9911796707
TMI Blog2021 (11) TMI 577X X X X Extracts X X X X X X X X Extracts X X X X ..... mandamus directing respondents 1 and 2 to collect the taxes in respect of the accumulated arrears over the interest income on FD from the respective bank accounts pending with respondents 3 to 5. 2. Heard learned Senior counsel Sri M.V. Sheshachala, for Sri Gangadhar J.M., learned counsel appearing for the petitioner and learned counsels for the respondents. Perused the material on record. 3. On 09.09.2019, this Court passed the following interim order : "The petitioner which is a Company has sought for a direction to respondents No.3 to 5 not to deduct TDS in respect of the interest income arising on the FD's of the petitioner with the respondents No.3 to 5 Banks, pending proceedings by respondent No.6. It is further submitted that by virtue of prohibitory order of respondent No.6, the FD's of the petitioner with the Banks respondents No.3 to 5 have been frozen/attached. It is further submitted that in the interregnum the Banks have been deducting TDS in terms of Section 194-A of the Income Tax Act. Learned senior counsel appearing on behalf of the petitioner submits that the question of deducting of TDS would not arise and relies on the observations made by the Delhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ched pursuant to an order dated 11.09.2009 passed by the CBI and the said proceedings initiated against the petitioner are still pending adjudication. In this contest, it is relevant to quote Section 194A of the IT Act, which reads as sunder : "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 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 : Provided that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (1) or clause (b) of Sections 44AB during the financial year immediately preceding the financial year in which such interest is credited or paid, shall be liable to deduct income-tax under this section. Explanation.- For the purpose of this section, where a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al year in which such interest is credited or paid, shall be liable to deduct income tax under this section. Explanation.--For the purposes of this section, where any income by way of interest as aforesaid is credited to any account, whether called "Interest payable account" or "Suspense account" or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly." 18. In terms of Section 194A of the Act, the petitioner would, in the normal course, be obliged to deduct tax at source in respect of any credit or payment of interest on deposits made with it. However, in the present case, the question that needs to be addressed is whether Section 194A of the Act contemplates deduction of tax in a situation where the assessee is not ascertainable and the person in whose name the interest is credited is also, admittedly, not a person liable to pay tax under the Act. 19. The Registrar General of this Court is, clearly, not the recipient of the income represented by interest that accrues on the deposits made in his/her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssary implication of this situation is recovery of tax without the corresponding income being assessed in the hands of any asessee. The ultimate recipient of the funds from the FD would also not be able to avail of the credit of TDS. It is apparent that in absence of an ascertainable assessee the machinery of recovering tax by deduction of tax at source breaks down because it does not aid the charge of tax under Section 4 of the Act but takes a form of a separate levy, independent of other provisions of the Act. This is, clearly, impermissible. 22. The impugned circular proceeds on an assumption that the litigant depositing the money is the account holder with the petitioner bank and/or is the recipient of the income represented by the interest accruing thereon. This assumption is fundamentally erroneous as the litigant who is asked to deposit the money in Court ceases to have any control or proprietary right over those funds. The amount deposited vests with the Court and the depositor ceases to exercise any dominion over those funds. It is also not necessary that the litigant who deposits the money would be the ultimate recipient of those funds. As indicated earlier, the person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he view that the necessary directions in this regard are to be issued against the respondent Nos.3 to 5; it is needless to state that the directions to be issued to the respondent Nos.3 to 5-Bank not to deduct TDS on the interest on the FDs, cannot be treated as absolving petitioner of its liability to pay tax on the interest accruing on the FD if the petitioner becomes entitled to the same after conclusion of the Court proceedings.
12. In the result, I pass the following:
ORDER
i. The petition is hereby allowed.
ii. The respondent Nos.3 to 5/Banks are directed not to deduct the TDS in respect of the interest arising/accruing on FDs of the petitioner lying with the respondent Nos.3 to 5/Banks till conclusion of the proceedings initiated by the 6th respondent-CBI against the petitioner.
iii. It is however made clear that the alleged liability of the petitioner, if any, to pay taxes in respect of the interest accruing on the said FDs shall arise after conclusion of the said proceedings.
iv. It is made clear that the present order passed will not affect any TDS already deducted by the respondent Nos.3 to 5/Banks prior to interim order dated 09.09.2019 passed by this Court. X X X X Extracts X X X X X X X X Extracts X X X X
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