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Canara Bank and Others Versus Income Tax Officer (TDS) , LTU, Bangalore

2015 (9) TMI 181 - ITAT BANGALORE

Non deduction of tds - assesses paid interest to KIADB - assessee had a belief that it was not liable to deduct tax since KIADB was exempt from tax, being registered under Section 12A - Assesee in default - Held that:- In the instant case, the assessee bank had taken term deposit from KIADB. The KIADB was entitled to interest on these term deposits. These interest incomes which have received by KIADB are not liable to be taxed in view of the Registration under Section 12AA enjoyed by KIADB. When .....

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he CIT (Appeals) did not have the benefit to peruse the same Restore the issue for de novo consideration to the file of the Assessing Officer. - Decided in favour of assessee for statistical purposes. - ITA No. 1476/Bang/2014,1477/Bang/2014, 1478/Bang/2014, 1479/Bang/2014, 1480/Bang/2014, 1481/Bang/2014 - Dated:- 12-8-2015 - SHRI GEORGE GEORGE K AND SHRI JASON P. BOAZ, JJ. For The Appellant : Shri Balaram R Rao, Advocate For The Respondent : Dr.P.K. Srihari, Addl. CIT (D.R.) ORDER Per Bench : Th .....

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e facts of the case, briefly, are as under :- 2.1 The aforesaid assesses, 4 branches of Canara Bank (supra) received deposits from Karnataka Industrial And Development Board ( KIADB ) and paid interest thereon. In the periods under consideration, the assesses paid interest to KIADB without deducting tax at source (TDS) under Section 194A of the Income Tax Act, 1961 (in short 'the Act') in the belief that it was not liable to deduct tax since KIADB was exempt from tax, being registered un .....

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that they had not deducted tax on the interest on its deposits at their branches (supra) as per the request of KIADB, on its assurance that it would submit to them IT Exemption Certificate. KIADB was unable to furnish to the assessees the required IT Exemption Certificates due to the cancellation of its Registration under Section 12A of the Act w.e.f. Assessment Year 2009-10. The assessees furnished Forms 26A duly certified by Chartered Accountants on the basis of which the Assessing Officer acc .....

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cle Branch 2012-13 24,789 4. Nelamangala Branch 2012-13 95,140 5. Trinity Circle Branch 2013-14 58,980 6. Nelamangala Branch 2013-14 22,076 2.2 Aggrieved by the aforesaid orders raising demands by charging interest under Section 201(1A) of the Act for Assessment Year 2012-13 and 2013-14, the assessees preferred appeals before the CIT (Appeals), LTU, Bangalore. The learned CIT (Appeals) vide separate orders in respect of the 6 Branches of Canara Bank listed at Para 2.1 (supra) dismissed the asses .....

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he action of the Assessing Officer, in charging the assessees interest under Section 201(1A) of the Act for failure on their part to deduct tax under Section 196A of the Act in respect of the interest paid to KIADB on deposits kept by it with these 6 branches of Canara Bank, and consequently dismissed the assessees appeals. 3.1 Aggrieved by the order of the CIT (Appeals), LTU, Bangalore for Assessment Year 2012- 13 and 2013-14, the assessees are in appeal before the Tribunal, raising the followi .....

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hat the Board is a body corporate covered by section 194A(3)(iii)(f) of the Income Tax Act, 1961 and hence, there is no need to deduct tax at source. 4. The learned CIT (Appeals), LTU failed to appreciate the facts that the KIADB is a statutory body, constituted under Section 5 of KIAD Act, 1966, the Board is registered under the provisions of Section 12A of the Income Tax Act, 1961 and therefore their income is exempt from income tax and hence they have returned a NIL income. As the Board is a .....

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pellate Tribunal. Hence, a demand from the assessee cannot be lawfully made unless there is a failure to act honestly and fairly. 6. The learned CIT (Appeals), LTU erred in confirming levy of interest under Section 201(1A) of ₹ 83,862.00 being the interest on TDS. The appellant denies its liability to interest under section 201(1A) and prays that the levy of such interest be quashed. 7. The appellant s craves leave to add, alter, amend, delete, substitute any or all of the grounds urged du .....

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Registration it enjoyed under Section 12A of the Act vide order dt.20.4.1988 and while the registration was cancelled by the Department under Section 12AA(3) of the Act, the co-ordinate bench of the Tribunal set aside the orders of Revenue and restored the registration under Section 12AA in order in ITA No.1095/Bang/2011 dt.31.1.2013. It is submitted that on further appeal by Revenue, the Hon'ble Karnataka High Court in ITA No.261/2013 dt.7.11.2014 dismissed Revenue s appeal. It is contended .....

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allowed. 3.3 Per contra, the learned Departmental Representative strongly relied on the impugned orders of the learned CIT (Appeals). 3.4.1 We have heard the rival submissions and perused and carefully considered the material available on record. In the instant case, the assessee bank had taken term deposit from KIADB. The KIADB was entitled to interest on these term deposits. These interest incomes which have received by KIADB are not liable to be taxed in view of the Registration under Sectio .....

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he assessee) dismissed the Revenue s appeal. Since the Hon'ble High Court has confirmed the Tribunal s order, the Registration which is granted to KIADB, the recipient of the interest income was still in vogue. When the interest income is not liable for taxation, there is no obligation on the part of the assessee bank to make deduction of tax at source. 3.4.2 The Hon'ble jurisdictional High Court in the case of CIT Vs. ITC Hotels Ltd. in ITA No.477 & 478/2009 Dt.15.6.2015 considered .....

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g into consideration the principles enunciated by the Apex Court in Transmission Corporation of AP Ltd. Vs. CIT - 239 ITR 587, where it clearly laid down that the taxability or not of the income of M/s. Sheraton International, USA, was liable to tax in India or not had to be examined by the Assessing Officer under Section 195 of the Act and not in the hands of the payer / deductor of TDS ? The Hon'ble High Court while considering the above question of law, has rendered the following finding .....

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