2015 (11) TMI 1363 - AT - Income Tax

TDS u/s 194A - Site Restoration Account - Held that - Following the decision of coordinate bench of the ITAT in the case of the assessee itself 2014 (7) TMI 905 - ITAT DELHI we hold that Site Restoration Account is not a term deposit for a fixed period and therefore in view of clause (vii) to section 194A(3), provision of section 194A are not applicable and the assessee was not liable for deducting tax at source on the interest credited in SRA. - Decided in favour of assessee

Summary

Issues:
1. Validity of the order of the Commissioner of Income-Tax (Appeals) as barred by limitation.
2. Tax liability on interest accrued on the Site Restoration Account (SRA) maintained by the assessee bank for Oil and Natural Gas Corporation Ltd. (ONGC).
3. Applicability of TDS provisions under section 194A on interest credited in SRA.
4. Adherence to the decision of the co-ordinate bench of the Income-tax Appellate Tribunal (ITAT) in a previous case.

Issue 1: Validity of the order of the Commissioner of Income-Tax (Appeals) as barred by limitation:
The Revenue appealed against the order of the Commissioner of Income-Tax (Appeals) (CIT(A)) dated 31.05.2013, alleging that the CIT(A) erred in holding the order of the Assessing Officer (AO) as barred by limitation. The AO had raised demands under sections 201 and 201(1A) of the Income Tax Act, contending that the assessee failed to deduct tax on interest accrued on the Site Restoration Account (SRA) maintained for ONGC. The CIT(A) held the AO's order invalid due to non-compliance with the limitation period under section 201(3)(i) of the Act, which requires the AO to pass the order within 2 years from the end of the financial year in which the statement was filed. The CIT(A) did not adjudicate on the merits due to the limitation issue.

Issue 2: Tax liability on interest accrued on the Site Restoration Account (SRA):
The assessee, a scheduled commercial bank, argued that as per section 33ABA of the Act, interest credited in the SRA for ONGC was deemed a deductible deposit and excluded from total income chargeable under the Act. The assessee contended that the interest was not taxable even upon withdrawal if utilized for SRA scheme purposes. However, the AO disagreed, holding the assessee in default for not deducting tax and raised demands under sections 201 and 201(1A) of the Act.

Issue 3: Applicability of TDS provisions under section 194A on interest credited in SRA:
The ITAT ruled that the Site Restoration Account is not a term deposit for a fixed period, and therefore, the provisions of section 194A regarding TDS are not applicable. Citing a previous decision in favor of the assessee, the ITAT held that the assessee was not liable to deduct tax at source on the interest credited in the SRA.

Issue 4: Adherence to the decision of the co-ordinate bench of the ITAT in a previous case:
The ITAT emphasized that it is bound to follow the decision of a co-ordinate bench in a previous case involving a similar issue. As the decision favored the assessee and established that the SRA was not a term deposit, the ITAT dismissed the Revenue's appeal, rendering the issue of the order being barred by limitation academic and infractuous.

In conclusion, the ITAT dismissed the Revenue's appeal, upholding the assessee's position that the interest credited in the Site Restoration Account was not subject to TDS provisions under section 194A. The decision was based on the precedent set by a previous case and the interpretation of relevant provisions of the Income Tax Act.