2022 (11) TMI 1179 - SCH - Income Tax

Chargeability of TDS on non-convertible debentures and FDR below - HELD THAT - As gone through the judgment and orders passed by the Tribunal as well as the High Court, we are of the opinion that no error has been committed by the Tribunal and/or the High Court on the chargeability of TDS amount on non-convertible debentures and fixed deposit of the value less than Rs.5,000/-. Both, the Tribunal as well as the High Court have concurrently found that on non-convertible debentures and fixed deposit of the value less than Rs.5,000/-, there shall not be any TDS leviable. We are in complete agreement with the view taken by the Tribunal as well as the High Court. Once, there is no liability to deduct TDS on non-convertible debentures and fixed deposit of the value less than Rs. 5,000/-, there is no question of charging any interest. At the same time the issue whether the levy of the interest was time barred considering Section 201(1) / 201(1)(a) has not been dealt with and considered in High Court, we keep the question of law on the aforesaid open.

Summary

Issues Involved:
Chargeability of TDS on non-convertible debentures and fixed deposits below Rs.5,000.

Analysis:

The Supreme Court, comprising Hon'ble Mr. Justice M.R. Shah and Hon'ble Mr. Justice M.M. Sundresh, addressed the issue of the chargeability of Tax Deducted at Source (TDS) on non-convertible debentures and fixed deposits below Rs.5,000. The Court examined the judgments and orders of the Tribunal and the High Court and concluded that no error was found in their decisions regarding the TDS on such financial instruments. Both the Tribunal and the High Court concurred that there should be no TDS levied on non-convertible debentures and fixed deposits valued at less than Rs.5,000. The Supreme Court agreed with this view and upheld the decisions of the lower courts. The Court emphasized that if there is no obligation to deduct TDS on these instruments, there should be no imposition of interest. However, the Court noted that the issue of whether the imposition of interest was time-barred under Section 201(1) / 201(1)(a) of the Income Tax Act, 1961 was not addressed by the High Court. Therefore, the Court left this question open for future consideration.

In conclusion, the Supreme Court dismissed/disposed of the Special Leave Petitions based on the above observations. Any pending applications were also disposed of accordingly.