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Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD
Before: SHRI WASEEM AHMED&
PER Ms. MADHUMITA ROY - JM: Both the appeals filed by the assessee are directed against the order passed by the Commissioner of Income Tax (Appeals)- III, Baroda both dated 31.12.2012 under section 154 of the Income Tax Act, 1961 (hereinafter referred as to “the Act”) whereby and whereunder the demand order passed by the ACIT, TDS Circle, Baroda on account of interest u/s 201(1A) of the Act have been confirmed for Assessment Years 2007-08 & 2008-09.
Since both the appeals relate to the same assessee, the same are heard analogously and are being disposed of by a common order.
& 543/Ahd/2013 Gujarat State Electricity Corporation Ltd. vs. ACIT Asst.Years –2007-08 & 2008-09 - 2 - A.Y. 2007-08: 2. The brief facts leading to this case is this that by and under an order issued u/s 154 of the Act dated 07.01.2011 the demand of Rs.4817.82 lacs u/s 201(1) and Rs.1638.05 lacs u/s 201(1A) aggregating to Rs.6455.87 lacs for the non-deduction of tax at source on payment of interest of Rs.22817.12 lacs to Gujarat Urja Vikas Nigam Limited (GUVNL) has been determined. The assessee, thereafter, by and under a letter dated 04.03.2011 filed a rectification application under section 154 of the Act for the year under consideration stating that the payee company has filed its Income Tax return on 31.10.2007 where it has paid the self assessment tax due on its total income and therefore, there was no justification to recover the tax and interest thereon u/s 201(1) and 201(1A) of the Act. The Learned AO was, however, of the opinion that since the appellant has preferred an appeal against the said order no rectification was necessary at that stage. As per the Learned AO interest of Rs.1638.05 lacs is compensatory measure and is mandatory and automatic in nature. The assessee’s case before us is this that if the interest is credited or paid to any company in which all the shares are held by the Government or Reserve Bank of India or a corporation owned by that company, no tax is to be deducted at source. However, such plea of the assessee was not found acceptable and prayer for rectification has been disallowed, which was further confirmed in appeal.
At the time of hearing of the instant appeal the Learned Counsel appearing for the assessee submitted before us that by and under an order dated 27.03.2019 passed in & 2970/Ahd/2011 for the A.Y. 2007-08 & 2008-09 in assessee’s own case, the Co-ordinate Bench has been pleased to hold that the obligation to deduct tax deducted at source u/s 194A(3) of the Act towards interest payment by the assessee has been obliterated in view of the & 543/Ahd/2013 Gujarat State Electricity Corporation Ltd. vs. ACIT Asst.Years –2007-08 & 2008-09 - 3 - notification being No. S.O.3489 [No. 170 (F. No.12/164/68-ITCC/ITJ0.] dated 22.10.1970. Since the assessee has not made liable to deduct tax at source u/s 194A(3) of the Act towards interest payment made to GUVNL demand u/s 201(1) & 201(1A) is therefore not sustainable. The copy of the said order passed by the said Bench has also been submitted before us.
Heard the respective parties, perused the relevant materials available on record. We have also carefully considered the order passed by the Co-ordinate Bench. The relevant portion of the said order as relied upon by the Learned Counsel appearing for the assessee as follows: “3. When the matter was called for hearing the Ld. AR for the assessee pointed out at the outset that assessee has credited/paid interest on loan/bonds payable to a government company M/s. Gujarat Urja Vikas Nigam Ltd. (GUVNL). A dispute has been raised by the Revenue that interest payable to the government company noted above is also susceptible to interest u/s. 201(1A) for default committed in not deducting tax deducted at source in terms of sec. 194A of the Act. The Ld. AR in this regard straight away submitted that the lender to whom the interest was payable namely Gujarat Urja Vikas Nigam Limited (GUVNL) is a wholly owned undertaking of Government of Gujarat and100% of share holding of Gujarat Urja Vikas Nigam Limited (GUVNL) is held by Government of Gujarat as certified by the lender company as per confirmation dated 13.03.2019 which certificate albeit was not furnished before the lower authorities. The Ld. Authorised Representative pointed that the lender to whom the interest is payable being a Government company, the assessee is exempted u/s. 194A(3)(iii)(f) of the Act from its obligation to deduct taxes at source. The Ld. Authorised Representative for the assessee for this purpose referred to notification S.O. 3489 [No. 170 (F. No. 12/164/68-ITCC/ITJ0.] dated 22.10.1970. The text of the notification is quoted here under: “(i) any corporation established by a Central, State or Provincial Act; (ii) any company in which all the shares are held (whether singly or taken together) by the Government or the Reserve Bank of India or a Corporation owned by that Bank; and (iii) any undertaking or body, including a society registered under the Societies Registration Act, 1860 (21 of 1860), financed wholly by the Government.” 4. In view of the express notification pointed out on behalf of the assessee, the obligation to deduct tax deducted at source u/s. 194A(iii) & 543/Ahd/2013 Gujarat State Electricity Corporation Ltd. vs. ACIT Asst.Years –2007-08 & 2008-09 - 4 - towards interest payments has been obliterated. In this view of the matter, we will find merit in the case of the assessee for non-application of sec. 201(A) as the assessee cannot be treated as assessee in default for the purposes of charging of interest.”
Taking into consideration the order passed by the Co-ordinate Bench on the same issue, we find substances in the submission made by the Learned AR. In our considered view since assessee has not made liable to deduct TDS u/s 194A(3) towards interest paid to GUVNL, the impugned demand has no legs to stand upon and hence the impugned order is quashed.
In the result, assessee’s appeal in A.Y. 2007- 08 is allowed. for A.Y 2008-09 : 6. In this appeal ground is identical to that of the ground already been dealt with by us in A.Y. 2007-08 and in the absence of any changed circumstances the same shall apply mutatis mutandis. Hence, this appeal preferred by the assessee is also allowed.