Case Law Details
Case Name : Commissioner of Income Tax (TDS) Vs State Bank of Patiala, IT (Himachal Pradesh High Courts)
Appeal Number : ITA No.17 of 2014
Date of Judgement/Order : 31/12/2014
Related Assessment Year :
Brief of the case:
The Hon’ble Himachal Pradesh High Court in the case of CIT vs. State Bank of Patiala held that the exemption notification issued by Central Govt. allowing non-deduction of TDS in case of certain deductees has an automatic effect as soon as the same is issued and there is no such requirement in the act to obliging deductor to specifically apply for availing the benefit under that notification.
Facts of the case:
- The assessee banking company paid interest to M/s Biotech Biobusiness and HP SITEG, wholly financed and controlled establishment of the Government on deposits made with the assessee (bank).Assessee did not deduct tax u/s 194A on interest payment made to such government establishment.
- Revenue initiated proceedings u/s 201(1)/201(1A) by issue of show cause notice and subsequently ITO(TDS) passed order confirming the demand and penalties.
- The actions of revenue was challenged before CIT(A) who reversed the findings of revenue and the order of CIT(A) was confirmed by ITAT also.
Contention of Assessee:
- The assessee contended that the societies wholly financed by the government institution notified by the Central Govt. u/s 194A(3)(f) are exempt from the applicability of Sec 194A.
- Therefore , the interest paid to them is not subject to TDS u/s 194A.
Contention of Revenue:
- The revenue contended that the assessee did not apply for any exemption for non-deduction of tax at source. The exemption from tax deduction as notified has to be claimed by making a pre-application thereof.
- Thus, the assessee has defaulted in tax deduction for which AO’s order raising demand and imposing penalties is justified.
Issue before High Court:
Whether the notification issued u/s 194A(3)(f) by Central Government exempting certain payments made to government establishment is allowed only when it is applied for before tax authorities?
Held by Hon’ble High Court:
- Sec 194A(3)(f) empower Central Government to issue notification exempting applicability of Sec 194A in respect of certain class of deductees for the reasons to be recorded in writing.
- Once the exemption notification issued, it is nowhere mentioned in the act the same need to be specifically applied for.
- With the issuance of notification by the Central Government, which is not the subject matter of challenge herein, provisions of Section 194(A) (1) of the Act, automatically becomes inapplicable.
- Thus, the court do not find any infirmity in the order passed by tribunal and thereby upheld the same.
- In result the appeal field by the revenue was dismissed.