1) of the Act clarifies that deduction of tax can be made prior to the assessment year of regular assessment, nonetheless the same would not imply that deduction of tax is mandatory even where it is known that the payee is not the assessee and there is no other assessee. Deducting tax in the name of the litigant who deposits the funds with this Court would also create another anomaly because the amount deducted would necessarily lie to his credit with the income tax authorities - the tax deducted at source would reflect as a tax paid by that litigant/depositor – He would be entitled to claim credit in his return of income – thus, the notice is to be set aside – Decided in favour of assessee. - W.P.(C) 3563/2012 & CM No.7517/2012, W.P.(C) 2714/2014 & CM 5633-34/2014 - - - Dated:- 11-11-2014 - S. Ravindra Bhat And Vibhu Bakhru,JJ. For the Petitioner : Ms Prem Lata Bansa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er bank to furnish details of the interest accrued with respect to the FDR No.163275, TDS deducted on the interest accrued and renewal of FD with respect to the company M/s Oriental Building Furnishing Company Limited. The petitioner bank complied with the said direction and by its letter dated 15.03.2011 intimated the details and status of the above stated FDR. 3.2 Subsequently, the ACIT issued a show cause notice dated 21.03.2011 to the petitioner bank for not deducting TDS on the interest accrued and to show cause why the petitioner bank be not treated as an assessee in default under Section 201(1)/201(1A) of the Act. The petitioner, by its reply dated 22.03.2011, submitted that the said FD was in the name of Register General of this Court as a custodian and no TDS was deducted on the accrued interest because the actual beneficiary was not known as the matter was sub judice. It was also submitted that the TDS would be deducted on when payment is made to the beneficiary as may be decided by the Court. 3.3 Thereafter, the ACIT passed an order dated 29.03.2011 considering the petitioner bank as an assessee in default and demanded ₹ 40,33,330 and ₹ 14,19,804 unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l pass the information furnished therein to the bank concerned for TDS properly in the name of the depositor(s) in accordance with the provisions of the Act. 5. Thereafter, the Commissioner of Income Tax, Delhi (hereafter CIT ) initiated proceeding under Section 263 of the Act as it was considered that the said order dated 29.03.2011 was prejudicial to the interest of revenue. By an order dated 27.03.2012, the CIT set aside the order dated 29.03.2011 as it was limited to the tax assessed with respect to the FD made by M/s Oriental Building Furnishing Company Limited. The CIT held that there were other similar deposits, which would also require to be considered for assessing the liability of the petitioner bank. Accordingly, the Assessing Officer to pass an order after considering the matter afresh. 6. Pursuant to the CIT s order of 27.03.2011, the ACIT issued a separate notice dated 25.04.2012 under Section 201(1)/201(1A) of the Act directing the petitioner bank to submit the details of all deposits made in the name of Registrar General of this Court during the Financial Years 2005-06 to 2010-11. Aggrieved by the same, the petitioner bank filed the present petition (W.P.(C) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t any rate or rates, income-tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions (including provisions for the levy of additional income-tax) of, this Act in respect of the total income of the previous year of every person : Provided that where by virtue of any provision of this Act income-tax is to be charged in respect of the income of a period other than the previous year, income-tax shall be charged accordingly. (2) In respect of income chargeable under sub-section (1), income-tax shall be deducted at the source or paid in advance, where it is so deductible or payable under any provision of this Act. 12. It is apparent from the plain language of Section 4(1) of the Act that income tax is charged in respect of the total income of the previous year of every person. Whilst total income is the basis of the charge of income tax and also the basis of the impost, the liability imposed is on the person whose total income is subjected to tax. Thus, the levy may be in respect to total income of a person but the tax is levied on the person so earning the income. Plainly, for any charge to be sustained under the Act, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he levy or the charge of tax. Even though the obligation to pay the tax with respect to certain payments, is imposed on persons responsible for making them, Section 199 of the Act makes it clear that the deduction made under Chapter XVII of the Act and paid to the Central Government is to be treated as payment on behalf of the assessee. Section 199 of the Act is quoted below for ready reference:- 199. Credit for tax deducted. (1) Any deduction made in accordance with the foregoing provisions of this Chapter and paid to the Central Government shall be treated as a payment of tax on behalf of the person from whose income the deduction was made, or of the owner of the security, or of the depositor or of the owner of property or of the unit-holder, or of the shareholder, as the case may be. (2) Any sum referred to in sub-section (1A) of section 192 and paid to the Central Government shall be treated as the tax paid on behalf of the person in respect of whose income such payment of tax has been made. (3) The Board may, for the purposes of giving credit in respect of tax deducted or tax paid in terms of the provisions of this Chapter, make such rules as may be necessary, inclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lier, deduct income-tax thereon at the rates in force: Provided that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such interest is credited or paid, shall be liable to deduct income-tax under this section. Explanation. For the purposes 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. 18. In terms of Section 194A of the Act, the petitioner would, in the normal course, be obliged to deduct tax at source in respect of any credit or payment of interest on deposits made with it. However, in the present case, the question that needs to be addressed is whether Section 194A of the Act contempla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imply that deduction of tax is mandatory even where it is known that the payee is not the assessee and there is no other assessee. 21. It is relevant to note that there is no assessee to whom interest income from the deposits in question can be ascribed; no person can file a return claiming the interest payable by the petitioner as income. The necessary implication of this situation is recovery of tax without the corresponding income being assessed in the hands of any asessee. The ultimate recipient of the funds from the FD would also not be able to avail of the credit of TDS. It is apparent that in absence of an ascertainable assessee the machinery of recovering tax by deduction of tax at source breaks down because it does not aid the charge of tax under Section 4 of the Act but takes a form of a separate levy, independent of other provisions of the Act. This is, clearly, impermissible. 22. The impugned circular proceeds on an assumption that the litigant depositing the money is the account holder with the petitioner bank and/or is the recipient of the income represented by the interest accruing thereon. This assumption is fundamentally erroneous as the litigant who is asked ..... X X X X Extracts X X X X X X X X Extracts X X X X
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