DCIT (TDS) Vs. State Bank of India (ITAT Delhi)
ITAT has examined the question of whether the Site Restoration Fund Account (SRF A/c) is a time deposit and held that it is not. Therefore, in view of the provisions of section 194A (3) (vii) it has held that the provisions of section 194A(1) have no application to the assessee’s case. Thus, once the ITAT has given a finding of fact that the SRF a/c is not a time deposit, the AO’s action in revisiting the issue on the basis of earlier submission made by the assessee in a verification relating to a previous assessment year (and subsequently retracted) cannot be upheld, in view of the fact that the Hon’ble IT AT has found that the assessee’s case does not fall u/s 194A(1) and that there was no liability or the part of the assessee to deduct any tax on site restoration fund of ONGC or on interest paid on site restoration deposit of ONGC, the assessee cannot be said to be an assessee in default within the meaning of section 201(1).
Full Text of the ITAT Order is as follows:-
This is an appeal by the department against the order dated 27.05.20 16 by ld. CIT(A), Dehradun.
2. The only ground raised in this appeal reads as under:
“Ld. CIT(A) has erred in law and on facts in holding that provisions of section 194A of the IT Act, 1961 are not applicable on payment of interest In Site Restoration Fund Account ignoring the fact that deposits in Site Restoration Fund Account are made for a fixed period and which carry interest as applicable to time deposit.”
3. During the course of hearing, the ld. Counsel for the assessee at the very outset stated that this issue is squarely covered in favour of the assessee vide order dated 18.07.2014 in ITA Nos. 3936 to 3938/Del/2013 for the assessment years 2010-11 to 2012-13 respectively, in assessee’s own case (copy of the said order was furnished which is placed on record).
4. The ld. CIT DR although supported the order of the AO but could not controvert the aforesaid contention of the ld. Counsel for the assessee.
5. We have considered the submissions of both the parties and perused the material available on the record. In the present case, it is noticed that the ld. CIT(A) while allowing the claim of the assessee followed the aforesaid referred to order of the ITAT in assessee’s own case and the relevant findings have been given in paras 11 to 12 of the
impugned order which read as under:
“11. I have duly considered the facts and circumstances of the case. The assessee has enclosed a judgement of the Hon’ble ITAT in the assessee s own case in ITA No. 3936, 3937 and 3928/Del/2013 in the case of DCIT(TDS), Dehradun Vs. State Bank of India, Tel Bhawan, Dehradun and ITA No. 3924, 3194 and 3195/Del/2013 in State Bank of India, Tel Bhawan, Dehradun Vs. DCIT (TDS), Dehradun for the A.Yrs. 2010-11, 2011-12 and 2012-13 pronounced by the Hon’ble ITAT vide a common judgement dated 18.7.2014. On going through the judgment it is seen that the Hon’ble Tribunal has held as under:
“17. We have considered the rival submissions and perused the record. Admittedly the assessee did not deduct the tax on the interest accrued on the corpus of SRF fund of ONGC and that triggered the controversy of non-deduction of tax at source Consequently, State Bank of India was treated as an assesses in default an 1 interest u/s 201 (1A) was also levied.
17.1 The plea of consistency with reference to certificate granted for A. Y. 2 002-03 is not acceptable for the simple reason that certificate is granted for income accruing during a specified period and, therefore, it cannot have any effect for subsequent years. Moreover, principles of re-judicata are not applicable to income-tax proceedings.
17.2 Section 194A mandates the payer of interest to deduct TDS at the time of credit of such interest to the account of the payee. However, by virtue of sub-section (3), provisions of sub-section (1) are not applicable, inter alia, as per clause (vii) in the case of interest credited or paid in respect of deposits (other than time deposits made on or before 1st day of July 1995). Therefore, if a deposit is not in the nature of time deposit, then it is not amenable to the provisions of section 194A.
17.3 In the present case interest has been credited by SB/ on SRF a/c which has been opened by ONGC with it as per the provisions of section 33ABA. Therefore, it is necessary to first examine the relevant provisions in this regard to find out whether SRF a/c is time deposit or not.
17.4 Section 33ABA deals with “Site Restoration Fund” in respect of those assessees, who are carrying on business of prospecting for, or extraction or production of petroleum or natural gas or both in India. Relevant portion reads as under:
[Site Restoration Fund
33ABA. (1) Where an assessee is carrying on business consisting of the prospecting for, or extraction or production of, petroleum or natural gas or both in India and in relation to which the Central Government has entered into an agreement with such assessee for such business, has before the end of the previous year-
(a) deposited with the State Bank of India any amount or amounts in an account (hereafter in this section referred to as the special account) maintained by the assessee with that Bank in accordance with, and for the purposes specified in, a scheme (hereafter in this section referred to as the scheme) approved in this behalf by the Government of India in the Ministry of Petroleum and Natural Gas; or
(b) deposited any amount in an account (hereafter in this section referred to as the Site Restoration Account) opened by the assessee in accordance with, and for the purposes specified in, a scheme framed by the Ministry referred to in clause (a) (hereafter in this section referred to as the deposit scheme), The assessee shall, subject to the provisions of this section, be allowed a deduction (such deduction being allowed before the loss, if any, brought forward from earlier years is set off under section 72) of-
(i) a sum equal to the amount or the aggregate of the amounts so deposited;
(ii) a sum equal to twenty per cent of the profits of such business (computed under the head “Profits and gains of business or profession” before making any deduction under this section),
Whichever is less:
Provided further that where any deduction, in respect of any amount deposited in the special account, or in the Site Restoration Account, has been allowed under this sub-section in any previous year, no deduction shall be allowed in respect of such amount in any other previous year:
Provided also that any amount credited in the special account or the Site Restoration Account by way of interest shall be deemed to be a deposit.
(3) Any amount standing to the credit of the assessee in the special account or the Site Restoration Account shall not be allowed to be withdrawn except for the purposes specified in the scheme or, as the case may be, in the deposit scheme.
(5) Where any amount standing to the credit of the assessee in the special account or in the Site Restoration Account is withdrawn on closure of the account during any previous year by the assessee, the amount so withdrawn from the account, as reduced by the amount, if any, payable to the Central Government by way of profit or production share as provided in the agreement referred to in section 42, shall be deemed to be the profits and gains of business or profession of that previous year and shall accordingly be chargeable to income-tax as the income of that ‘previous year.
Explanation- Where any amount is withdrawn on closure of the account in a previous year in which the business carried on by the assessee in no longer in existence, the provisions of this section shall apply as if the business is in existence in that previous year.
17.5 Explanation 1 to clause (vii) of sub-section (3) to section 194A clearly contemplates time deposit to mean deposits which are repayable on the expiry of fixed periods.
17.6 Ld. Sr. counsel has referred to the various forms, forming part of the Schemes, which have been noted in his argument from which it is evident that there is no fixed period prescribed in regard to these deposits and assessee has to give notice to the bank for making withdrawal from this deposit account The withdrawal is to be made as per requirement of sub-section (3) to section 33ABA. Therefore, it cannot be said to be for a fixed period. The fixed period implies that ‘period’ is determinate at the time of entering into contract. The term ‘period’ is qualified with term ‘fixed’ and, therefore, when period of deposit is left to the eventuality of arising of purposes for withdrawal as contemplated u/s 33ABA (3) then, we fail to appreciate as to how It cart come within the ambit of fixed period. The definition/meaning of time deposit’ is given in section 194A and, therefore, it cannot be assigned a general meaning as submitted by Id. CIT(DR). There is no room for any interpretation/construction in tax laws, when there is no ambiguity in the language of section. When the plain words of statute clearly and directly convey no other meaning, then there is no need for any interpretation. Therefore, Ld. CIT(DR)’s contention that this withdrawal notice itself implies that the deposit is for fixed period cannot be accepted in the backdrop of specific definition given under the Act.
17.7 Further, it is not necessary that entire amount is to be withdrawn one go and with the withdrawal the scheme will close. On the contrary there are stipulations u/s 33ABA read with the Scheme to ensure that ONGC withdraws the squired amount only for utilizing the amount as per the scheme. In order to clarify this aspect, we produce here under certain clauses from the Scheme.
17.8 Clauses 8&9 of the Scheme read as under:-
“8 Withdrawal and utilization of the amount deposited: A depositor shall be entitled to withdraw from the amount standing to the credit of the account only such amount as is necessary to meet any expenditure to be incurred by him on the expiry or termination of the agreement or relinquishment of part of the contract area, towards removal of all equipments and installations in a manner agreed with the Central Government pursuant to an abandonment plan or toward all necessary site restoration in accordance with morden oil filed and petroleum industry practices and towards meeting all other expenses necessary to prevent hazards to life or property or environment consequent on such expiry. Termination or relinquishment.
9. Procedure for withdrawal
(1) The depositor shall be entitled to withdrawn the whole or any part of the amount standing to the credit of the account by making an application in Form E, duly authorized by the Ministry of Petroleum & Natural Gas or any agency authorized by the Ministry of Petroleum & Natural Gas in this behalf. (2) On receipt of the request for withdrawal, the deposit office shall, a soon as may be, pay the amount to the depositor through a credit o the designated account.
17.9 SRF deposit continues to run as long as the agreement of ONGC with the Government runs and withdrawals can be made depending upon requirements. Clause 3 of the SRF Schemes read as under:
“3. Deposit: how to be made-
(1) A deposit in terms of Section 33BA of the Income-tax Act, 1961 may be made by any depositor in accordance with the provisions of this Scheme.
(2) The deposit may be made in one lump sum or In installments (not exceeding four installments in each financial year).
(3) Such deposit has to be made in India Rupee, and out of profits derived from the business referred in sub paragraph (3) of paragraph 1 above.
(4) Shall account shall be maintained in Indian Rupees.”
17.10. This clearly shows that SRF Deposit may be made in one lump sum or installments not exceeding four installments in each financial year. This plea is further fortified by clause 6 of the scheme which contemplated for computing interest and reads as under:
(1) Subject to sub-paragraph (2) the deposit shall carry interest at the highest rate for the applicable period as paid by the State Bank of India on the date the deposit is made for Rupee term deposits prevailing at the end of the financial year.
(2) Where during any financial year any part of the deposit is withdrawn, the interest payable on the deposits shall be calculated on the basis of the minimum monthly balance in the account during each of the months in the financial year.
(3) The interest payable for any financial year, or part thereof, shall only be credited to the account and shall not be payable to the depositor except as part of withdrawal for utilization in terms of paragraph 9 or part of a payment of balance on closure of account in terms of paragraph 12. (4) The gross interest credited to the account in a financial year shall be evidenced by a certificate issued in- Form C, by the deposit office and the amount of such gross interest shall be deemed to be a deposit made by the depositor under this scheme in that financial year.”
17.11 Sub-clause (2) of clause 6 of the Scheme makes it clear that withdrawal can be made in any financial year and, therefore, it cannot be a case of fixed period. Ld. Sr. counsel in the course of hearing pointed out that not even single paise has been withdrawn for the last 12 years from the corpus of the fund that has now swelled approximately to Rs. Eleven thousand crores. We are in agreement with the submission of the Ld. Counsel for the assesses that SRF is clearly not for fixed period at all We, therefore, find ourselves in agreement with the submissions of Ld. Counsel for the assessee that in view of clause (vii) to section 194A(3), the provisions of section 194A(1) are not attracted to the present case,”
12. I have considered the facts of the case and the decision of the Hon ‘ble ITAT. The ITAT has examined the question of whether the SRF A/c is a time deposit and held that it is not. Therefore, in view of the provisions of section 194A (3) (vii) it has held that the provisions of section 194A(1) have no application to the assessee’s case. Thus, once the ITAT has given a finding of fact that the SRF a/c is not a time deposit, the AO’s action in revisiting the issue on the basis of earlier submission made by the assessee in a verification relating to a previous assessment year (and subsequently retracted) cannot be upheld, in view of the fact that the Hon’ble IT AT has found that the assessee’s case does not fall u/s 194A(1) and that there was no liability or the part of the assessee to deduct any tax on site restoration fund of ONGC or on interest paid on site restoration deposit of ONGC, the assessee cannot be said to be an assessee in default within the meaning of section 201(1). In view of the fact it cannot be held to be an assessee in default u/s 201(1), the question of any liability for interest u/s 201(1A) simply does not arise. Therefore, following the orders of the Hon ‘ble IT AT for the assessment year 2010-11, 2011-12 & 2012-13 on identical issues, I hereby delete the additions made u/s 201(1) & 201 (1A) amounting toRs. 1,05,68,13,294/-.”
6. We, therefore, do not see any merit in this appeal of the Accordingly, no interference is called for in the impugned order passed by the ld. CIT(A).
7. In the result, the appeal of the department is dismissed.
(Order Pronounced in the Court on 10/11/2017)