TMI Blog2023 (7) TMI 863X X X X Extracts X X X X X X X X Extracts X X X X ..... should be no dispute that, in terms of Section 196 of the Act, no deduction of tax is to be made by any person from any sum payable to the Government. It is, thus, abundantly clear that the interest paid or accrued on the Term Deposit Accounts under Saving Bank Account of JKSRRDA was the money belonging to the Central Government and, therefore, exempted from deduction of income tax at source u/s 194A. Thus raising a demand on account of failure of the assessee/Bank to deduct tax at source u/s 194A on the interest income accrued on the Term Deposit Accounts of the JKSRRDA was legally and factually flawed as JKSRRDA is a society registered under the Act of 1998 is a body wholly financed by the Central Government for implementation of PMGSY and, therefore, exempt from TDS in terms of Notification No.3489 dated 22.10.1970 issued by the Central Government under Section 194A(3)(iii)(f) - Decided in favour of assessee. - HON BLE MR. JUSTICE SANJEEV KUMAR, AND HON BLE MR. JUSTICE PUNEET GUPTA, For the Appellant Through :- Ms. Pariksha Parmar Advocate vice Ms. Aruna Thakur Advocate For the Respondent(s) Through :- Mr. Subash Dutt Advocate with Mr. Sachin Sharma Advocate. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on record, we are of the considered opinion that the substantial question of law, as proposed by the appellant, is not only misconceived, but does not arise out of the pleadings and the controversy that is raised for determination in this appeal. We are, however, in agreement with the learned counsel appearing for the respondent that the Assessing Authority has proceeded on a wrong premise and has, thus, illegally and contrary to law, raised a demand of more than Rs. 2.00 crores on account of failure of the assessee to deduct tax at source under Section 194A of the Act on the interest paid/accrued on the Term Deposit Accounts of the JKSRRD, a society registered under J K Societies Registration Act, Svt. 1998 [ the Act of 1998 ]. 6. Indisputably, JKSRRDA is a Society registered under the Act of 1998 and has been appointed as a nodal agency of the Government of Jammu and Kashmir for implementation of Pradhan Mantri Gram Sadak Yojana [ PMGSY ]. The Ministry of Rural Development, Government of India funds this society for implementation of PMGSY. As per the Memorandum of Understanding [ MoU ] of Banking arrangements of the funds released by the Government of India under PMGSY, ente ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts, found that the entire funding for implementation of PMGSY in the State of Jammu and Kashmir was made by the Ministry of Rural Development, Government of India. The funds released by the Ministry as provided in the MoU, were to be deposited in an account known as Programme Fund/Account , to be maintained with Moving Secretariat Branch, J K Bank, Civil Secretariat, Jammu with a stipulation that the assessee/bank will convert funds in excess of Rs. 20.00 lacs lying in the account into fixed deposits for one year in the units of Rs. 15.00 lacs. The assessee/Bank, as per the MoU, was bound by the PMGSY Guidelines and the orders regulating the use of funds issued by the Ministry of Rural Development/NRRDA. The MoU as also the Accounting Manual of PMGSY further provided that whatever interest would accrue on the fixed deposits would also be included in the funds transferred by the Ministry of Rural Development. The CIT (A) relied upon Chapter 10 of the Accounting Manual of PMGSY to come to the conclusion that the funds lying in the Programme Fund/Account released by the Government of India was the money belonging to the Government of India and, therefore, interest, if any, accrue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per the MoU were converted into FDRs, were the funds/money belonging to the Government of India and, therefore exempt from the operation of sub- section (1) of section 194A of the Act. That apart, the J KSRRDA may not be a society registered under the Societies Registration Act, 1860 (the Central Act) but would still fall within the ambit of clause (iii) of S.O 3489 dated 22.10.1970 which reads as under: (iii) Any undertaking or body, including a society registered under the Societies Registration Act, 1860 (21 of 1860) financed wholly by the Government . 11. From a reading of clause (iii), it clearly transpires that, what is included in the exemption notification is any undertaking or body which is financed wholly by the Government. The definition is inclusive in nature and includes specifically a society registered under the Societies Registration Act, 1860. We would like to clarify at the cost of repetition that JKSRRDA is a society registered under the State Act i.e J K Societies Registration Act, Svt., 1998, but that shall not denude it of the status of being an undertaking or a body which is wholly financed by the Government. 12. Since both the Forums below i.e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities or shares owned by it or in which it has full beneficial interest, or any other income accruing or arising to it 14. From the foregoing discussion, it is crystal clear that the order passed by the Assessing Authority dated 18.03.2013 in respect of assessment year 2009-10 raising a demand of Rs. 2,11,19,843/- on account of failure of the assessee/Bank to deduct tax at source under Section 194A of the Act on the interest income accrued on the Term Deposit Accounts of the JKSRRDA was legally and factually flawed for the following two reasons: (a.) that the interest income accrued on Term Deposit Accounts under the Saving Bank Account No. 0110040100015854 of the JKSRRDA was the income of the Government of India and, therefore, exempt from TDS in terms of Section 196 of the Act; and, (b) that JKSRRDA is a society registered under the Act of 1998 is a body wholly financed by the Central Government for implementation of PMGSY and, therefore, exempt from TDS in terms of Notification No.3489 dated 22.10.1970 issued by the Central Government under Section 194A(3)(iii)(f) of the Act. 15. That being the clear position emerging from the discussion made hereinabove, the o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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