2015 (12) TMI 1546 - HC - Income Tax

Right to be exempted from depositing the tax (TDS) liability on assessee bank before filing an appeal - whether the petitioner-Bank had raised the contention before the ITO with regard to the benefit granted to the petitioner Bank under the proviso attached to Section 201 (1) of the Act or not? - Held that - The demand can be stayed by the learned Commissioner, provided that demand in dispute relates to issues that have been decided in assessee s favour by an Appellate Authority, or the Court earlier. However, the learned counsel for the petitioner has not been able to show this Court as to which Appellate Authority, or by which Court the issues involved in the present case have already been decided, that, too, in favour of the petitioner-Bank. Thus, obviously, the petitioner-Bank cannot claim that it falls under illustration (a) of para-C of Instruction No.1914. For a statutory duty has been imposed upon the Bank to deduct the TDS. In case the Bank does not deduct the TDS, it has to face the consequences as mentioned in Section 201 of the Act. Since Section 249(4) of the Act imposes a duty upon the assessee to deposit the entire amount, before that appeal can be admitted, the Bank cannot escape from its liability to follow the mandate of Section 249(4) of the Act. Although Instruction No.1914 does create exception to Section 249(4) of the Act, as mentioned above, the petitioner-Bank cannot take any benefit from Instruction No.1914, as it does not come within the ambit and scope of the said instruction. - Decided against assessee.

Summary

Issues:
Challenge to order rejecting stay of demand under Income Tax Act, 1961.

Analysis:
1. The petitioner, a bank, challenged the rejection of its prayer for stay of demand by the Commissioner of Income Tax (Appeals). The bank had not deducted TDS on interest payments to a university based on the university's claim of exemption from filing returns under the Income Tax Act.

2. The Income Tax Officer issued summons and notices to the bank regarding the TDS issue. Despite explanations provided by the bank, the Officer treated the bank as an assessee in default and raised a substantial interest payment demand for multiple assessment years.

3. The bank filed an appeal and a petition for stay of demand before the Commissioner of Income Tax (Appeals). The Commissioner directed the bank to pay 50% of the disputed demand but rejected the application for stay, leading to the present challenge before the High Court.

4. The High Court examined the legal provisions and arguments presented. The bank contended that it fell within an exception to TDS deduction under Section 201 of the Act and should be granted a stay. However, the Court found discrepancies in the bank's contentions before the Income Tax Officer and the absence of recorded contentions in the assessment order.

5. The Court refrained from expressing opinions on certain issues to avoid affecting the pending appeal. It focused on whether the bank could claim exemption from depositing tax liability before admission of its appeal, analyzing relevant sections and discretionary powers of the Commissioner.

6. The Court scrutinized the Commissioner's decision not to grant a stay, emphasizing the necessity for good and sufficient reasons for such decisions. It found that the bank did not meet the criteria for stay as per the instructions provided, and the bank's status as a public sector undertaking did not exempt it from statutory duties.

7. Ultimately, the High Court dismissed the petitions, stating that no illegality or perversity was found in the Commissioner's decision. The bank's arguments were deemed meritless, and the orders rejecting the stay of demand were upheld.