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2015 (5) TMI 519 - PATNA HIGH COURT

2015 (5) TMI 519 - PATNA HIGH COURT - TMI - Exemption certificate for non deduction of TDS under Section 197 rejected - as per assessee interest in question earned on the funds provided by the State Government is not at all the income of the petitioner and not only it has never been taxed but has continuously been given the benefit of exemption certificate under Section 197 - Held that:- This Court finds sufficient force in the submission of learned counsel for the petitioner. The impugned order .....

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unlawful by the Income Tax Authorities and further relying upon the decisions of the Delhi High Court and Karnataka High Court, reported in COMMISSIONER OF INCOME-TAX Versus DELHI STATE INDUSTRIAL DEVELOPMENT [2007 (4) TMI 150 - HIGH COURT, DELHI] and Commissioner of Income-Tax And Another Versus Karnataka Urban Infrastructure Development And Finance Corporation [2006 (2) TMI 114 - KARNATAKA High Court]. Thus, if at all, the respondent-authorities were of the view that they could take a dif .....

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not open to the Department to come to a different conclusion in view of the overriding effect of the provisions of Article 289 of the Constitution of India.

For the aforesaid reasons, the writ application is allowed. The impugned letter communicating the decision of the CIT (TDS) is quashed. The respondents shall issue exemption certificate to the petitioner, accordingly. - Decided in favour of assessee. - Civil Writ Jurisdiction Case No. 4737 of 2015 - Dated:- 30-3-2015 - Ramesh Kum .....

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respondent nos. 4,5 and 6. The writ application has been filed seeking quashing of the communication dated 11.3.2015 issued by respondent no.1, the Assistant Commissioner of Income Tax (TDS), Circle, Patna in which it has been stated that the Commissioner of Income Tax, TDS Circle, Patna has rejected the proposal for issuance of exemption certificate under Section 197 of the Income Tax Act for the financial year 2014-15 and for consequential reliefs. The short facts of the case are that the pet .....

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he Act as also on the direction issued from time to time by the Central Government and State Government. It is the specific stand of the petitioner that after funds are received for the specified project, the same are utilized for the said project only in accordance with the scheme formulated for implementation of the specified project and since the work is carried out in phases, the unutilized portion of the funds are invested in fixed deposits and the interest accruing thereupon also form part .....

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ized funds are treated to be income, it will be the income of the State Government and the State income is not taxable in view of the provisions of Article 289 of the Constitution of India. It is the further case of the petitioner that since the financial year 2008-09 onwards the petitioner has been applying for and getting exemption from deductions under the provisions of Section 197 of the Income Tax Act. It is also the stand of the petitioner that in none of the assessments of any assessment .....

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submits that the aforesaid action of the respondents is wholly unjust and whimsical and without any justification as the interest in question is not at all the income of the petitioner and not only it has never been taxed but has continuously been given the benefit of exemption certificate under Section 197 of the Income Tax Act. It is further submitted by learned counsel that earlier also in the year 2009 the aforesaid issue had arisen and the petitioner was compelled to approach this Court by .....

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ng to the State of Bihar cannot be subjected to income tax or TDS by the Income Tax Authorities. However, since the assessment orders have not been passed in respect of petitioner for the relevant years, hence this Court would not like to give a definite and positive finding over the issues involved, at this stage. Hence, the orders contained in Annexures 3 and 4 are quashed and the matter is remitted back to the concerned Authority of the Income Tax Department, i.e., Assistant Commissioner of I .....

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; It is further submitted that pursuant to the same the Assessing authority had rejected the claim of the petitioner under Section 197, whereafter matter went before the Commissioner under Section 264 of the Income Tax Act and by his order dated 20.4.2010 the Commissioner had decided the matter in favour of the petitioner with the observations in the following terms: "Similar assertion was made in the Writ Petition and the Hon ble Patna High Court in its order dated 20.7.2009 was prima faci .....

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r specific project. The entire allotted funds along with interest earned on investment of such fund in fixed deposit are to be spent on the project for which it has been granted. The surplus, if any, of a project is required to be return back to the Government of Bihar and deficit, if any, is to be recovered from Government of Bihar." Further, it has been solemnly affirmed in the said affidavit "that the interest earned from fixed deposits (details given in pages 33 of paper book) is t .....

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dgments of Hon ble Delhi and Kernataka High Courts." After the aforesaid order dated 20.4.2010, the petitioner has been continuously getting the benefit of exemption under Section 197 of the Income Tax Act so far as the said interest is concerned. It is also submitted by learned counsel for the petitioner that the order dated 11.3.2015 suffers from complete non-application of mind as no reasons have been assigned for rejecting the proposal for issuance of certificate under Section 197 parti .....

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respondent-Income Tax Department including filing of ITR in ITR-7, failure to clarify whether Rule 28AA or 28AB applies to its case, defaults on account of TDS obtained online, etc. It is also asserted that no certificate had been issued for the financial year 2013-14. In reply to the aforesaid, learned counsel for the petitioner submits that no such ground has been stated in the order rejecting the application of the petitioner and the respondents cannot be permitted to take such grounds in the .....

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d. It is also urged by learned counsel for the petitioner that all such issues have no relevance so far as the term "interest as income" is concerned as admittedly the said interest income accrues upon the funds provided by the Central Government or State Government for specific purposes which funds have to be utilized in accordance with the statutory provisions and directions of the Central Government or State Government or even the interest thereon has to be similarly utilized and th .....

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