2007 (9) TMI 440 - AT - Income Tax

Summary

Issues Involved:
1. Confirmation of order u/s 201(1) and 201(1A) read with section 194A.
2. Determination of the status of the Trust as "individual" and applicability of section 194A.

Summary:

Issue 1: Confirmation of order u/s 201(1) and 201(1A) read with section 194A

The learned Commissioner of Income-tax (CIT) confirmed the order made u/s 201(1) and 201(1A) read with section 194A by the Income-tax Officer, TDS Ward 49(2), New Delhi. The Assessing Officer (AO) observed that the assessee, a PF Trust, did not have a TAN number nor was it filing any TDS returns. Consequently, demands under section 201(1) and 201(1A) were raised for financial years 2001-02 to 2004-05. The CIT(A) upheld the AO's orders, relying on the ITAT Delhi Bench decision in the case of ONGC v. ITO [2005] 4 SOT 333, stating that the facts were pari materia with the instant case.

Issue 2: Determination of the status of the Trust as "individual" and applicability of section 194A

The assessee contended that the status of the Trust should be determined as "individual" as per section 2(31) of the Income-tax Act, 1961, and hence, section 194A would not apply. The CIT(A) did not accept this proposition, citing that the case laws referred to by the assessee were not applicable to the issue of tax deduction at source. The Tribunal noted that the tax authorities did not determine the status of the assessee-trust before holding it in default under section 194A. The Tribunal referred to various judicial decisions, including CIT v. SAE Head Office Monthly Paid Employees Welfare Trust [2004] 141 Taxman 364, which held that the status of the trustees should be treated as "individual." Consequently, the Tribunal concluded that the assessee-trust, being an individual, was not liable to deduct tax at source as per section 194A(1) and thus could not be held in default. The demands raised under section 201 and 201(1A) were cancelled, and the appeals were allowed.

Conclusion:

The Tribunal allowed the appeals filed by the assessee, setting aside the orders of the tax authorities and cancelling the demands raised under section 201 and 201(1A) read with section 194A of the Income-tax Act, 1961.