The Income Tax Appellate Tribunal(ITAT), Chandigarh in a recent ruling held that No TDS is applicable in respect of interest paid on term deposits received from Punjab State Cooperative Bank Pension Fund and Board of Trustee Provident Fund. The Tribunal was considering an appeal filed by the assessee in connection with their assessment for the year 210-13.
The assessee is a cooperative society registered under the Punjab Cooperative Societies Act , 1961. It is engaged in the business of banking. For the relevant assessment year , the assessee had paid interest on term deposits to Punjab State Cooperative Bank Pension Fund amounting to Rs.2,23,34,880/- and to Board of Trustee, Provident Fund, amounting to Rs.1,41,22,274/- . The assessee had not deducted tax at source when it had made payment of interest to Punjab State Cooperative Bank Pension Fund and Board of Trustee, Provident Fund. The ITO(TDS- I I ) had passed orders under sect ions 201(1) and 201(1A) of the Act treating the assessee as an assessee in default for non-deduct ion of tax at source and also making it liable for consequent interest.
It was submitted by the learned counsel for the assessee that the copy of certificate issued by the payee trust showing that the amount of interest received from the assessee was duly accounted in its books of account, was enclosed in the Paper Book filed before the CIT (Appeals) . It was further submitted that since the income of the assessee is exempted under sect ions 10(25) and 10(23AAA) of the Act, there was no point in deducting tax at source, since the recipient of the interest income would have claimed refund of the same.
The Assessee further claimed that they are not liabe to pay tax in the light of the decision of the apex court inHindustan Coco cola Beverages Pvt Ltd. Vs. Commissioner of Income Tax, 293 ITR. However, the learned CIT(A), on appeal, rejected thisstating that the recovery of the tax cannot be made from the deductor when the deductee has filed the return and paid the tax. The contention of the appellant is misplaced as in the case of Hindustan Coca Cola Beverages Pvt Ltd. it is the situation in which tax cannot be recovered from deductor in case the deductee has shown the payment as its income in its books of accounts and paid the tax due on such payment.
On second appeal, the Tribunal found that the Punjab State Cooperative Bank Pension Fund and Board of Trustee Provident Fund is approved trusts created by assessee for the purpose of pension fund and Provident Fund respectively. Whole of their income was exempt under sect ions 10(25) and 10(23AAA) of the Act. Therefore, there was no liability in respect of these trusts, warranting tax deduction at source under sect ion 194A of the Act. Consequently, the orders passed under sect ions 201(1) and 201(1A) of the Act are liable to be quashed in the facts and circumstances of the case.
It was further observed that the assessee had furnished a certificate issued by the Chairman of Board of Trustees, Punjab State Cooperative Bank Ltd. , Pension Fund, stating that they are in receipt of an amount of Rs.2,23,34,880/- as interest on term deposit with the assessee bank and the same was duly accounted in its books of account and the return of income has been f i led for the relevant assessment year . Similar certificate is also issued by Punjab State Cooperative Bank, Provident Fund Trust. Therefore, it is evident from the certificates that these two entities who are in receipt of interest income from the assessee had duly accounted the same in their books of account and filed their return of income for the concerned assessment year.
Referring to Hindustan Coco cola Beverages Pvt Ltd. Vs. Commissioner of Income Tax, the Division Bench of the Tribunal held that the assessee is not liable to deduct tax at source, in respect of interest paid on term deposits received from Punjab State Cooperative Bank Pension Fund and Board of Trustee Provident Fund.
Read the full text of the order below.
