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2015 (1) TMI 473 - HC - Income TaxTDS u/s 194A on interest - Exemption under Section 194A(3)(f) - Whether the assessee was required to apply for exemption and the same could only be granted to the assessee after the Central Government issued a notification in this behalf in the official gazette? Held that - Once the notification stands issued, it is not the requirement of the Act for the assessee to either apply or seek exemption from the Authorities under the Act or the Central Government. Expression reasons to be recorded in writing are in reference to the stage preceding issuance of notification by the Central Government. Reasons have to be that of the Central Government and not the assessee. 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.
Issues:
1. Interpretation of Section 194A(3)(f) of the Income Tax Act for exemption. 2. Alleged non-compliance with statutory provisions by the assessee regarding TDS deduction. 3. Validity of the notice issued under Section 201(1) /201(1A) of the Act. 4. Decision of the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal. 5. Application of relevant provisions of the Act in the case. Interpretation of Section 194A(3)(f) for Exemption: The case revolved around the interpretation of Section 194A(3)(f) of the Income Tax Act regarding exemption. The dispute arose from the alleged failure of the assessee to deduct TDS as required by Section 194A(1) when making payments to entities wholly funded by the government. The Central Government had issued a notification exempting such entities, including societies, from TDS deductions. The court held that once the notification exempting the societies was issued, the assessee was not required to seek further exemption. The language of the Act was deemed clear, and the provisions of Section 194A did not apply to payments made to exempted societies. The court emphasized that the reasons for exemption had to be those of the Central Government, not the assessee. Alleged Non-Compliance and Notice Issued: The case originated from the alleged non-compliance of the assessee with the TDS provisions under Section 194A(1) of the Income Tax Act. The Revenue initiated proceedings and issued a notice under Section 201(1) /201(1A) of the Act due to the failure to deduct TDS on certain payments made by the assessee. The Income Tax Officer raised demands and took penal action, leading to an appeal by the assessee against these actions. Decision of the Appellate Tribunal: The Commissioner of Income Tax (Appeals) in Shimla reversed the findings against the assessee, a decision that was affirmed by the Income Tax Appellate Tribunal in Chandigarh. The Tribunal's order in favor of the assessee was based on the exemption provided under Section 194A(3)(f) for societies wholly financed by the government. The Tribunal held that the assessee was not required to deduct TDS from payments made to such exempted societies. Application of Relevant Provisions: The court examined the relevant provisions of the Income Tax Act, specifically Section 194A, to determine the applicability of TDS deductions to payments made by the assessee to government-funded societies. The Central Government's notification exempting these societies from TDS deductions played a crucial role in the court's decision to uphold the order of the Appellate Authority. The court concluded that once the Central Government issued the notification, the provisions of Section 194A(1) became inapplicable to the payments made by the assessee to the exempted societies. In conclusion, the court upheld the order of the Appellate Authority, answering the substantial question of law in favor of the assessee. The appeal was disposed of accordingly, along with any pending applications.
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