2015 (4) TMI 1138 - AT - Income Tax

TDS u/s 194H - commission for daily collection purpose in respect of pigmy deposits without deduction of tax at source - ndividuals whom commission was paid for daily collection the same was treated as salary incomeHeld that - Tax was required to be deducted by treating the payment as salary in respect of three individual NNND Agents, hired by banks for daily collection purposes in respect of Pigmy deposits, in view of the letter dated 12.12.2007, issued by Under Secretary (ITB) from F.No. 275/75/2007-ITB. The Assessing Officer has wrongly treated the payment made to these individuals as commission u/s 194 H of the Act. In our opinion the Ld. CIT(A) has correctly decided the issue because if an organization is exempted then same is not liable to tax and therefore there is no need for deduction of tax. Therefore we find nothing wrong in the order of Ld. CIT(A) and confirm the same. Non TDS on interest paid to PEC University of Technology (Pension Fund Trust) - Held that - The scheme of the provisions for deduction of tax at source applied not only to the amount paid, which bears the character of income , such as salaries, dividends, interest on securities, etc., but also to gross sums, the whole of which may not be income or profits in the hands of the recipient, such as payment to contractors or sub-contractors. The purpose of the provisions for deduction of tax at source in Chapter XVII-B of the Income-tax Act, 1961, is to see that from the sum which is chargeable under section 4 for levy and collection of income-tax, the payer should deduct tax thereon at the rates in force, if the amount is to be paid to a non-resident. They are meant for tentative deduction of income-tax subject to regular assessment. Thus from above it is clear that normally a person making payment is required to deduct the tax as per the provisions of the Act because this is a tentative deduction.Pension fund trust of the PEC University of Technology has not been approved so far and infact in reply to query raised by the branch, it was clearly admitted by the Ld. Counsel for the assessee that University has not been able to provide to the counsel any information on this. Therefore only presumption is that this trust has not been recognized so far. The income of trust which is not approved by the Commissioner is not exempted and therefore tax was required to be deducted by the bank.

Summary

Issues:
1. Deduction of interest paid on FDRs without TDS under section 194A.
2. Treatment of interest payments to specific parties and individuals for tax deduction purposes.
3. Dispute regarding interest paid to PEC University of Technology (Pension Fund Trust) under section 201(1)/1A.

Issue 1: Deduction of interest paid on FDRs without TDS under section 194A:
The Revenue challenged the deletion of an addition made on interest paid on Fixed Deposit Receipts (FDRs) without Tax Deducted at Source (TDS) under section 194A. The CIT(A) held that the tax was not required to be deducted on interest paid to various parties based on the exemption provisions of the Income Tax Act. The AO questioned the non-deduction of tax on interest payments to specific parties and individuals, leading to a tax demand. The CIT(A) allowed the appeal partly, concluding that tax was not deductible for most parties except in one case. The ITAT upheld the CIT(A)'s decision, stating that if an organization is exempted, there is no need for tax deduction.

Issue 2: Treatment of interest payments to specific parties and individuals for tax deduction purposes:
The dispute involved interest payments made to various parties and individuals, including PEC University of Technology and three individuals hired for daily collection purposes. The CIT(A) analyzed the exemption provisions under the Income Tax Act for each party and individual. The ITAT confirmed the CIT(A)'s decision, emphasizing that tax deduction was not required for most cases based on the specific exemptions provided under the Act.

Issue 3: Dispute regarding interest paid to PEC University of Technology (Pension Fund Trust) under section 201(1)/1A:
The appellant contested the order treating them as an 'assessee in default' for interest paid to PEC University of Technology (Pension Fund Trust) under section 201(1)/1A. The CIT(A) upheld the order for tax deduction on the interest paid to the Pension Fund Trust, leading to a confirmed demand. The ITAT supported the CIT(A)'s decision, stating that tax deduction was necessary as the trust had not been approved, making the income not exempted and liable for tax deduction.

In conclusion, the ITAT dismissed both appeals, upholding the CIT(A)'s decisions on tax deduction issues related to interest payments and confirming the tax liabilities in specific cases based on the provisions of the Income Tax Act.