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TMI Blog2015 (6) TMI 201X X X X Extracts X X X X X X X X Extracts X X X X ..... d the interest charged u/s 201(1A) is deleted and the orders are quashed - Decided in favour of assesse. X X X X Extracts X X X X X X X X Extracts X X X X ..... ngth at paras 7 to 12 of its order has held as under: "7. We have duly considered the rival contentions and gone through the record carefully. Section 194A and section 196 of the Income Tax Act has a direct bearing on the controversy in hand. Therefore, we deem it appropriate to take note of the relevant clauses of these sections. They read as under: 'Section 194A [Interest other than "Interest on securities". 194A. Any person, not being an individual or a Hindu paying to a resident any income by way of interest other than income (by way of interest on securities], shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force: ………………xxxxxxxxx…………………….. (3) The provisions of sub-section (1) shall not apply- …………..xxxxxxxxxxxxxxxx…………. (iii) to such income credited or paid to: (a)x.x.x.x.x.x.x.x.x. (b) x.x.x.x.x.x.x.x.x (c).x.x.x ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A(3)(iii)(f). Perusal of clause (f) extracted (supra) indicate that such institution, associations or body ought to be notified by the Govt. of India in the official gazette. According to the Assessing Officer, the notification bearing No.S.O.3489 dated 22.10.1970 provide definition of company, to whom payment can be made with deducted taxes. It should be a company in which all the shares are held (whether singly or taken together) by the Govt. or the RBI or a corporation owned by that Bank. He observed in Paragraph No.5.5 that the benefit of section 194A(3)(iii)(f) would be admissible to an assessee who made payments to a company whose shares are held by the Govt. or held by the RBI or held by the corporation owned by RBI. Thereafter the Assessing Officer took into consideration the shareholding pattern of KUIDFC in Paragraph No.5.6 of the impugned order. The details read as under: "5.6 In the present case, the share holding pattern of the deductee i.e. KUIDFC which was made available during the course of present proceedings read as under: S. No Name of share holders No. of shares 1 Govt. of Karnataka, Bangalore 606476 2 Director of town planning & Member Secretary, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... G.O No.UDD 18 BMR 97 Bangalore dated 17.02.1997 (3) G.O No.UDD 2 PRJ 99(P) Bangalore dated 21.12.2000 (4) G.O No.HUD 33 BMR 95 Bangalore dated 30.11.1995 Preamble: Vide G.O read at (1) State Govt. decided to set up Karnataka Urban Infrastructure Development and Finance Corporation (KUIDFC) as a company under the Companies Act, 1956 to function as the Nodal Agency (NA) of the State Govt. for implementation of (i) centrally sponsored Mega City Scheme dealing with infrastructural problems of by metroes/mega cities including Bangalore (ii) externally/Govt. assisted schemes for urban areas development and improvement of infrastructural facilities in urban areas and (iii) act as a Funds Manager for the Govt. and intermediary between the Govt. and Urban Local Bodies (Implementing Agencies-IAs) in the funding and implementation of urban development & infrastructural schemes. 2. State Govt. has accorded sanction for implementation of Karnataka Urban Infrastructure Development (KUID) Project with loan from the Asian Development Bank in the cities of Mysore, Tumkur, Ramanagaram & Channapatna vide G.O read at (2) and for implementation of Karnataka Urban Development and Coastal Environmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No.UDD 67 PRJ 03(2) Bangalore dated 31.03.2003. In the circumstances explained in the preamble, Govt. directs that the KUIDFC shall in confirmity with the KUID and KUDCEM Project guidelines continue the present practice of not treating the following amounts as income in its books. The KUIDFC shall credit them to the Urban Infrastructure Development Fund (UIDF) over which the Govt. has absolute domain, from the first receipt of project funds and accrual of revenues thereon: (a) loan recoveries from the IAs (b) Interest, dividend, incentive and other revenues on deployment of unutilized Govt. funds released under the projects; (c) Interest on the loans given to the IAs: (d) Revenues generated on redeployment of funds as per (a), (b) and (c). Further distinct identify of constituents of the UIDF as mentioned above shall be maintained in the books of KUIDFC. 2. Govt. hereby authorizes Empowered Committee constituted under the KUID Project to evolve and approve regulations for the UIDF under the KUID and KUDCEM Projects. 3. Govt. accords approval for sanction of Management Fees (MF) to KUIDFC commending from 2002-03 for the services rendered by it on behalf of the Govt. in the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision of Hon'ble Kerala High Court rendered in the case of Cochin State Power & Light Corporation Ltd. vs. CIT (1974) 93 ITR 582 (Ker). The Tribunal found a diversion of opinion amongst various Hon'ble High Courts, therefore, made a direct reference to the Hon'ble Supreme Court under s. 257 of the IT Act, 1961. Hon'ble Supreme Court while taking note of c/s. (III), (IV) and (V) of Sixth Schedule to the Electricity Act observed that assessee was required to maintain a contingency reserve, the contingency reserve shall not be drawn upon during the currency of license except to meet such charges as the State Government may approve as being : "(a) expenses or loss of profits arising out of accidents, strikes or circumstances which the management could not have prevented; (b) expenses on replacement or removal of plant or works other than expenses requisite for normal maintenance or renewal; (c) compensation payable under any law for the time being in force and for which no other provision is made; (2) On the purchase of the undertaking, the contingencies reserve, after the deduction of the amounts drawn under sub-para (1) shall be handed over to the pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... beneficiaries of the trust, namely, assessee's brother's wife, assessee's niece and the assessee's mother. In asst. yr. 1974-75, he claimed that as 50 per cent of the income attributable to his share from the firm stood transferred to the trust resulting in diversion of income at source, the same could not be included in his total income for the purpose of his assessment. The ITO rejected the claim on the ground that it was a case of application of income and not diversion of income at source; he also found that s. 60 of the Act was attracted as only income without a transfer of assets was settled. The Revenue took the matter in appeal before the learned first appellate authority who allowed the appeal of the assessee and the Tribunal reversed the order of the AAC. Hon'ble High Court relying on the judgments of Hon'ble Supreme Court in the cases of CIT vs. Bagyalakshmi & Co. (1965) 55 ITR 660 (SC) and Murlidhar Himatsingka & Anr. vs. CIT (1966) 62 ITR 323 (SC) held that on assignment of 50 per cent share of the assessee in the firm, it became the income of the trust by overriding title and it could not be added in the total income of the assessee. Hon'bl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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