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2015 (12) TMI 1689 - ITAT AMRITSAR

2015 (12) TMI 1689 - ITAT AMRITSAR - TMI - Addition u/s 40(a)(ia) - TDS u/s 194J - no tax had been deducted on processing charges paid to SBI for managing the consortium account of the FCI - Held that:- The processing charges were collected from the FCI by the SBI for processing of the loan involved. It never went to the assessee’s account. The assessee got net of the processing charges i.e., interest exclusively, there being no outflow of expenses. There was no occasion for the assessee to dedu .....

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tax was required to be deducted on the processing charges paid to the SBI - Decided in favour of assessee. - TDS u/s 194J - non deduction of tds on clearing house charges/MICR charges paid - human intervention - Held that:- As per this system, the machine recognizes the numeric data printed with magnetic charged ink. This is done with the help of ultraviolet rays which scan the genuineness of cheques. The department has not been able to dispute that MICR clearance of cheques can be possible .....

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fee received for technical services, as wrongly held by the AO. - Decided in favour of assessee. - Bari Brahmana Branch of the assessee as eligible for deduction u/s 36(1)(viia) - Held that:- The provisions of section 36(1)(viia) prescribe that in respect of any provision for bad and doubtful debts made by a Scheduled Bank, an amount not exceeding certain percentage, as specified by the Finance Acts for different assessment years, of aggregate average advances made by the Rural Branches of .....

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be resorted to. In the present case, the Bari Brahamana Branch of the Bank is located at village Kartholi, where the population as per the last census was of 314. - Decided in favour of assessee. - 100% depreciation on wooden partitions - Held that:-It is seen that depreciation was claimed on the wooden partitions, claiming that the expenditure was incurred on wooden partitions, as purely temporary erections, eligible for 100% depreciation as provided under the I.T.Act, 1961. A similar addi .....

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, it has not been shown that they created any tangible assets, for which, a value could be attributable.- Decided in favour of assessee. - TDS on interest paid to Jammu Development Authority - Held that:- It has not been disputed that Jammu Development Authority stands incorporated by the J & K Development Act, 1970. C.B.D.T. Notification no.3489, dated 27.10.1970, issued in pursuance of the provisions of section 194A(3)(f) of the Act, provides that no tax was required to be deducted on inte .....

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For the Respondent : R. K. Gupta, CA ORDER A. D. Jain (Judicial Member) This is the Department s appeal for the assessment year 2007-08, against the order dated 15.02.2013, passed by the ld. CIT(A), Jammu. The Department has raised the following grounds of appeal: 1. On the facts and circumstances whether the ld. CIT(A) was right in deleting the disallowance made u/s 40(a)(ia) of the Income Tax Act, 1961 on account of processing charges paid to SBI when the processing charges paid are for managi .....

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case as some amount of human intervention is involved in clearing of cheques by the clearing house and as such the activity constitutes technical services. 3. On the facts and circumstances whether the ld. CIT(A) was right in treating the Bari Brahmana Branch as eligible for deduction u/s 36(1)(viia) when the branch is located in Bari Brahmana town having population of 31,616/- as per the Digest of Statistics for 2002-03 published by the Government of J & K. 4. On the facts and circumstance .....

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)(ia) of the Income Tax Act, 1961 on account of non deduction of tax on interest paid to Jammu Development Authority when Jammu Development Authority is a taxable entity assessed as Local Authority and it was the liability and responsibility of the assessee bank to deduct TDS on interest payments. 2. Apropos Ground no.1, the AO disallowed an amount of ₹ 79,26,589/- u/s 40(a)(ia) of the Act, on the basis that no tax had been deducted on processing charges paid to SBI for managing the consor .....

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of the Act; that the loan was processed by the SBI and not by the assessee and it was for this, that the processing charges were paid to the SBI. 4. The ld. counsel for the assessee, on the other hand, has placed strong reliance on the impugned order. Reliance has also been placed on the Tribunal order dated 28/05/2013 in the assessee s case for the assessment year 2008-09 in ITA No.206(Asr)/2013. 5. In this regard, we find no fault with the order passed by the ld. CIT(A). As correctly observed .....

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ion 194J of the Act are definitely not attracted. So far as the present case is concerned, the payment was for services rendered, i.e., fees for technical services. Now, as per Explanation (b) to section 194J (1), fees for technical services shall have the same meaning as explained in section 9(1)(vii). As per Explanation (2) to section 9(1)(vii) of the Act, fees for technical services means any consideration for rendering of any managerial, technical or consultancy services . Herein, however, t .....

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ssing charges had been deducted by the SBI from the gross interest paid, i.e., the processing charges were included in the interest earned. That being so, it has rightly been held that no tax was required to be deducted on the processing charges paid to the SBI. In this regard, the Tribunal, vide its order (supra) in the assessee s case for the assessment year 2008-09, has observed as follows: 6. We have heard the rival contentions and perused the facts of the case. As argued by the Ld. counsel .....

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ion 194A nor that of section 194J of the Act are attracted. Thus, the action of the AO is totally against the facts, unlawful & needs to be annulled. In the facts and circumstances of the present case, we concur with the views of the ld. CIT(A) that processing charges are integral part of interest and no tax is required to be deducted on these payments. Accordingly, the provisions of section 40(a)(ia) of the Act, are not attracted and the ld. CIT(A) has rightly deleted the disallowance and w .....

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ce by relying on the decision of the Hon ble Supreme Court in the case of CIT vs. Bharti Cellular Ltd. , 234 CTR 146 (SC), particularly when the same is distinguishable in as much as in the present case, some amount of human intervention is involved in clearing of cheques by the clearing house, due to which, the activity constitutes technical services. 9. The ld. counsel for the assessee, on the other hand, placed strong reliance on the impugned order, as also the order of the Tribunal in assess .....

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cleared through with the help of ultraviolet rays which scans the genuineness of cheques. No human intervention is required in MICR clearing of cheques by way of examining technical data, analyzing them and making them useful for subsequent use. In fact, MICR clearance of cheque can be possible by a mechanized system only and not through human intervention keeping in view the processing of bulk cheques. Therefore, in the facts and circumstances of the present case, the decision of Hon ble Suprem .....

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tic charged ink. This is done with the help of ultraviolet rays which scan the genuineness of cheques. The department has not been able to dispute that MICR clearance of cheques can be possible by a mechanized system only and not through human intervention, keeping in view the processing of bulk cheques. The assessee Bank did not make TDS, since the amount had been paid as share of expenditure incurred by the concerned Bank and apportion to the assessee Bank as its share of that expenditure. No .....

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any human intervention is involved in the service provided under MICR. Now, for any service to fall under section 194J of the Act, as technical services, as held by the Hon ble Supreme Court, in the case of Bharti Cellular Ltd. (supra), intervention of humans is a must. In the absence thereof, the same would not partake the character of technical services. To reiterate, MICR is a cheque clearing service, which is different from manual clearing, as it is clearance through machines employing ultra .....

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d that the AO was not justified in holding that in MICR charges, technical services are attracted, thereby inviting the provisions of section 40(a)(ia) of the Act. 14. For the above discussion, Ground no.2 stands rejected. 15. So far as regards Ground no.3, the AO treated the Bari Brahmana Branch of the assessee as eligible for deduction u/s 36(1)(viia) of the Act. The AO made a disallowance of ₹ 8,17,28,840/- claimed as deduction under the provisions of section 36(1)(viia) of the Act. As .....

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the Government of J & K. 17. The ld. counsel for the assessee, on the other hand, besides placing reliance on the impugned order, also relied on the Tribunal order in the assessee s case for the assessment year 2008-09, wherein, the Tribunal has held in favour of the assessee, as follows: 10. We have heard the rival contentions and perused the facts of the case. On the identical facts, similar issue has come up before the ITAT, Amritsar Bench, in the case referred to in the CIT(A) s order o .....

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situated is to be considered first and the place and branch of bank is to be read together. In the present case, the village Kartholi is the place where the branch of the bank is situated with reference to which the ld. CIT(A) has rightly allowed the deduction and we find no infirmity in the order of the ld. CIT(A). Thus, ground No.3 of the Revenue is dismissed. 18. The provisions of section 36(1)(viia) prescribe that in respect of any provision for bad and doubtful debts made by a Scheduled Ban .....

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een published before the first day of the previous year. 19. In view of the above specific provisions of the Act, the definition of the Rural Branch as a place with population upto 10000, the department is not justified in placing reliance on the Digest of Statistics for 2002-03 published by the Govt. of J & K. It is trite that when the Act specifically deals with a particular situation, it is the concerned provisions of the Act, which have to be gone by and no outside material can be resort .....

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med 100% depreciation on wooden partitions, but the AO restricted the allowance to 10%. The ld. CIT(A) allowed the whole claim, following the Tribunal order for the AY 2008-09 in the assessee s own case. 21. The ld. DR contends that the ld. CIT(A) was wrong in allowing 100% depreciation on wooden partitions as permanent structures fixed for dividing spaces in the office for the staff to work, not susceptible to dismantling; and that in all modern offices, it is usual to have such wooden partitio .....

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r addition was deleted by the ld. CIT(A) for the assessment year 2002-03, which deletion was not challenged by the department. The wooden partitions, as remains undisputed, were erected in leasehold (tenanted) premises. The partitions had not provided any enduring advantage to the assessee. They were redesigned time and again, as per the assessee s business requirement. It is also not the case of the department that these partitions became the property of the assessee at the end of the lease. Mo .....

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A) deleted the disallowance of ₹ 2,93,15,880/-, relying on the Tribunal order (supra) for AY 2008-09 in the assessee s case. As per the department, J.D.A. is a taxable entity. The assessee is a Local Authority and it was the liability and responsibility of the assessee Bank to deduct TDS on interest payment; and that the ld. CIT(A) has erred in deleting the disallowance correctly made by the AO u/s 40(a)(ia) of the Act. 28. As for Ground nos. 1 to 4, for Ground no.5 also, besides relying o .....

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corporated under a State Act. The position is not any different so far as regards J.D.A. incorporated under the said State Act, too. Therefore, the provisions of section 194A of the Act are not applicable, due to which, the provisions of section 40(a)(ia) are also not attracted. 30. Moreover, the Tribunal, in the assessee s case (supra) for the assessment year 2008-09, has held as follows on the issue: 15. We have heard the rival contentions and perused the facts of the case. We have perused the .....

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