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TMI Blog2015 (9) TMI 1674X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment, which were remitted to the said Board. Such remittance received by the Board were placed in deposits in several banks including branches of the assessee bank at K. R. Road, Hoskote, Bangalore 562114 and Chintamani Main Road, Nandagudi. During the financial year 1112, K. R. Road, Hosakote Road Branch paid interest of Rs. 1,13,35,607/- and during the financial year 2012-13 it paid interest of Rs. 1,27,20,953/- to the said Board, on deposits placed with them. Similar interest payment made by Nandagudi Branch to the Board came to Rs. 18,04,714/- for F. Y. 2011-12 and Rs. 40,10,612/- for F. Y. 2012-13. These branches of the assessee bank had not deducted tax at source on such interest payment. 03. ITO (TDS), was of the opinion that assessee should have deducted tax at source as stipulated under Section 194A of the Act, on the interest paid by it to the Board, and as such there was a default which attracted the provisions of Section 201(1) of the Act. Notice was issued to the concerned branch managers. Submission of the assessee's branches was that the said Board which had placed deposits with them had given declaration in form 15G, as mandated under that sub-section (1A) of Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from deduction of tax at source by virtue of Section 194A(3)(iii)(f) of the Act could be given only if the concerned institution or organisation applied for it and got a notification in this regard from the Central government. As per the CIT (A), the notification dt.23.10.1970 (supra) relied on by the assessee, exempted only corporations established by central / state enactments. Though assessee Board was established under a State Act, it was not constituted by such Act. As per the CIT (A) assessee was only a procedural mechanism for implementing the activities, mentioned in notification dt.22.10.1970 (supra). For this, he placed reliance on judgment of Hon'ble Apex Court in the case of Dalco Engineering P. Ltd v. Shree Satish Prabhakar Padhy & Ors in Civil Appeal No.1886 of 2007, dt.31.03.2010. Reliance was also placed on judgment of Hon'ble Kerala High Court in the case of Kerala Toddy Workers Welfare Fund Board v. CIT in OP Nos.2131,2920, 5105, 5167, 5571 of 2003 & WP (C) No.13410 of 2008, dt.13.06.2008, wherein it was held that only a limited meaning could be given to the term 'Government corporation' established by Central / State or Provincial legislation and it would not inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22.10.1970 (supra) and held that assessee was liable to deduct tax at source on interest paid to the Board. 08. Per contra, Ld. DR strongly supporting the orders of authorities below submitted that if the assessee wanted to effect payment without deducting tax at source it should have insisted on a certificate as prescribed u/s.197(1) of the Act, from the Board. Board should have obtained such certificate from the AO and furnished it to the assessee. As per the Ld. DR assessee could not by itself decide that Section 194A did not apply to the interest payments effected by it when such payments did not fall within any of the clauses of sub-Section (3) of the said section. 09. We have perused the orders and heard the rival contentions. Section 194A (1) is reproduced hereunder : (1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any income by way of interest other than income by way of interest on securities, shall at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness of banking;(c) deposits with a public company which is formed and registered in India with the main object of carrying on the business of providing long-term finance for constructions or purchase of houses in India 1for residential purposes and which is eligible for deduction under clause (viii) of subsection (1) of section 36,the aforesaid amount shall be computed with reference to the income credited or paid by a branch of the banking company or the co-operative society or the public company, as the case may be ; (iii) to such income credited or paid to-- (a) any banking company to which the Banking Regulation Act, 1949 (10 of 1949), applies, or any co-operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank), or (b) any financial corporation established by or under a Central, State or Provincial Act, or (c) the Life Insurance Corporation of India established under the Life Insurance Corporation Act, 1956 (31 of 1956), or (d) the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963), or (e) any company or co-operative society carrying on the business of insurance, or (f) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k ; Explanation - 1. For the purposes of clauses (i), (vii) and (viia), "time deposits" means deposits (excluding recurring deposits) repayable on the expiry of fixed periods. Claim of the assessee is that it falls under sub-clause (f) of clause (iii) to subsection (3) of the above section. Reliance has also been placed on notification SO 3489 [No.170 F. No.12/164/68 - ITCC/ITJ, dt.22.10.1970]. Said GO is also reproduced hereunder : "In pursuance of sub-clause (f) of clause (iii) of sub-section 194A of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notify the following for the purposes of the said sub-class. i. Any corporation established by a Central, State or Provincial Act. ii. Any company in which all the shares are held (whether singly or taken together) by the Government or the Resen'e Bank of India or a Corporation owned by that Bank. iii. Any undertaking or body, including a society registered under the Societies Registration Act, 1860 (21 of 1860), financed wholly by the Government. " 10. As per the assessee it is a corporation established by a Central, State or Provincial Act. At this juncture it is required to have a look as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our opinion, the terminology used in clause (i) of the notification should be interpreted keeping in mind the tenor and texture of the other clauses. For interpreting what could come within the ambit of clause (i) of the rule "Noscitur A Sociis" can be applied in such a situation. The common genus that runs through all the three clauses is that ownership is vested with the Government either by way of holding the shares or by way of financing. If a company whose shares are held by the government is considered as one falling within sub-clause (f) of clause (iii) of section 194A of the Act, there is no reason why a welfare board constituted in accordance with the Central enactment should be excluded from its ambit. Especially so since funds of the Board was nothing but only cess collected by contractors under a statutory edict. 12. Apart from the above, what we find is that the Board has been established through a notification issued, under section 18 of Building and other Construction Workers' (Regulation and Employment and Conditions of Service) Act, 1996. This Section has been reproduced by us above at para ten above. Clause (2) thereof states that the Board shall be a body corp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e disabled during his service. It also gave power to the appropriate government to exempt any establishment from the rigors of the said section. The term establishment employed in Section 47 of the said Act was defined in Section 2(k) of that Act. As per this definition, establishment meant a corporation established by or under a central, state or provincial Act or an authority or a body owned or controlled or aided by the government of a local authority or a government company, as defined in Section 617 of the Companies Act, 1956 and included departments of a government. Contention of the respondent was that his employer was incorporated under Companies Act, 1956 and therefore, was a corporation falling with the definition of section 2(k). Question before the Hon'ble Apex Court was therefore whether a company incorporated under the Companies Act could be construed as a corporation falling within Section 47 of the Disability Act. It was in such circumstances the Hon'ble Apex Court distinguished between a corporation established by a Central Act and a corporation established under a Central Act. A company incorporated under the companies Act can never be equated with a board constit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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