2013 (4) TMI 453 - HC - Income Tax

TDS on amount deposited as provided in the third proviso to Sub-Section (1) of Section 33ABA. - It is the contention of State Bank of India that any withdrawal from the said Account will be deemed to be income, under Sub-Section 5 of Section 33ABA, of ONGC. It is the contention of State Bank of India that, inasmuch as, interest, thus credited in the Account, is to be treated as deposit, the same cannot be treated as income by way of interest as dealt with in Section 194A of the Income Tax Act. It is the further contention of State Bank of India that since the deposit, thus credited in the Account, cannot be treated as income by way of interest, there is no obligation on the part of State Bank of India to deduct tax at source and, thereupon, to deposit the same with the Revenue. Held that - having regard to the fact that State Bank of India was aware of the fact that its challenge to the legality of the demand can only be assailed by preferring an appropriate Appeal and it approached the writ Court only for a limited protection until such time the Appellate Authority considers its Appeal and the connected application for stay of the demand and having regard to the fact that an Appeal has been preferred by State Bank of India against the assessment orders and, along with that, it has also applied for stay of the demand pursuant to the assessment, we dispose of this Appeal and, thereby, while set aside the order under Appeal, permit State Bank of India to press its application for stay before the Appellate Forum, where it is pending with a request to the appellants not to enforce the demand before that application is heard and decided, one way or the other.

Issues:
1. Interpretation of Section 33ABA of the Income Tax Act, 1961 regarding Site Restoration Fund and interest credited by State Bank of India.
2. Obligation of State Bank of India to deduct tax at source on interest credited and deposit the same with the Revenue.
3. Assessment of tax liability by the Assessing Authority on State Bank of India for alleged failure to deduct tax at source.
4. Legality of the demand raised under Section 156 of the Income Tax Act.
5. Time limit for meeting the demand and the reduction of time from 30 days to 7 days.
6. Writ petition filed by State Bank of India seeking protection until the Appellate Authority considers its Appeal and application for stay of the demand.

Analysis:
1. The case revolves around the interpretation of Section 33ABA of the Income Tax Act, specifically concerning the Site Restoration Fund and interest credited by State Bank of India. The bank argues that the interest credited should be treated as a deposit under the Act, not as income subject to tax deduction under Section 194A. State Bank of India contends that the Assessing Authority incorrectly assessed its tax liability for not deducting tax at source on the interest credited.

2. State Bank of India asserts that it is not obligated to deduct tax at source on the interest credited since it is considered a deposit under Section 33ABA. The bank challenges the demand raised by the Assessing Authority under Section 156 of the Income Tax Act, claiming it to be inappropriate and illegal. The dispute arises from the differing interpretations of whether the interest credited should be treated as income or as a deposit.

3. The Assessing Authority imposed a tax liability on State Bank of India for its alleged failure to deduct tax at source and deposit the same with the Revenue. State Bank of India contests this assessment, arguing that the interest credited should not be considered income by way of interest under Section 194A, thus relieving the bank from the obligation to deduct tax at the source.

4. The legality of the demand raised under Section 156 of the Income Tax Act is questioned by State Bank of India. The bank argues that there is no basis for the demand and challenges the Assessing Authority's assessment of its tax liability for the alleged failure to deduct tax at source and deposit the same with the Revenue.

5. The time limit for meeting the demand is a crucial aspect of the case, with State Bank of India highlighting that the statutory time granted for meeting the demand is 30 days. However, the time limit was reduced to 7 days using the proviso to Sub-Section (1) of Section 220, which State Bank of India claims is unjustified given the circumstances of the case.

6. State Bank of India filed a writ petition seeking protection until the Appellate Authority considers its Appeal and application for stay of the demand. The court acknowledged the bank's appeal and application for stay, permitting State Bank of India to press its application for stay before the Appellate Forum without enforcement of the demand until the application is heard and decided. The court disposed of the appeal, setting aside the previous order and providing State Bank of India with the opportunity to present its case before the Appellate Forum.

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