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TMI Blog2014 (11) TMI 412X X X X Extracts X X X X X X X X Extracts X X X X ..... educted at source (hereafter 'TDS') certificates. 2. The writ petition (W.P.(C) No.2714/2014) has been filed impugning an order dated 10.03.2014 passed by the Deputy Commissioner of Income Tax, holding the petitioner bank to be an assessee in default within the meaning of Section 201(1) of the Income Tax Act, 1961 (hereafter the 'Act') for a sum of Rs. 7,78,34,950 determined under Section 201(1)/(lA) of the Act. 3. The brief facts necessary for considering the present petitions are that the petitioner bank, on 29.09.2004, accepted a Fixed Deposit (FD) for a sum of Rs. 7,07,45,550/- in the name of Register General of this Court and issued a Fixed Deposit Receipt (FDR) bearing no. 163275. The said FD was made in compliance of a direction passed by this Court in Execution Petition No. 216/1999 titled as 'Union of India v. Oriental Building Furnishing Co. Ltd.' The said FD was initially for a period of one year, however, before maturity of the said FD, certain amount was paid to M/s CJ International Hotel on 27.10.2004 and the remaining amount of Rs. 6,93,87,888/- (being balance principal and accrued interest) was again accepted as a FD for a period of one year. The said FD was renew ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. 4. The CBDT, thereafter, issued the impugned circular (bearing no. 8/2011 dated 14.10.2011) clarifying that Banks would have to deduct TDS under Section 194A of the Act at the time of accrual of interest and issue the TDS certificate in the name of the depositor. The relevant portion of the said Circular is quoted below:- "3.1 The matter has been examined in the Board and it has been decided that, subject to para 4 below, this circular shall be applicable to cases where one or more than one litigant is directed by the court that a specified amount be deposited in the bank directly or through the court. The bank shall in accordance with the provisions of the Act, deduct tax at source on the interest accruing on the above mentioned deposit(s) as per existing procedure and at the rates in force. The certificate of deduction of tax shall be issued by the bank in the name of 'the depositor'. If more than one person has been directed to deposit any specified amount, the amount of TDS shall be corresponding to each such depositor for the portion of interest accrued in its respective share in the total amount deposited and TDS certificates shall be accordingly issued by the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty Commissioner of Income Tax. 8. Essentially, the controversy in the present case involves the question whether the provisions of Chapter XVII of the Act would be applicable in respect of interest which is payable on the fixed deposits maintained by this Court with the petitioner bank, in the name of the Registrar General. Concededly, money deposited by litigants or at their instance in this Court and kept in fixed deposit with the petitioner bank are not funds or assets of this Court and would be payable to the person as may be ultimately directed in the concerned proceedings. Any accretion on account of interest on the said deposits also do not inure to the benefit of this Court 9. There are myriad of situations in which this Court directs deposit of money by litigants or at their instance; directions for depositing funds in a case are made after considering the relevant facts and circumstances of that case. The final recipient or the beneficiaries of the funds can be ascertained only after appropriate orders are passed in those proceedings. 10. It is in the above circumstances that applicability of the provisions of Chapter XVII of the Act are to be considered. 11. Chapter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 191 of the Act provides that where provisions are not made for deducting income tax at the time of payment or in accordance with the provisions of Chapter XVII of the Act, income tax shall be paid by the assessee directly. Section 190 and 191 of the Act are relevant and are quoted below:- "190. Deduction at source and advance payment. - (1) Notwithstanding that the regular assessment in respect of any income is to be made in later assessment year, the tax on such income shall be payable by deduction or collection at source or by advance payment, as the case may be, in accordance with the provisions of this Chapter. (2) Nothing in this section shall prejudice the charge of tax on such income under the provisions of sub-section (1) of section 4. 191. Direct payment. - In the case of income in respect of which provision is not made under this Chapter for deducting income-tax 1673 at the time of payment, and in any case where income-tax has not been deducted in accordance with the provisions of this Chapter, income-tax shall be payable by the assessee direct." 14. Thus, although the collection of tax by deduction at source may precede the assessment, it is clear that the same doe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 201 of the Act, if a person who is obliged to deduct tax at source and pay to the Central Government, fails to do so, he would - by legal fiction - be considered as an assessee in default and be subjected to proceedings for recovery of tax in the same manner as an assessee who had defaulted in paying his taxes. Section 202 of the Act also clarifies that deduction of tax is only one of the modes of recovery of tax and is without prejudice to other modes of recovery of tax under the Act. The important aspect to bear in mind is that notwithstanding the deeming provision of Section 201 of the Act, the provisions for recovery of tax are not in respect of tax levied or chargeable on the payer but the recipient assessee. 17. In the present case, the controversy is regarding applicability of Section 194A of the Act which provides for deduction of tax at source in respect of any payment/credit on account of interest, other than interest on securities. Section 194A(1) of the Act is quoted as under:- "194A. Interest other than "Interest on securities".-(1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any income by way of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioner would have no obligation to deduct tax, because at the time of credit there is no person assessable in respect of that income which may be represented by the interest accrued/paid in respect of the deposits. The words "credit of such income to the account of the payee" occurring in Section 194A of the Act have to be ascribed a meaning in conformity with the scheme of the Act and that would necessarily imply that deduction of tax bears nexus with the income of an assessee. 20. In absence of an assessee, the machinery of provisions for deduction of tax to his credit are ineffective. The expression "payee" under Section 194A of the Act would mean the recipient of the income whose account is maintained by the person paying interest. In the present case, although the FD is made in the name of the Registrar General, the account represents funds which are in custody of this Court and the Registrar General is neither the recipient of the amount credited to that account nor the interest accruing thereon. Therefore, the Registrar General cannot be considered as a "payee" for the purposes of Section 194A of the Act. The credit by the petitioner bank in the name of the Registrar Gene ..... X X X X Extracts X X X X X X X X Extracts X X X X
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