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2016 (2) TMI 967 - HC - Income TaxPenalty under section 271C r.w.s. 274 - failure to deduct tax at source out of interest paid/credited to four deductees as required under section 194A - ITAT confirms CIT(A) order in deleting penalty - Held that - As decided in CIT (TDS) v. State Bank of Patiala Sectt. Shimla ( 2015 (1) TMI 473 - HIMACHAL PRADESH HIGH COURT ) that no tax at source is required to be deducted in view of section 194A(3)(iii)(f) of the Act in respect of payments made to any societies which are wholly financed by the Government and the Central Government had issued notification exempting those societies. Learned counsel for the Revenue was not able to demonstrate that the approach of the Commissioner of Income-tax (Appeals) and the Tribunal was erroneous or perverse or that the findings of fact recorded were based on misreading or misappreciation of evidence on record warranting interference by this court. - Decided against revenue
Issues:
1. Whether the Income-tax Appellate Tribunal was right in law in deleting the penalty imposed for failure to deduct tax at source under section 271C of the Income-tax Act? 2. Whether the assessee was liable to deduct tax at source under section 194A of the Income-tax Act? 3. Whether the assessee had a genuine belief that it was not required to deduct tax at source under section 194A of the Income-tax Act? Issue 1: Penalty Imposed under Section 271C: The appeal was filed by the Revenue against the order of the Income-tax Appellate Tribunal deleting the penalty imposed under section 271C of the Income-tax Act. The Tribunal upheld the order of the Commissioner of Income-tax (Appeals) who had cancelled the penalty. The Tribunal found that the assessee had a genuine belief that it was not required to deduct tax at source, falling under the provisions of section 273B of the Act. The Tribunal's decision was based on the fact that the assessee had a reasonable cause for the failure to deduct tax at source, as evidenced by the exemption certificate under section 80G(5)(vi) of the Act for one of the societies involved. Issue 2: Liability to Deduct Tax at Source under Section 194A: The Commissioner of Income-tax (Appeals) and the Tribunal examined whether the assessee was liable to deduct tax at source under section 194A of the Income-tax Act. It was observed that for three societies involved, the assessee was not liable to deduct tax at source as per the provisions of section 194A(3)(iii)(f) of the Act read with a specific notification issued by the Central Government. The Tribunal affirmed that the exemption applied to these societies as they were registered under the Societies Registration Act, 1860 and financed by the Government. Issue 3: Genuine Belief for Non-Deduction of Tax at Source: The Tribunal considered whether the assessee had a genuine belief that it was not required to deduct tax at source under section 194A of the Income-tax Act. It was noted that the Tribunal relied on previous judgments and decisions to support the conclusion that the assessee had a genuine belief in not deducting tax at source. The Tribunal emphasized that the penalty was not leviable as the assessee had proven a reasonable cause for the failure to deduct tax at source, aligning with the provisions of section 273B of the Act. In conclusion, the High Court dismissed the appeal by the Revenue, stating that no substantial question of law arose in the case. The decision was based on the findings of the Commissioner of Income-tax (Appeals) and the Tribunal, which were deemed appropriate and not erroneous. The judgment highlighted the importance of genuine belief and reasonable cause in cases of failure to deduct tax at source, emphasizing the legal provisions under the Income-tax Act.
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