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Issues involved:
- Entitlement of welfare fund boards to receive interest payment without deduction of income tax at source u/s 194A(1) of the Income Tax Act. Summary: The judgment dealt with the issue of whether welfare fund boards, established under various State Legislations, are entitled to receive interest payment without deduction of income tax at source u/s 194A(1) of the Income Tax Act. The petitioners sought a declaration to this effect, arguing that they should be exempt from tax deduction based on their inclusion under a specific clause of a notification issued by the Central Government. However, the court found that the petitioners did not fall within the scope of the exemption notification as they were not considered statutory corporations as per the relevant clause. The court emphasized that the control exercised by the Government over the administration of the boards did not transform them into statutory corporations eligible for the exemption. Therefore, the petitioners were not covered by the exemption notification. Furthermore, the judgment addressed the procedure for the petitioners to claim exemption from tax deduction on interest payments. The court noted that if the petitioners had no tax liability, they should approach the Assessing Officer or the Income Tax Officer for a certificate u/s 197 of the Income Tax Act. However, the court highlighted the importance of establishing entitlement to exemption from income tax, rather than merely seeking payment of interest without tax deduction. The court suggested that the State Government should intervene and take up the matter with the Central Government to seek a policy decision on the exemption claims of various boards with similar objectives. The court directed the respondents to continue withholding the tax portion of the interest for another six months to allow the petitioners time to obtain orders from the Central Government. In conclusion, the writ petitions were disposed of with the court ruling that the petitioners were not entitled to receive interest payment without deduction of tax at source under the current circumstances.
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