TMI Blog2019 (8) TMI 810X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant Bank was held the assessee in default in respect of the four depositors, namely, BIADA, IDA, the Bihar State Housing Board and the Official Liquidator of Patna High Court. The order of the Assessing Officer, the Assistant Commissioner of Income Tax at Annexure 1 passed in purported exercise of jurisdiction under sections 201(1) and 201(1A) of the Act gives the details of interest generated on deposits in each case as well as the tax deductable against the same. The statutory ladder through which the case has moved confirms that while a demand in its entirety on default of such deduction was raised by the Assistant Commissioner of Income Tax, the same was modified by the order passed under section 154 of the Act in view of the certificates of exemption submitted under section 197A by M/s BIADA and by M/s IDA. The matter moved in appeal as against the remaining two depositors i.e. the Bihar State Housing Board and the Official Liquidator and the Commissioner of Income Tax (Appeals) having noted the losses returned by the Bihar State Housing Board has interfered with the default of the appellant in not deducting tax and thus while modifying the demand in so far as tax el ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f tax at source on the interest paid by the appellant on the deposits made by the Official Liquidator appointed by the Patna High Court on behalf of the Company in liquidation, namely, Rohtas Industries Limited in exercise of powers vested under Section 201 of the Act . The appellant is a nationalized Bank whose business premises was surveyed by the respondent authorities under Section 133 of the Act on 18.12.2007 and in which course documents relating to Tax Deducted at Source (hereinafter referred to as the TDS ) were examined. It is in course of survey of such documents that it transpired that the appellant Bank had failed to deduct tax at source in respect of interest generated on the deposits made by the Bihar Industrial Area Development Authority (BIADA), the Infrastructure Development Authority (IDA), the Bihar State Housing Board and the Official Liquidator of Patna High Court. A demand was raised which was inclusive of tax as well as interest payable thereon to the tune of ₹ 48,89,749/- which demand was subsequently modified on an application filed under Section 154 of the Act to exclude such demand in respect of the BIADA and IDA . A copy o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt in discharge of such obligation. Although exhaustive arguments have been advanced by Mr. Pathy, learned counsel appearing for the appellant, who has also filed written submissions in support of his contentions and in which process he has referred to the provisions of Section 194A of the Act which deals with the issue of interest other than the interest on securities as well as definition of income present at Section 2(24) of the Act to persuade this Court that since there was no commercial transaction in the process rather the Official Liquidator had only sold some of the assets of the company in liquidation for its distribution pari passu amongst the creditors, the company in liquidation running huge losses was not liable to tax. According to learned counsel, even if the interest earned on the fixed deposit was to be included in the income of the company in liquidation, there yet would be no liability to pay tax as the interest element would be set off with the losses present and carried forward. In this context learned counsel has referred to the provisions of Section 197A of the Act to submit that a person would not be liable to tax i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of BIADA and IDA. In reference to the case of the Bihar State Housing Board, she submits that the Commissioner of Income Tax (Appeals) while upholding the interest charged on the appellant under Section 201(1A) of the Act , waived of deduction of tax element. According to Ms. Sinha, there had to be sufficient documents in possession of the Bank to justify the non-deduction and even if the Bank has escaped default in the case of BIADA and IDA on production of the certificate under section 197A, the default has been partially upheld in the case of the Bihar State Housing Board and in so far as the case of the Official Liquidator is concerned, the default is in its entirety because there is nothing in possession of the Bank to justify the non-deduction. We have heard learned counsel for the parties and have perused the records and while there is no dispute that the interest on fixed deposit are chargeable to tax, the appellant was under duty to deduct the same in absence of any returns filed by the Official Liquidator declaring losses and/or filing of a certificate under section 197A to declare NIL income. That the fixed deposits generated an interest of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the company in liquidation with the appellant Bank. The argument advanced by Mr. Pathy that the company in liquidation was in losses, is an argument only taken for rejection for in absence of any returns filed by the Official Liquidator to canvass as such and/or in absence of any certificate filed by the Official Liquidator under section 197A, it was not within the jurisdiction of the Bank to adjudicate on the admissibility of tax or on its deduction at source. In so far as the reliance on the judgment of the Allahabad High Court in the case of M/s Sahara India Commercial Corpn. Ltd. (supra) is concerned, Mr. Pathy has missed to take note of the fact that the conclusion drawn by the Allahabad High Court is on the foundation where, the recipient assessee has either paid tax or is not liable to pay any tax and in which circumstance no interest under section 201(1A) could have been recovered by the assessee in default. In so far as the case in hand is concerned, there is absolutely nothing on record in form of return filed by the Liquidator or a certificate to such effect under section 197A of the Act which would justify the default by the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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