PANJAB NATIONAL BANK,DEHRADUN vs. THE ASSISTANT COMMISSIONER OF INCOME TAX (TDS), DEHRADUN

Per Dr. B. R. R. Kumar, Accountant Member:

The present appeals have been filed by the assessee against the orders of ld. CIT (A), Dehradun dated 11.10.2019, 14.10.2019 and 16.10.2019.

“1. For that the learned CIT Appeal failed to appreciate the fact that the appellant was not liable to deduct tax at source u/s 194A on payment of interest of Rs 21,95,687/- (erroneously stated as Rs 27,95,687/- in the appellate

ITA Nos. 10 to 14/Del/2020 2 Punjab National Bank order) made to Uttarakhand Co-operative Sugar Factories Federation Limited Employees Contributory Provident Fund Trust since the same is recognized by the Commissioner of Income Tax under sub-rule (1) of rule 3 of part A of the fourth schedule of the Income Tax Act 1961. Circular No 004 of 2002 dated 16-7-2002 issued by the CBDT provides for non-deduction of tax at source in respect of entities whose income is unconditionally exempt from tax and specifies recognized provident fund trust in para 2(xi) as eligible to receive income without deduction of tax at source. 2. For that the learned CIT Appeal failed to appreciate the fact that the appellant was not liable to deduct tax at source u/s 194A on payment of interest of Rs 26,13,300/- made to Uttarakhand Co-operative Sugar Factories Federation Limited since the same is set up, financed and is under the control of Government of Uttarakhand. Section 194A(3)(f) provides that the provisions of section 194A will not apply to such institutions or class of institutions that the Central Government may notify in the official gazette. The Central Government vide Notification dated 15-5-1987 notified institutions for the purpose of the aforementioned section. Entry no 41 of the notification specifies any undertaking or body wholly financed by the Government. 3. For that the learned CIT (Appeals) ignored the fact that the recipient of interest, namely Uttarakhand Co- operative Sugar Factories Federation Limited Employees Contributory Provident Fund Trust being an exempt entity u/s 10(25) was not liable to file return of income u/s 139 of the Act. The learned CIT (Appeal) rejected the alternate claim of the appellant to take on record form 26A prescribed under rule 31ACB for the purpose of first proviso to section 201(1) only because the return of income was not filed by the Uttarakhand Co-operative Sugar Factories Federation Limited Employees Contributory Provident Fund Trust. 4. For that the learned CIT (Appeals) ignored the report submitted by the respondent, namely ACIT (TDS), requisitioned by him during the appellate proceedings. The ACIT (TDS) had herself agreed that the appellant was not liable to deduct tax at source on payments made to the Uttarakhand Co-operative Sugar Factories Federation Limited Employees Contributory Provident Fund Trust and to Uttarakhand Co-operative Sugar Factories Federation Limited.”

ITA Nos. 10 to 14/Del/2020 3 Punjab National Bank 4. The core issue revolves around the failure of the assessee to deduct TDS u/s 194 of the Income Tax Act, 1961 on the payments made to interest on term deposits to M/s Uttarkhand Co-operative Sugar Factories Federation Ltd. (USFL) and Employees Contributory PF Trust (PF Trust).

ITA Nos. 10 to 14/Del/2020 4 Punjab National Bank 7. In view of the apparent provisions of the Act, circular of the CBDT, the recognition accorded by the ld. CIT, Dehradun, the observation of the revenue authorities that no tax exemption certificate was ever sought by the department is incorrect on the specifics of record, we straightaway hold that the assessee is not liable to any action u/s 201(1) and Section 201(1A) of the Income Tax Act, 1961.

Sd/- Sd/- (Amit Shukla) (Dr. B. R. R. Kumar) Judicial Member Accountant Member Dated: 06/08/2021 *Subodh* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR