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TMI Blog2021 (11) TMI 577X X X X Extracts X X X X X X X X Extracts X X X X ..... nly after conclusion of the proceedings initiated by the CBI against the petitioner. In otherwords, for the present, the interest on the FDs which is credited to the account of the petitioner is not income for the petitioner so as to attract the TDS under Section 194A of the IT Act, so as to enable deduction of TDS on the interest accruing on the FDs. Entitlement of interest accruing on the FDs to the petitioner would be dependant on the result of the pending Court/CBI proceedings and consequently, till conclusion of the said Court proceedings, the interest accruing on the FD cannot be construed or treated as income for the purpose of deduction of TDS under Section 194A - 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. ORDER: - The respondent Nos.3 to 5/Banks are directed not to deduct the TDS in respect o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 High Court in the case of UCO Bank vs. Union of Indian and Others at paragraphs 21 and 23. It is further submitted that the question of ascertaining the assessee is a matter to be deferred till the proceedings by the respondent No.6 is concluded. In light of the said submissions and also noticing the circular dated 28.12.2015, it is made clear that respondents No.3 to 5 are restrained from deducting TDS till the conclusion of the proceedings by respondent No.6. It is made clear that once the proceedings by respondent No.6 are concluded, the question of deduction of TDS in terms of Section 194-A of the Income Tax Act would be considered. Issue emergent notice to the respondents. Learned counsel, Sri Y.V.Raviraj accepts notice for respondents No.1 and 2. The petitioner is permitted to take out notice by way of hand summons to respondents No.3 to 5, which would be in addition to notice in normal course. Learned counsel, Sri M.B.Kanavi is directe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e (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 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. 8. A plain reading of the said provision will indicate that tax deduction at source is permissible only if the income is credited to the account of the petitioner ; in the instant case, in view of the freezing/attachment of the said FDs of the petitioner, it cannot be said that the petitioner is receiving income by way of interest from the said FDs for the present and entitlement or otherwise of the petitioner qua the said FDs or interest will have to be decided only after conclusion of the proceedings initiated by the CBI against the petitioner. In otherwords, for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able 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 name. The Registrar General is also not an assessee in respect of the deposits made with the petitioner bank pursuant to the orders of this Court. The deposits kept with the petitioner bank under the orders of this Court are, essentially, funds which are custodia legis, that is, funds in the custody of this Court. The interest on that account - although credited in the name of the Registrar General - are also funds that remain under the custody of this Court. The credit of interest to such account is, thus, not a credit to an account of a person who is liable to be assessed to tax. In this view, the petitioner 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 who is ultimately granted the funds would be determined by orders that may be passed subsequently. And at that stage, undisputedly, tax would be required to be deducted at source to the credit of the recipient. However, the litigant who deposits the funds cannot be stated to be the recipient of income for the reasons stated above. 23. Deducting tax in the name of the litigant who deposits the funds with this Court would also create another anomaly because the amount deducted would necessarily lie to his credit with the income tax authorities. In other words, the tax deducted at source would reflect as a tax paid by that litigant/depositor. He, thus, would be entitled to claim credit in his return of income. The implications of this are that whereas this Court had removed the funds from the custody of a litigant/depositor by judicial orders, a part of the accretion thereon is received by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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