Case Law Details
CIT Vs Jammu and Kashmir Bank Ltd (Jammu and Kashmir High Court)
Introduction: This case involves an appeal filed by the Commissioner of Income Tax (TDS-I), Chandigarh against the order of the Income Tax Appellate Tribunal, Amritsar Bench. The dispute arose when the Assessing Officer noticed that the Jammu and Kashmir Bank Ltd. (the assessee) did not deduct tax at source under Section 194A of the Income Tax Act, 1961, on the interest paid/accrued on Term Deposit Accounts held by the J&K State Rural Roads Development Agency (JKSRRDA) during the assessment year 2009-10. The Assessing Officer passed an order demanding a payment of Rs. 2,11,19,843/-.
Analysis: The assessee appealed the order before the Commissioner of Income Tax (Appeals) [CIT(A)], who ruled in favor of the assessee, stating that the JKSRRDA, being a Society covered by Notification No.3489 dated 22.10.1970, was not required to deduct tax at source. The appellant, dissatisfied with the CIT(A)’s decision, filed an appeal before the Income Tax Appellate Tribunal (ITAT), which upheld the CIT(A)’s order.
The appellant raised a substantial question of law, contending that the assessee needed to apply for exemption under Section 194A(3)(iii)(f) of the Act, and the Central Government should issue a notification in the Gazette to grant such exemption, as clarified by the CBDT in its letter dated 23.06.2009.
However, the High Court opined that the substantial question of law proposed by the appellant was misconceived and did not arise from the pleadings and controversy in the appeal. Instead, the Court found that the assessee’s funds deposited in the Term Deposit Accounts were wholly financed by the Central Government and exempt from TDS under Section 196 of the Act. Additionally, the Court stated that the JKSRRDA, though not registered under the Central Societies Registration Act, was a body wholly financed by the Government, making it eligible for exemption under the Notification No. 3489 dated 22.10.1970.
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