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2020 (1) TMI 249 - AT - Income TaxTDS u/s 194 - interest on deposit to Karnataka Building Other Construction Workers Welfare Board - assessee in default for not deducting tax at source - HELD THAT - As brought to our notice by the ld. Counsel for the assessee that the organization to which the assessee paid interest viz., Karnataka Building Other Construction Workers Welfare Board was an entity falling within section 194A(3)(iii)(f) of the Act and therefore there was no obligation on the part of assessee to deduct tax at source on payment of interest to the aforesaid organization. Reliance was placed on the order of the Tribunal in the case of Canara Bank v. ITO 2015 (9) TMI 1674 - ITAT BANGALORE wherein the issue was decided in favour of the assessee. Since this Tribunal has already taken a view that the person to whom interest was paid was falling within the ambit of section 194A(3)(f) of the Act, there cannot be any order treating the assessee as an assessee in default u/s. 201(1) and also levying interest u/s. 201(1A) of the Act. We accordingly cancel the orders passed u/s. 201(1) 201(1A) of the Act and allow the appeal of the assessee.
Issues Involved:
1. Condonation of delay in filing the appeal. 2. Non-deduction of tax at source on interest payment to Karnataka Building & Other Construction Workers Welfare Board under Section 194A(3)(iii)(f) of the Income Tax Act. 3. Treatment of the assessee as an assessee in default under Sections 201(1) and 201(1A) of the Income Tax Act. Issue-wise Detailed Analysis: 1. Condonation of Delay in Filing the Appeal: The appeal by the assessee was delayed by approximately 239 days. The delay was attributed to the change in office premises due to the merger of State Bank of Travancore (SBT) with State Bank of India (SBI), causing a delay in obtaining approval from the Head Office. The Tribunal considered the submission and found no negligence or lack of diligence on the part of the assessee. The reasons for the delay were deemed reasonable and with sufficient cause. Consequently, the delay in filing the appeal was condoned. 2. Non-Deduction of Tax at Source on Interest Payment: The assessee bank paid ?60,67,388 as interest to the Karnataka Building & Other Construction Workers Welfare Board during the FY 2012-13 without deducting tax at source. The Assessing Officer (AO) passed an order under Sections 201(1) and 201(1A) of the Income Tax Act, treating the assessee as an assessee in default for not deducting tax at source under Section 194A. On appeal, the CIT(A) confirmed the AO's order. During the Tribunal hearing, it was argued that the Karnataka Building & Other Construction Workers Welfare Board falls under Section 194A(3)(iii)(f) of the Act, exempting the assessee from the obligation to deduct tax at source. Reliance was placed on the Tribunal's decision in the case of Canara Bank v. ITO, where a similar issue was decided in favor of the assessee. The Tribunal noted that Section 194A(1) mandates the deduction of income tax on interest payments, but Section 194A(3) provides exemptions for certain types of interest payments. The Tribunal examined the constitution of the Karnataka Building & Other Construction Workers Welfare Board, which was established through a notification under Section 18 of the Building and Other Construction Workers (Regulation and Employment and Conditions of Service) Act, 1996. The Board was deemed a body corporate, and the Tribunal concluded that it falls within the ambit of Section 194A(3)(iii)(f) of the Act. The Tribunal distinguished the present case from the judgments in Dalco Engineering P. Ltd and Kerala Toddy Workers Welfare Fund, finding them not applicable to the facts of this case. 3. Treatment of the Assessee as an Assessee in Default: The Tribunal held that since the Karnataka Building & Other Construction Workers Welfare Board falls within the ambit of Section 194A(3)(iii)(f), the assessee was justified in its belief that it was not liable to deduct tax at source on the interest payments. The Tribunal concluded that the assessee could not be deemed an assessee in default under Sections 201(1) and 201(1A) of the Act. Consequently, the orders passed under these sections were set aside, and the appeal of the assessee was allowed. Conclusion: The Tribunal allowed the appeal, condoned the delay in filing, and canceled the orders treating the assessee as in default under Sections 201(1) and 201(1A) of the Income Tax Act. The decision was pronounced in the open court on December 30, 2019.
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