Case Law Details
Section 206AA not applicable to persons having income below taxable limits
In a writ petition filed by small investors, Karnataka High Court Held in the case of Kowsalya Bai vs. Union of India that provisions of Section 206AA of the Income Tax Act are contrary to provisions of Section 139A of the Act. Accordingly, provision of Section 206AA were made inapplicable to persons and was read down from the Act only for those persons whose income was less than the taxable limits. However, the High Court made it very clear that the provisions of the Section 206AA are applicable to the persons whose income is more than the taxable limits.
Accordingly, the High Court Guided the Banks and the Financial Institutions that they shall not invariably insist upon PAN from small investors who intend to open an account in the bank or financial institution.
Author: CA Jinesh R. Bhagdev, Director at eSupport Outsourcing Services Private Limited
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What is the bill limit for collection of tax at source ??
i read that judgement, but i am not in favor of the judgement. That should be made in other way.
Because:-
1. In my view furnishing PAN a/w 15G/H should be compulsory becuase in many cases people intentionally furnishe 15G/H even if there income is taxable.
It will be helpful for Income Tax Authorities to detect such type of cases by comparing the data of persons who furnishe 15G/H as well there PAN is also appearing in 26AS.
2. This decision will have very serious and wide-ranging consequences as regards opening and operating bank a/cs (by bif business houses/traders/politicians/corrupt bureaucrats and professional (but most honourable) fraudsters in benami names of non-existent people)
3. It’s not so costly (Rs. 100 or so) to obtain PAN, but it will cause huge losses to IT Dept., if they don’t ask for PAN and that will cause illegal activities to get done. (as pointed in pt. 2 above)
This judgment is helpful to small illeterate investors as well as to bankers specially working in small towns of eastern U.P.. The branch manager of P.N.B. Mariahu(Jaunpur) has forced to loose deposits after asking PAN from investors desirious to open FDR A/C above 50,000. The Manager is fully aware of the fact that these monies has been sent by their son/husband from Bombay/ Surat or abroad for marriage or old days, but can’t take deposit without PAN. Now He can accept such rural deposits. His Controlling Office should immediately send circular in this regard.
In my view furnishing PAN a/w 15G/H should be compulsory becuase in many cases people intentionally furnishe 15G/H even if there income is taxable.
It will be helpful for Income Tax Authorities to detect such type of cases by comparing the data of persons who furnishe 15G/H as well there PAN is also appearing in 26AS. For example a person having taxable salary income gives 15G to Bank for interest income on Fixed Deposits!!
The judgement , no doubt, clears a legal and logical inconsistency between two sections and grants relief to people of limited means. Nevertheless, banks will wait for instructions.CBTD may take its own time to clarify. And the Govt may initiate appropriate legislative measures to negate the judgement besides perhaps moving the Supreme Court.Best wishes to the beneficiaries of this judgement.
R Balasubramanian.
After this judgement can we hope that the Act will be amended accordingly or suitable instructions are given to the assessing officers to the effect that if a depositor gives Form 15G/H, tax should not be deducted and PAN also should not be insisted from those poor citizens who do not have assessable income?
This decision will have very serious and wide-ranging consequences as regards opening and operating bank a/cs (by bif business houses/traders/politicians/corrupt bureaucrats and professional (but most honourable) fraudsters in benami names of non-existent people), but will go a long way in also helping migrant labour and common people on transfer of residence/location to other cities under job and employment-related compulsions. The ordinary people in the lower economic stratum of society, seeking to open bank accounts during their stay in mega cities, engaged in mega construction projects, are forced to pay bribes to bank officials/ their agents (especially in Delhi-UP-Bihar-Bengal) operating under the very nose of bank managers (invariably with their pecuniary connivance inside the bank premises) just to be able to open bank accounts. It is not clear as to why every bank branch is not equipped with photographic machines to take instant photographs of intending account openers and also to obtain finger prints (though NOT permissible under the law). Considering in particular the plight of migrant labour and lower level employees in small companies in transferrable jobs, one would certainly share the concern of their lordships of the Karnataka High Court about the logic behind this requirement of obtaining and furnishing PAN (which also is available for fixed rates in any name and address!) and the reasonableness of the provision being declared ultra vires in respect of those who would never be in the tax radar for the very smallness of their income. Read with the scrapping of the entire set of all the Aadhar Cards already issued to millions and the fresh process now under way for re-issue of these ID cards through the same time-consuming exercise causing harassment to the itizens, this decision poses too many valid questions for the Govt., especially the CBDT, Passport Offices (which are nothing but minting money and dehumanizing Indian citizens, unless bribes are paid), IB, DRI, NIC, SFIO, etc. who do NOT have ideas about the ground realities of how the poor and “below”-BPL people eke out their living!
It was said that half of the people in the world does not know how the other half lives! This is truer in the case of the Indian bureaucracy, which is much less humane than the politicians–thoroughly criminalised though.