2017 (11) TMI 679 - AT - Income Tax

TDS u/s 194A - payment of interest In Site Restoration Fund Account - whether deposits in Site Restoration Fund Account are made for a fixed period and which carry interest as applicable to time deposit - Held that - As decided in assessee s own case in view of the provisions of section 194A(3)(vii) it has held that the provisions of section 194A(1) have no application to the assessee s case. Thus, once the ITAT has given a finding of fact that the SRF a/c is not a time deposit, the AO s action in revisiting the issue on the basis of earlier submission made by the assessee in a verification relating to a previous assessment year (and subsequently retracted) cannot be upheld, in view of the fact that the Hon ble IT AT has found that the assessee s case does not fall u/s 194A(1) and that there was no liability or the part of the assessee to deduct any tax on site restoration fund of ONGC or on interest paid on site restoration deposit of ONGC, the assessee cannot be said to be an assessee in default within the meaning of section 201(1). In view of the fact it cannot be held to be an assessee in default u/s 201(1), the question of any liability for interest u/s 201(1A) simply does not arise. - Decided against revenue

Summary

Issues Involved:
1. Applicability of Section 194A of the IT Act, 1961 on the payment of interest in the Site Restoration Fund Account.
2. Determination of whether the Site Restoration Fund Account is a time deposit.
3. Liability of the assessee under Section 201(1) and 201(1A) of the IT Act.

Issue-wise Detailed Analysis:

1. Applicability of Section 194A on Payment of Interest in the Site Restoration Fund Account:
The department contended that the provisions of Section 194A of the IT Act, 1961, which mandates the deduction of tax at source (TDS) on interest payments, should apply to the interest accrued in the Site Restoration Fund (SRF) Account. The CIT(A) had previously held that Section 194A was not applicable, and this appeal challenged that decision.

2. Determination of Whether the Site Restoration Fund Account is a Time Deposit:
The core of the dispute was whether the SRF Account qualifies as a "time deposit," which would necessitate TDS under Section 194A. The Tribunal examined the provisions of Section 33ABA and the nature of the SRF Account. It was noted that the SRF Account is not for a fixed period but is contingent upon specific conditions related to the business of prospecting, extraction, or production of petroleum or natural gas. The Tribunal cited its previous judgment in the assessee's own case for the assessment years 2010-11 to 2012-13, where it was held that the SRF Account does not qualify as a time deposit. The Tribunal reiterated that the SRF Account's withdrawal conditions and the nature of deposits do not align with the definition of a "time deposit" as per Section 194A(3)(vii).

3. Liability of the Assessee under Section 201(1) and 201(1A):
Given that the SRF Account was determined not to be a time deposit, the provisions of Section 194A(1) were deemed inapplicable. Consequently, the assessee could not be held liable for non-deduction of TDS under Section 201(1). Furthermore, since there was no liability under Section 201(1), the associated interest liability under Section 201(1A) also did not arise. The Tribunal upheld the CIT(A)'s decision to delete the additions made under Sections 201(1) and 201(1A), amounting to Rs. 1,05,68,13,294/-.

Conclusion:
The Tribunal found no merit in the department's appeal and upheld the CIT(A)'s order, confirming that the provisions of Section 194A do not apply to the interest accrued in the SRF Account. Consequently, the appeal of the department was dismissed.

Final Judgment:
The appeal of the department is dismissed, and the order of the CIT(A) is upheld. There is no liability on the assessee under Sections 201(1) and 201(1A) of the IT Act, 1961. (Order Pronounced in the Court on 10/11/2017)