Loading judgment…
No AI summary yet for this case.
Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.
Income Tax Appellate Tribunal, JAIPUR BENCHES,”A” JAIPUR
Before: SHRI RAMESH. C. SHARMA, AM & SHRI VIJAY PAL RAO, JM vk;dj vihy la-@ITA No. 713 & 714/JP/2018
आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”A” JAIPUR Jh jes’k lh0 ’kekZ] ys[kk lnL; ,oa Jh fot; iky jko] U;kf;d lnL; ds le{k BEFORE: SHRI RAMESH. C. SHARMA, AM & SHRI VIJAY PAL RAO, JM vk;dj vihy la-@ITA No. 713 & 714/JP/2018 fu/kZkj.k o"kZ@Assessment Year : 2013-14 & 2014-15 cuke M/s Rajasthan Urban Drinking Water The ACIT, Vs. Sewerage and Infrastructure Corp. Ltd. Circle-6, Old work Women Hostel Building, Jaipur. Lal Kothi, Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AADCR 0095 E vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by: Shri S.K. Gogra (C.A.) jktLo dh vksj ls@ Revenue by : Shri Varinder Mehta (CIT) lquokbZ dh rkjh[k@ Date of Hearing : 23/01/2019 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 05/02/2019 vkns'k@ ORDER PER: VIJAY PAL RAO, J.M. These two appeals by the assessee are directed against the two separate orders of CIT(A), Jaipur passed both dated 29.03.2018 for the assessment years 2013-14 & 2014-15 respectively. The assessee has raised common grounds in these appeals except the variation of the quantum of addition made by the AO. The grounds raised for the assessment year 2013-14 are reproduced as under:- &714/JP/2018 M/s Rajasthan Urban Drinking Water Sewerage and Infrastructure Corporation Ltd. vs. ACIT “1. That Ld. AO has erred in doing addition of interest on FDR of Rs. 3,78,34,698/- into total income of appellant whereas same is held for and on behalf of Central and State Government and forming part of cost of various public welfare projects in accordance with direction of GOR/GOI. This income does not partake character of income u/s 2(24) of I.T. Act, 1961, thus, Ld.AO has erred in doing taxing of interest on those funds which are not owned by appellant and kept as custodial of those funds for GOR/GOI, may please be deleted.
That Ld. AO has erred in not properly appreciating facts of the case and erroneously holding the appellant company as Commercial concern whereas appellant is a Government Company. Thus finding of Ld. AO may please be declared as erroneous finding.”
2. Ground no. 1 is regarding the addition made on account of interest on FDRs by treading the same income of the assessee. The assessee company is a State Government Company and whose entire share capital is being held through Governor of Rajasthan and is working as Nodal Agency for implementation of various Central/State Government Schemes for which funds are provided by Central/State Government. The assessee is disbursing the funds for implementation of various welfare schemes i.e. Atal Mission for Rejuvetion and Urban Transformation (AMRUT), Rajeev Avas Yojna (RAY), Jawahar Lal Nehru National Urban Renewal Mission (JNNURM) and various other schemes for the welfare of State. During the course of assessment proceedings, &714/JP/2018 M/s Rajasthan Urban Drinking Water Sewerage and Infrastructure Corporation Ltd. vs. ACIT the AO noted that as per 26AS the assessee received Rs. 4,80,29,655/- as interest during the year from various banks. The TDS made on this interest income has been claimed by the assessee, however, in the Profit & loss account the assessee has shown the interest income of Rs.1,01,94,957/- only. Thus, the AO issued a show cause notice to the assessee as to why the balance amount, the interest income less shown by Rs. 3,78,34,698/- should not be added to the total income. In response the assessee contended that the assessee is a Nodal Agency and receiving funds from the Central/State Government for allocating the same to the various schemes/projects of public welfare. Thus, the assessee contended that the said amount was kept by the assessee in the fiduciary capacity and the same was parked in the bank FDR during the period when there is time leg between the receipt of funds and direction for getting them disburse to various scheme/projects. The assessee further contended that the interest on the said amount does not belong to the assessee but it is part of the funds which is to be allocated on a particular projects or schemes. Even otherwise the balance of disburse funds along with interest is to be refunded to the consolidated funds or the funds of the State Government, therefore, the assessee explain that this is not the income of the assessee. The AO did &714/JP/2018 M/s Rajasthan Urban Drinking Water Sewerage and Infrastructure Corporation Ltd. vs. ACIT not accept the contention of the assessee and treated the said interest amounting to Rs. 3,74,78,34,698/- as income of the assessee and added to the total income. The assessee challenged the action of the Assessing Officer before the ld. CIT(A) but could not succeed as the ld. CIT(A) has confirmed the addition made by the AO.
Before us, the ld. AR of the assessee has submitted that as per the memorandum and article association of the assessee. The assessee is a non profit company and has been incorporated with the objects to give subsidy, aid and assistance of any financial nature to any of the State urban local bodies and NGOs (Non Government Organizations) as well as to work as a Nodal Agency on behalf of the Government for maintaining, monitoring, managing or to carry any activity relating to and in respect to the Rajasthan Urban Development Funds. The ld. AR has referred to the various object clauses of the assessee as enumerated in the memorandum and articles of association as under:-
“3. To give subsidy, aid and assistance of any financial nature to any of the State urban local bodies and NGOs (Non Government Organizations) for the social welfare, development works, commercial activities and other works related directly or indirectly with the objects of these agencies and bodies. (3A) To deploy funds/reverses /share capital towards Rajasthan Urban Development Fund and/or any other development funds or other funds 4 &714/JP/2018 M/s Rajasthan Urban Drinking Water Sewerage and Infrastructure Corporation Ltd. vs. ACIT as may be created, setup and directed by the Government of Rajasthan and/or any Department/body/authority/undertaking or the case may be, as grant/contribution/investment and/or as directed by State Government.”
(8A)To work as Nodal Agency for and/or on behalf of the Government of Rajasthan and/or any Department /Body/Authority/Undertaking owned and controlled by the Government of Rajasthan for maintaining, monitoring, managing or to carry all/or any activity related to and in respect to the Rajasthan Urban Development Fund and/or any other development funds or other funds as may be created, setup and directed by the Government of Rajasthan and/or any Department /Body/Authority/Undertaking or the case may, for this purpose of infrastructure, housing and/ or any developmental activities related or incidental or ancillary thereto or any activity of like nature and for the purpose to raise loans, advances, to receive grants or other moneys from the State/Central Government, any Banks or Financial Institutions or other bodies/agencies or any other person as the case may beand to provide loans with or without interest/to give grants/ advances or otherwise to fund the projects/schemes/any developmental work related therewith of all or any municipalities, ULBs or/and any local bodies or/any person/organization as may be authorized by the aforesaid agencies.
(9) To assist, co-ordinate, assess technical, legal and financial viability, arrange consortium/alliances, secure regulatory clearances, negotiate terms and conditions, approach banks and financial institutions funds, bodies corporate (whether or not incorporated) for the financing the project related to development, implementation, construction, operation, expansion, modernization, maintenance, management of infrastructure facilities, including provision of various guarantees, re- finance schemes.
&714/JP/2018 M/s Rajasthan Urban Drinking Water Sewerage and Infrastructure Corporation Ltd. vs. ACIT (10)Without prejudice to the provisions under the law time being in force, to make recommendations to the State Government or to any local authority, as the case may be, as it any other matter referred to the corporation in the interest of sound municipal finance.
(11) To plan and financially monitor, all types of project related to development of urban areas in the state of Rajasthan, financed or funded, wholly or partly by any of the national/International Agencies/Institutions/Banks including HUDCO, ADB World Bank being implementing by any Agency.
14) Cost Effective Technologies of Construction a) to participate in 'Housing the Poor' programme of the Government by taking up construction works using cost effective technologies for urban and rural areas; b) to take up all sorts of construction works using cost effective technologies for promoting the use of local building materials; c) to identify appropriate cost effective technologies for different zones in the country for which help from various research institutes in the country and abroad is sought to be available; d) to document the various technologies, housing styles in use, in various region of the country and to suggest improvement, if necessary, to make the technologies cost effective and durable; e) to develop Research and Development institutions for the above; f) to identify, develop, produce, propagate and sell cost effective building components, based on the Research and Development findings; g) to develop new innovative planning method for the economical use of available land; h) to develop alternative building materials to wood for ecological balance and to use waste materials as building material through Research and Development efforts and put up such production plants; to propagate and sell the same.” 6 &714/JP/2018 M/s Rajasthan Urban Drinking Water Sewerage and Infrastructure Corporation Ltd. vs. ACIT 3.1 Thus, he has submitted that the object of the company is to create and maintain a fund for the development of infrastructural assets on a continuing basis and channelize them to the objects of the Centrally sponsored scheme of infrastructural development, welfare of nation/ state in accordance with its objects. Generally there remains a time leg in between of receipt of funds and direction for getting them disbursed to various DLB/ULB's and till then these funds are parked with the bank so that it will not lose interest and further this interest component is further to be implemented/ applied for and in accordance with guidelines of scheme. It is also clarified that appellant is not engaged in carrying out any business activity nor working with any profit motive which is explicitly written in MOA/AOA of Company. That Ld AO while passing the assessment order has erred in treating this interest amount as income of appellant company whereas the interest is forming part of funds over which it has been received/ credited by bank. The capacity of appellant company is to be hold the same in fiduciary capacity/ as bailee and will never use same according to its own wishes as capacity of appellant company to work as NODEL AGENCY only and work of Nodal Agency is to disburse the funds to &714/JP/2018 M/s Rajasthan Urban Drinking Water Sewerage and Infrastructure Corporation Ltd. vs. ACIT those ULB, Departments, Funds for which these are being received by them. That for levy of tax under Income tax Act, 1961 there should be an income to have taxation therein and in case there is no income then same cannot be taxed. The definition of Income u/s. 2(24) of Income Tax Act does not lay any clauses wherein the funds in form of interest therein for an on behalf of other person creates income. Further income tax is levied upon Person as defined u/s. 2(31) and the Central/ State Governments are out from preview of "Person", therefore there is no requirement to have PAN Numbers by Government. The funds which are disbursed by Central/ State Governments are deployed through Nodal Agency (appellant company) which are to be implemented upon various public welfare projects of Central/ State.
3.2 The ld. AR has pointed out that the assessee has already shown interest income on the share capital which was deposited in the banks, however, the funds lying with the company to be deployed on various Central/State Governments schemes for welfare of public would not generate any income to the assessee but the interest of such funds will be forming part of the funds of a particular scheme for which it has to be deployed. He has further 8 &714/JP/2018 M/s Rajasthan Urban Drinking Water Sewerage and Infrastructure Corporation Ltd. vs. ACIT contented that the assessee is showing the said amount as a liability and not as an income in the books of accounts. As per office memorandum of the Government of India any funds which remains unutilized along with interest will be brought back to the consolidated funds of India. Therefore, the funds along with interest earned on a particular fund has to be disbursed for a particular project or otherwise has to be a return back to the consolidated fund of India. Hence, the ld. AR has submitted that the interest earned on the said fund cannot be treated as income of the assessee but the same is forming part of the particular fund to be allocated to the project. In support of his contention, he has relied upon the decision of Hon’ble Karnatka High Court in case of CIT & Anr. Vs. Karnatka Urban Infrastructure Development & Finance Corporation 315 ITR 301, decision of Hon’ble Gujarat High Court in case of Gujarat Power Corporation vs. ITO 354 ITR 201 and decision of Coordinate Bench of this Tribunal in case of Rajasthan Avas Vikas & Infrastructure Ltd. vs. DCIT dated 18.03.2016 in & 248/JP/2014.
On the other hand, ld. DR has relied on the orders of the authorities below and submitted that once the assessee is taking 9 &714/JP/2018 M/s Rajasthan Urban Drinking Water Sewerage and Infrastructure Corporation Ltd. vs. ACIT the credit of the TDS deducted on the said interest then, the income on account of interest will be assessed in the hands of the assessee. Further, the interest was earned and received by the assessee and it is not a case of diversion of income before it has reached to the assessee, therefore, once the assessee has earned and received the interest then subsequent use of the said amount will not change the character from assessable income to no income. The ld. DR has submitted that the ld. CIT(A) has relied on the decisions of Hyderabad Tribunal in case of Andhra Pradesh Housing Board vs. DCIT 36 taxmann.com 561 as well as in case of A.P. Mahesh Cooperative Urban Bank Ltd. 55 taxmann.com 429.
We have considered the rival submissions as well as relevant material on record. There is no dispute that the assessee was incorporated as a State Government company to function as a Nodal Agency for the purpose of monitoring and disbursing funds to the various welfare schemes and projects. The assessee is receiving funds from the Government and then disbursing the same to various projects and schemes as it is clearly spelt out in the objects of the assessee. During the year under consideration the assessee has received interest of Rs. 3,78,34,698/- on the 10 &714/JP/2018 M/s Rajasthan Urban Drinking Water Sewerage and Infrastructure Corporation Ltd. vs. ACIT FDRs which were made to park various amounts with the bank.
There is no dispute that the amount which was put into the fixed deposit was received by the assessee from the Government for the purpose of disbursement of the same in the various schemes/projects sponsored by the Government. This fact has not been disputed by the authority below that the assessee is working as a Nodal Agency and it is not the assessee own activity of providing such activation or carrying out the activity of development or infrastructure under the welfare schemes but the assessee is only disbursing the funds as intermediary between the Government and the actual execution of the scheme. Therefore, the assessee is functioning as a Nodal agency for disbursing of funds as per mandate or instructions given by the Government.
The assessee has been keeping the said amount in the fixed deposit for earning the maximum interest as per the memorandum issued by the Ministry of Finance Department of Expenditure dated 28.01.2013. In case the fund remained unutilized along with interest has to go back to the consolidated fund of India.
Otherwise, the interest will be forming part of the funds to be allocated to a particular projects or schemes. Therefore, even if &714/JP/2018 M/s Rajasthan Urban Drinking Water Sewerage and Infrastructure Corporation Ltd. vs. ACIT the interest amount is not refunded to the consolidated funds, the same has to be adjudicated while allocating the subsequent funds for the purpose of utilizing on a schemes or projects. Therefore, the assessee is receiving the funds and utilizing the same as per instructions/directions of the Government and in the mean time holding the said fund in the fiduciary capacity and the interest if any earned in the mean time would not belong to the assessee but it will be forming part of the fund itself which is meant for a particular scheme(s) or project(s). The assessee has been showing the interest as liabilities and give the treatment to the said interest as the fund itself being liability in the balance sheet. The Hon’ble Karnataka High Court in case of CIT & Anr. Vs. Karnataka Urban Infrastructure Development & Finance Corporation (supra) while considering the issue of interest income brought to tax has held in paras 6 to 8 as under:- “6. We have no doubt in our mind that the said judgment squarely covers the issue involved in this appeal. It has been held by the Division Bench of this court in the aforesaid judgment in the relevant paragraph as under (page 584) : "The material on record shows that the very purpose of constitution of the assessee was to act as a nodal agency for implementation of the mega city scheme worked out by the Planning Commission. Both the Central and the State Governments are expected to 12 &714/JP/2018 M/s Rajasthan Urban Drinking Water Sewerage and Infrastructure Corporation Ltd. vs. ACIT provide requisite finances for implementation of the said project. The funds from the Central and State Governments will flow directly to the specialised institutions/nodal agencies as grant and the nodal agency will constitute a revolving fund with the help of Central and State shares out of which finance could be provided to various agencies such as water, sewerage boards, municipal corporations, etc. The objective is to create and maintain a fund for the development of infrastructural assets on a continuing basis and, therefore, the assessee is a nodal agency formed/created by the Government of Karnataka as per the guidelines ; there is no profit motive as the entire fund entrusted and the interest accrued therefrom on deposits in bank though in the name of the assessee has to be applied only for the purpose of welfare of the nation/States as provided in the guidelines ; the whole of the fund belongs to the State Exchequer and the assessee has to channelise them to the objects of the Centrally sponsored scheme of infra- structural development for the mega city of Bangalore. Funds of one wing of the Government are distributed to the other wing of the Government for public purpose as per the guidelines issued. The monies so received, till they are utilised, are parked in a bank. The finding recorded by the Tribunal clearly shows that the entire money in question is received for implementation of the scheme which is for a public purpose and the said scheme is implemented as per the guidelines of the Central Government and, therefore, the assessee is only acting as a nodal agency of the Central Government for implementation of these projects. It is not the case of the Revenue that the assessee was carrying on any business or activities of its own while implementing the scheme in question. The unutilised money, during which the project could not be fully implemented, is deposited in a bank to earn interest. That interest earned is also again utilised for the implementation of the mega city scheme which is also permitted under the scheme. Therefore, in computing the total income of the assessee for any previous year the interest accrued on the bank deposits cannot be treated as an income of the assessee as the interest is earned out of the money 13 &714/JP/2018 M/s Rajasthan Urban Drinking Water Sewerage and Infrastructure Corporation Ltd. vs. ACIT given by the Government of India for the purpose of implementation of the mega city scheme. Therefore, we do not find any error in the conclusion reached by the Tribunal that there was no income earned by way of interest by the assessee and setting aside the order of the Assessing Officer which is affirmed by the first appellate authority. The finding given by the Tribunal is purely a question of fact. We do not find any substantial question of law involved in this appeal and, therefore, this appeal is liable to be dismissed at the stage of admission itself."In the light of the aforesaid findings recorded by the Division Bench of this court, we are of the considered opinion that there is no merit or sub stance in this appeal. No substantial question of law arises to be answered by this court. Thus, the appeal is hereby dismissed.
7. As observed supra, Explanation 3C has now in clear terms provided that 7 such conversion of interest amount into loan shall not be deemed to be regarded as “actually paid” amount within the meaning of section 43B. In view of clear legislative mandate removing this doubt and making the intention of the legislature clear in relation to such transaction, it is not now necessary for his court to interpret the unamended section 43B in detail, nor it is necessary for this court to take note of facts in detail is also the submissions urged in support of various contentions except to place reliance of Explanation 3C to section 43B and answer the question against the assessee and in favour of the revenue.
In view of the forgoing discussion and in the light of Explanation 3C appended to section 43B, quoted supra, we answer the questions referred to this court against the assessee and in favour of the Revenue.”
Therefore, the Hon’ble High Court has upheld the order of the Tribunal that there was no income earned by way of interest by &714/JP/2018 M/s Rajasthan Urban Drinking Water Sewerage and Infrastructure Corporation Ltd. vs. ACIT the assessee as the entire money was received for implementation of the scheme which is for the public purpose the said scheme implemented by the Central Government. It was also held that the assessee is only acting as a Nodal Agency for the Government for implementation of those projects. Thus, once the assessee has not carried out any business activity of its own while implementing the scheme floated by the Government then, the unutilized money during which the project could not be fully implemented is deposited in the Bank to earn interest, the same would not be the income of the assessee. The Coordinate Bench of this Tribunal in case of Rajasthan Avas Vikas & Infrastructure Ltd. vs. DCIT (supra) while dealing with an identical issue of not granting the TDS credit in respect of the interest of such deposit has held in para 4.3 and 5 as under:-
“4.3. We have heard rival contentions and perused the material available on record. In our view the issue involved in the present appeal had already been adjudicated in the matter of CIT vs. Relcom (2015) 62 Taxmann.com 190 (Delhi) wherein it was held as under :- 6. Having heard the submissions made on behalf of the revenue and after a perusal the orders passed by the CIT(A) and the ITAT, we are of opinion that the said orders do not call for any interference and were warranted and justified in the facts and circumstances of the case. Before we proceed to elaborate on our 15 &714/JP/2018 M/s Rajasthan Urban Drinking Water Sewerage and Infrastructure Corporation Ltd. vs. ACIT reasons for the same, a perusal of Section 199 of the Act is necessary. Section 199 reads as follows: "199. Credit for tax deducted. (1) Any deduction made in accordance with the foregoing provisions of this Chapter and paid to the Central Government shall be treated as a payment of tax on behalf of the person from whose income the deduction was made, or of the owner of the security, or of the depositor or of the owner of property or of the unit-holder, or of the shareholder, as the case may be. (2) Any sum referred to in sub-section (1A) of section 192 and paid to the Central Government shall be treated as the tax paid on behalf of the person in respect of whose income such payment of tax has been made. (3) The Board may, for the purposes of giving credit in respect of tax deducted or tax paid in terms of the provisions of this Chapter, make such rules as may be necessary, including the rules for the purposes of giving credit to a person other than those referred to in sub-section (1) and sub-section (2) and also the assessment year for which such credit may be given."
The revenue relies on the phrase "shall be treated as a payment of tax on behalf of the person from whose income the deduction was made" to contend that the assessee's TDS claim cannot be based on the receipts of M/s REPL. However, the assessee fairly admitted throughout the proceedings for its TDS claim of Rs. 1,20,73,097/- that the benefit of such claim has not been availed by M/s. REPL. Therefore, the revenue, having assessed M/s REPL's income in respect to such TDS claim cannot now deny the assessee's claim on the mere technical ground that the income in respect of the said TDS claim was not that of the assessee, given that M/s Relcom (the assessee) and M/s REPL are sister concerns and M/s REPL has not raised any objection with regard to the assessee's TDS claim of Rs. 1,20,73,097/-.
&714/JP/2018 M/s Rajasthan Urban Drinking Water Sewerage and Infrastructure Corporation Ltd. vs. ACIT 8. This Court's reasoning is supported by a ruling of the Division Bench of the Andhra Pradesh High Court in CIT v. Bhooratnam & Co. [2013] 357 ITR 396/216 Taxman 6/29 taxmann.com 275 where the Court noted as follows: "In our view, the CIT (Appeals) and the Tribunal have rightly held that the assessee is entitled to the credit of the TDS mentioned in the TDS certificates issued by the contractor, whether the said certificate is issued in the name of the Joint Venture or in the name of a Director of the assessee company. They have considered the terms of the agreement dated 12-03-2003 among the parties to the joint venture and held that credit for TDS certificates cannot be denied to the assessee while assessing the contract receipts mentioned in the said certificates as income of the assessee. The income shown in the TDS certificates has either to be taxed in the hands of the joint venture or in the hands of the individual co-joint venturer. As the joint venture has not filed return of income and claimed credit for TDS certificates and the TDS certificates have not been doubted, credit has to be granted to the TDS mentioned therein for the assessee. ** ** **
The Revenue cannot be allowed to retain tax deducted at source without credit being available to anybody. If credit of tax is not allowed to the assessee, and the joint venture has not filed a return of income, then credit of the TDS cannot be taken by anybody. This is not the spirit and intention of law."(Emphasis Supplied) 9. At this stage, it is also relevant to note the provisions of Rule 37BA of the Income Tax Rules, 1962, which envisions grant of TDS credit to entities other than the deductee (herein, M/s REPL). We must clarify that we are not oblivious of the fact that Rule 37BA is not directly applicable in the facts of this case. The reliance placed on Rule 37BA is merely to demonstrate that in not all circumstances is TDS credit given to the deductee.
&714/JP/2018 M/s Rajasthan Urban Drinking Water Sewerage and Infrastructure Corporation Ltd. vs. ACIT In the present case the amount was deposited as FDR’s by the assessee on behalf of State of Rajasthan with the Bank of Rajasthan and on the FDR’s deposit the interest has been accrued . The TDS was deducted by the Bank on the interest accrued on the FDRs. In our view, the Revenue is taking the hyper technical plea of not returning the TDS to the assessee on the pretext that the amount has been deposited with the bank on behalf of State of Rajasthan. Since the State of Rajasthan is not a taxable entity, therefore, refund of TDS cannot be given to the State of Rajasthan. It is not disputed that the assessee after realizing the interest income from the bank has given back the amount to the State of Rajasthan . Similarly it is also undisputed that the refund of TDS has not been claimed by the the State of Rajasthan and is only claimed by the Assessee being the nodal agency of the State of Rajasthan for this project . In our view, no prejudice will be caused to any person if the TDS is refunded to the assessee being the nodal agency with the undertaking to return the amount to the State of Rajasthan Avas Vikas & Infrastructure Ltd. Vs. DCIT Rajasthan. In view of thereof and also in view of the judgment referred hereinabove, the TDS deducted by the Income Tax Department is directed to be paid to the assessee and we accordingly hold the same. In this view of the matter, the appeal of the assessee is allowed.
5. Similar ground is raised in the assessee’s appeal in for the assessment year 2010-11. Since we have decided the assessee’s appeal in ITA No. 247/JP/2014 in its favour, on the same reasoning we decide the appeal of the assessee for the A.Y. 2010-11 in favour of the assessee.”
The Coordinate Bench has again considered the issue of non grant of TDS credit in case of Rajasthan Avas Vikas & Infrastructure Ltd. vs. ACIT in & 392/JP/2016 vide order dated 12.05.2017 has held in para 2.2 to 2.5 as under:- &714/JP/2018 M/s Rajasthan Urban Drinking Water Sewerage and Infrastructure Corporation Ltd. vs. ACIT
“2.2 At the outset, the ld. AR drawn our attention to the decision passed by the Coordinate Bench in & 248/JP/2014 dated 18.3.2016 in assessee’s own case for A.Y 2009-10 and 2010-11 and submitted that issue was decided in favour of the assessee by the said decision passed by the Coordinate Bench and hence, the same should be followed in respect of impunged matters before us.
2.3 The issue under consideration before the Coordinate Bench for for A.Y 2009-10 and 2010-11 are as under:- (Assessment Year 2009-10): “In the facts and circumstances of the case the learned Commissioner (Appeals) has erred in not allowing credit of TDS of Rs. 4502798, deducted by our Bank on interest and deposited to the Income Tax Department and holding that the interest belongs to Police Department and the provisions of section 199 are applicable.’ ITA No. 248/JP/2014 (Assessment Year 2010-11) “In the facts and circumstances of the case the learned Commissioner (Appeals) has erred in not allowing credit of TDS of Rs. 1741463, deducted by our Bank on interest and deposited to the Income Tax Department and holding that the interest belongs to Polce department and the provisions of section 199 are applicable.” The facts under consideration before the Coordinate Bench were that during the year under consideration the assessee deposited funds received from HUDCO in FDRs with the Bank as the same were lying idle and got the interest of Rs. 2,18,15,365 and on the said interest the Bank of Rajasthan had deducted TDS of Rs. 45,02,798. The assessee did not offer the interest income of Rs. 2,18,15,365 for the purpose of tax in the return of income as the assessee was merely acting as a nodal agency for the State of Rajasthan and has deposited the amount with the bank for and on behalf of State of Rajasthan. It was also the case of the assessee that the interest income accrued on the FDRs was not taxable. The assessee has submitted that the assessee is entitled to the refund of entire amount of Rs. 45,02,798 in the 19 &714/JP/2018 M/s Rajasthan Urban Drinking Water Sewerage and Infrastructure Corporation Ltd. vs. ACIT assessment year 2009-10. In the context of above facts, the Coordinate Bench relied on the decision of Hon’ble Delhi High Court in case of CIT vs. Relcom (2015) 234 Taxman 693 (Delhi) and its relevant findings are as under:- “In the present case the amount was deposited as FDR’s by the assessee on behalf of State of Rajasthan with the Bank of Rajasthan and on the FDR’s deposit the interest has been accrued. The TDS was deducted by the Bank on the interest accrued on the FDRs. In our view, the Revenue is taking the hyper technical plea of not returning the TDS to the assessee on the pretext that the amount has been deposited with the bank on behalf of State of Rajasthan. Since the State of Rajasthan is not a taxable entity, therefore, refund of TDS cannot be given to the State of Rajasthan. It is not disputed that the assessee after realizing the interest income from the bank has given back the amount to the State of Rajasthan. Similarly it is also undisputed that the refund of TDS has not been claimed by the State of Rajasthan and is only claimed by the assessee being the nodal agency of the State of Rajasthan for this project. In our view, no prejudice will be caused to any person if the TDS is refunded to the assessee being the nodal agency with the undertaking to return the amount to the State of Rajasthan. In view of thereof and also in view of the judgment referred hereinabove, the TDS deducted by the Income Tax Department is directed to be paid to the assessee and we accordingly hold the same. In this view of the matter, the appeal of the assessee is allowed”
2.4 The facts of the instant case are pari materia to the facts of the case before the Coordinate Bench in respect of assessee’s own case for A.Ys 2009-10 and 2010-11. The Revenue has not brought to our notice any contrary authority on the said issue. Hence, we do not see a reason to deviate from the view taken by the Coordinate Bench in assessee’s own case.
&714/JP/2018 M/s Rajasthan Urban Drinking Water Sewerage and Infrastructure Corporation Ltd. vs. ACIT
2.5 Undisputedly, the interest income has not been brought to tax by the Revenue accepting the assessee’s contention that the receipt of funds and interest thereon is in the fudiciary capacity on behalf of the State of Rajasthan. The State of Rajasthan being not a taxable entity, there should not be any TDS at first place. For reasons best known to the assessee and the bank, the TDS has been deducted. Given that interest income is not taxable either in the hands of the assessee or the state of Rajasthan, the TDS has to be refunded. Since the assessee is acting as the nodal agency and all funds have been routed through it, the refund of TDS has to be routed through it to the State of Rajasthan. Accordingly, we direct the Revenue to refund the TDS of Rs. 38440/- to the assessee with the undertaking to return the said amount to the State of Rajasthan.”
Thus, it is now settled precedent that the interest earned by the assessee on the fixed deposit of the amount which is received from the Government for disbursement to the various schemes/projects for which the assessee is a Nodal Agency to implement such projects/schemes such interest will not be the income of the assessee. Accordingly, following the decisions of Hon’ble Karnataka High Court as well as Coordinate Bench of this Tribunal (supra) we hold that the interest received by the assessee is not assessable to tax but it was received on behalf of the Government and will be forming part of the funds to be disbursed for implementation of various schemes and projects for public welfare. Hence, the addition made by the assessee is deleted. This 21 &714/JP/2018 M/s Rajasthan Urban Drinking Water Sewerage and Infrastructure Corporation Ltd. vs. ACIT issue is common for both the years, therefore, it stands adjudicated for assessment years 2013-14 & 2014-15.
Ground no. 2 is regarding the status of the assessee is a Government company. As we have already discussed the facts and memorandum of association wherein the objects of the assessee has been set out. From the objects and purpose of creating the assessee it is clear that the state Government is helping more than 98% shares of the assessee, therefore, this issue though is only academic in nature, however, once the Government is holding more than 98% shares then the assessee company is a Government company.
In the result, both the appeals filed by the assessee are allowed.
Order pronounced in the open court on 05/02/2019
Sd/- Sd/- ¼ jes’k lh0 “kekZ ½ ¼fot; iky jko½ (Ramesh. C. Sharma) (Vijay Pal Rao) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 05/02/2019. *Santosh. आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- M/s Rajasthan Urban Drinking Water Sewerage and Infrastructure Corp. Ltd., Jaipur. 22