NON-SUBMISSION OF FORM 15G/15H TO THE COMMISSIONER FOR TDS UNDER SECTION 194A

[Mr. M. GOVINDARAJAN]

Section 194A of the Income Tax Act, 1961 (‘Act’ for short) mandates for the deduction of tax at source (‘TDS’ for short) on interest other than interest on securities.  The people used to invest in Fixed Deposits in banks and in non-banking financial corporations.  TDS on FD interest attracts a tax deduction of 10%. This charge is levied on income more than Rs 40,000 if the depositor is less than 60 years of age. For senior citizens, i.e. people above 60 years of age, TDS on interest on Fixed Deposit is levied if the interest income exceeds Rs 50,000 in a financial year.   The bank or the financial institution in which the Fixed Deposit is held is responsible for deducting TDS on FD.  The rate of TDS on Fixed Deposit interest increases to 20% if the PAN details of the investor are not available. 

All Fixed Deposit holders who wish to avail of TDS waiver on FD must submit Form 15G or Form 15H to the concerned bank. These are self-declaration forms that claim that the total income is below the exemption limit and the tax payable, if any, will be paid by the depositor at the time of self-assessment tax filing.  Form 15G is to be submitted if the depositor is below 60 years of age. The 15G Form states that the annual income of the depositor is less than Rs. 2.5 lakh, and the tax liability is NIL.  Form 15H is to be submitted if the depositor is more than 60 years old. It is only for Senior Citizens and states that their annual income is less than Rs. 3 lakhs. Super Senior Citizens i.e. people above the age of 80 years, must also submit the 15H Form if their annual income is less than Rs. 5 lakhs. 

The bank is to collect the forms 15G/15H from the depositors and forward one copy of  the same to the Commissioner for TDS on or before the seventh day of the month next following the month in which the declaration is furnished to him.  If the same have not been submitted then it will be presumed that the bank has not deduct tax act source on the interest other than securities and the same will be disallowed.

In M/S DISTRICT COOPERATIVE BANK LIMITED VERSUS DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-I, BAREILLY - 2024 (11) TMI 626 - ITAT LUCKNOW, the appellant bank, in this case, paid interest to its depositors without deducting tax.  The Assessing Officer required the assessee to submit the details of interest paid more than Rs.10000/-.  The assessee submitted the same to the Assessing Officer of its 21 branches.  The bank collected Form 15G/15H from each and every depositor.  The Assessing Officer held that the assessee could not able to explain how the TDS forms have been procured from the Deposits and to whom the same have been forwarded.  Therefore, the Assessing Officer held that the assessee has not deducted tax at source and disallowed the interest paid to the extent of Rs.1.02 crores.  The assessee filed an appeal before the Commissioner of Income Tax (Appeals) against the order of Assessing Officer. 

Before the Commissioner of Income Tax (Appeals) the assessee contended that all the branches of the bank were situated in remote rural areas and required Forms 15G/15H from the depositors for non-deduction had been collected in each case.  The Commissioner of Income Tax (Appeals) found that the appellant has not delivered one copy of the TDS form 15G/15H to the Income Tax Authorities, which is an essential condition to be fulfilled by the banks.  The Commissioner of Income Tax (Appeals) considered that there may be chances to manipulate the said forms.  Further it may be a strategy to attract more customers to solicit more customers.  There shall be no reason for non-delivering a copy of the TDS form by the bank.  Since the essential conditions laid down in Section 197A(2) of the Act the Commissioner of Income Tax (Appeals) confirmed the assessment made by the Assessing Officer.

The bank, being aggrieved by the order of Commissioner of Income Tax (Appeals) filed the present appeal before the Income Tax Appellate Tribunal (‘ITAT’ for short).  Before the ITAT, the appellant submitted the following-

• The assessee did not deduct the tax at source under section 194A, on the basis of Forms 15G/15H deposited by the customer under section 197A(1A).
• The Assessing Officer and Commissioner of Income Tax (Appeals) have not appreciated the fact that the branches have obtained the Forms 15G/15H from the depositors.
• Both the authorities confirmed the demand since a copy of the TDS form has not been delivered to the prescribed authorities.

The appellant relied on a judgement of ITAT, Hubli in THE KARUR VYSYA BANK LTD. VERSUS THE ASSISTANT COMMISSIONER OF INCOME TAX, TDS CIRCLE, HUBLI - 2017 (9) TMI 829 - ITAT BANGALORE in which the ITAT held that since the assessee had filed the forms, the lower authorities should have examined the same.  The ITAT remanded the matter back to the Assessing Officer and directed the lower authorities to examine the same.  If the said forms are said to be correct on verification the assessee shall not be held as in default. 

The Revenue contended before the ITAT that the assessee was not only to collect the Forms 15G/15H, but also to submit the same on time to the prescribed authority for verification. Therefore, the interest paid without deduction of tax, was liable to be added back under section 40(a)(ia).

The ITAT considered the submissions of both the parties.  The ITAT analysed the entire facts of the case.  The ITAT also relied on various judgments of various ITAT.  The ITAT felt that the failure to submit the form 15G/15H to the Commissioner is a technical breach and the assessee cannot be saddled with a tax liability, only on this account.  the basic purpose of submission of these forms to the Commissioner, is to enable verification of the same.  The ITAT was of the opinion that the Assessing Officer should verify the correctness of the Forms 15G/15H and if the forms are found to be correct, the assessee should be granted the relief under section 197A.  If the forms are not verifiable, Assessing Officer may act, in accordance with law.  Therefore, the ITAT set aside the impugned orders passed by the lower Authorities.  The ITAT directed the bank to produce the Form 15G/15H and all details for verification.  The Assessing Officer is directed to make a fresh assessment, after conducting such verification.