2019 (1) TMI 141 - AT - Income Tax

TDS u/s 194A - non deduction of TDS on the payment of interest to STPI - demand U/s 201(1)/201(1A) - Held that - STPI is a society established and registered under the Societies Registration Act, 1860 by the Ministry of Electronics & Information Technology, Government of India on 05/6/1991. As per the notification scheme U/s 194A(3)(iii)(f) of the Act if any society is registered under the Societies Registration Act 1860 and financed wholly by the Government then as per the notification No. SO3489 dated 22/10/1970, the deduction of tax at source is not required so far as the interest paid to such society. Since this status of STPI being notified U/s 194A(3)(iii)(f) of the Act has not been verified by the authorities below, therefore, we set aside this issue to the record of the Assessing Officer for verification and adjudication of this issue whether the STPI is a society falling under the category as notified U/s 194A(3)(iii)(f) of the Act as claimed by the assessee. - Appeal of the assessee is allowed for statistical purposes only

Issues involved:
1. Assessment of demand under Section 201(1A) of the Income Tax Act, 1961 for the A.Y. 2009-10.
2. Applicability of TDS on interest payments made to Software Technology Parks of India (STPI) by a public sector nationalized bank.
3. Challenge to the assessment by the assessee before the ld. CIT(A).
4. Interpretation of the exemption under Section 194A(3)(iii)(f) of the Act for societies registered under the Societies Registration Act, 1860 and financed wholly by the Government.
5. Consideration of the status of STPI as notified under Section 194A(3)(iii)(f) by the Assessing Officer.

Analysis:

1. The appeal was against an order by the ld. CIT(A)-3, Jaipur regarding a demand of ?2,83,592 raised by ACIT(TDS), Jaipur under Section 201(1A) of the IT Act, 1961 for the A.Y. 2009-10.

2. The Assessing Officer held the assessee in default for not deducting TDS on interest payments of ?28,60,035 made to STPI, stating that the payments were subject to TDS under Section 194A of the Act.

3. The ld. CIT(A) upheld the demand on interest payment to STPI but deleted the addition made for payments to National Institute of Agricultural Marketing (NIAM), exempt under Section 10(23)(3b) of the Act.

4. The assessee argued that STPI, being a society registered under the Societies Registration Act, 1860 and financed wholly by the Government, is exempt from TDS under Section 194A(3)(iii)(f) as per notification No. SO3489 dated 22/10/1970. The issue was not raised before the lower authorities.

5. The Tribunal noted that STPI was established by the Ministry of Electronics & Information Technology, Government of India, and set aside the issue for verification by the Assessing Officer to determine if STPI falls under the exemption criteria of Section 194A(3)(iii)(f).

6. The Tribunal emphasized the need for verification of STPI's status under the relevant notification and directed the Assessing Officer to conduct a thorough examination. The assessee was granted a hearing opportunity before any final decision.

7. The appeal of the assessee was allowed for statistical purposes only, indicating a procedural victory without altering the tax liability.

This detailed analysis highlights the legal issues, arguments presented, and the Tribunal's decision to remit the matter for further verification, ensuring a fair assessment based on the specific provisions of the Income Tax Act.

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