CANARA BANK,TRIVANDRUM vs. DCIT (TDS), TRIVANDRUM

Per CHANDRA POOJARI, AM:

This appeal filed by the assessee is directed against the order of the

CIT(A), Trivandrum dated 31/07/2018 and pertain to the assessment year 2009-

10.

The assessee has filed condonation petition accompanied by an affidavit stating that the original order of the CIT(A) was received on 2nd August, 2018 and as per the provisions of Income Tax Act, the appeal should have been filed on 1st

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October, 2018, However, the appeal was filed on 15th October, 2018 due to the

reason that the taxation department of the Bank was situated in Bangalore and

to file an appeal before the Tribunal as per the Bank’s policy it has to get

approval from the Taxation Department. The original assessment order and the

appellate order were sent to the department for approval. It was stated that

there was change in the top executive of the Bank in the month of September

and due to this change, the approval was delayed which was received only in the

first week of October 2018 and the papers were submitted to the chartered

accountant for preparation of the appeal. It was submitted that the delay in filing

the appeal was not willful but due to reasons beyond the control of the assessee.

Hence, it was prayed that the delay of 15 days in filing the appeal may be

condoned and the appeal admitted.

2.1 We have gone through the condonation petition and we find that there is

sufficient cause for filing the appeal belatedly before the Tribunal. Hence, we

condone the short delay of 15 days in filing the appeal and admit the appeal for

adjudication.

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State Beverages corporation Ltd., Trivandrum and the quarterly TDS returns filed

by the assessee’s Cantonment Branch, Trivandrum, the Assessing Officer found

that the said Branch had paid to the said Corporation an amount of

Rs.4,10,16,457/- as interest during the F.Y. 2008-09 but had deducted

Rs.42,31,627/- only as tax u/s. 194A of the Act. The tax deductible u/s. 194A

against the interest paid to the said Corporation for the F.Y. 2008-09 was at

20.6% since the deductee is a domestic company and tax at 20.6% worked out

at Rs.84,49,390/-. Hence, the Assessing Officer found that there was short

deduction of tax at Rs.42,17,763/-. Against the said default committed in short

deduction of tax, the Assessing Officer treated the assessee as assessee in

default u/s. 201(1A) of the Act and directed the assessee to remit the tax of

Rs.42,17,763/- which was not deducted at source to the exchequer and further

levied interest of Rs.30,36,744/- u/s. 201(1A) of the Act against the default

committed in short deduction of tax.

treated as assessee in default in view of the judgment of the Supreme Court in

the case of Hindusthan Coca-Cola Beverages Pvt. Ltd. vs. CIT (293 ITR 226)

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wherein it was held that where no tax has been deducted or there is short fall in

tax deducted but the deductee had paid the tax on income earned then no tax

shall be recovered from the deductor. The CIT(A) observed that what is shown in

the return filed by the said Corporation is the interest of Rs.22,96,05,562/-

received from fixed deposits and it was not known where this amount included

the amount of Rs.4,10,16,457/- claimed to have been paid by the assessee or

not which is to be verified. According to the CIT(A), the assessee claim that the

income of Rs.2,29,60,562/- offered by the Kerala State Beverages Corporation

was only for tax but not Rs.4,10,16,457/- as originally claimed which needs to be

looked into afresh. Since both the income offered and the tax paid by Kerala

State Beverages Corporation Ltd. against the interest received from the assessee

was not clear, the CIT(A) directed the assessee to furnish all documents to the

Assessing Officer for further verification at his end.

5.1 With regard to the charging of interest u/s. 201(1A) of the Act, the CIT(A)

observed that assessee cannot escape the rigour of tax since they had agreed

that they have not deducted the tax in full leaving thereby a short deduction of

Rs.42,17,763/-. He relied on the judgment of the Supreme Court in the case of

Hindusthan Coca-Cola Beverages Pvt. Ltd. vs. CIT (293 ITR 226) wherein it was

held that interest u/s. 201(1A) is to be paid by the assessee. Thus, the CIT(A)

confirmed the interest charged u/s. 20(1A) of the Act.

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the assessee. The Ld. AR has filed written submission wherein it was submitted

that Canara Bank Cantonment branch filed the TDS returns for the Financial year

2008-09. The department found that the branch had deducted only 10% as tax

from Kerala State beverages Corporation Limited (KSBC) as against the actual

rate of 20.3% and a notice was issued on 15/03/2015 to the branch to explain

why it should not be treated as an assessee in default within the meaning of

Section 201 of the Income Tax Act. It was submitted that the Branch sought

one month time for filing the reply for the reason that the bank had migrated to

Core banking system and the records of 2008-09 were in the old legacy system

and needed time to check the records and file the reply. However, it was

submitted that the assessing officer did not provide time as the assessment was

getting time barred on 31/03/2015 and he treated the Branch as an assessee in

default within the meaning of Section 201 of the Income Tax Act. The Assessing

Officer made a demand of Rs.42,17,763/- for short deduction of Tax and also

charged Rs.30,36,744/- as interest U/s 201 of the Income Tax Act and the

interest was calculated at l.5% per month from the first day of the Assessment

year (01/04/2009) till the date of completion of assessment(3103/2015).

6.1 At the time of hearing of the appeal before the Commissioner of Income-

tax(Appeals), it was argued that the judgment of the Supreme Court decision in

the case of Hindustan Coco Cola Beverages Pvt. Ltd. vs. CIT (293 ITR 226) was

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applicable to the assessee wherein it was held that if the dedcutee has included

the income on which short deduction of tax was made has been included in the

total income and tax has been paid there on then the deductor should not be

treated as an assessee in default. There was also a condition in the said

judgment that the dedcutee assesee should have filed the return of income. It

was also held by the Supreme Court that interest for short deduction under

Section 201 should be paid from the first day of the assessment year till the date

on which dedcutee assessee pays the tax thereon. It was submitted that during

the hearing of the appeal, the details regarding the filing of returns by the

deductee assessee were produced before the Commissioner(Appeals). However,

the Commissioner(Appeals) after considering the details remanded the case back

to the assessing officer with a direction to verify the details produced regarding

the tax returns filed by the deductee assessee and give effect to the judgment of

the Supreme Court in the case of Hindustan Coco Cola supra. The CIT(A)

however upheld the interest charged u/s 201 (1A)of the Income Tax Act based

on the decision of Kerala High Court in CIT vs Dhanalekshmi Weaving

Works(245!TR 13) in which the High Court held Interest u/s 201 (1A) is

mandatory and it is a levy to claim compensation on the amount which ought to

have been deducted and deposited which was not done. However, it was

submitted that the Commissioner erred in deciding the quantum of interest and

he upheld the order of the assessing officer who charged interest from the first

day of the assessment year till the date of completion of assessment whereas it

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was held by the Supreme Court in the case of Hindustan Coco Cola cited supra

that interest should be charged from the first day of the assessment year till the

date on which the deductee assessee pays the tax thereon. This appeal is filed

against this decision of the Honourable Commissioner of Income Tax (Appeals).

Though there was short deduction of tax by the assessee, the dedcutee

assessee had included the interest paid by the assessee on the total income for

the assessment year 2009-10. The Ld. AR enclosed the copy of computation of

total income of KSBC (deductee) and ITRV. The whole Interest paid by this

assessee was included in the total income as can be seen in the Computation

statement. It was submitted that the assessing officer when considering the

details produced by the assessee at the time of hearing of the remanded case

had held that the deductee assessee had included the interest paid by the

assessee in the total income and had paid the tax thereon and completed the

assessment deleting the short deduction of Rs.42,17,763/- originally assessed.

Thus, it was clear from the revised order that the department also agreed with

the judgment of the Supremee Court in the case of Hindustan Coco Cola supra

and the case was applicable to the assessee.

6.2 It was submitted that the Supreme Court had held in Hindustan Coco Cola

supra that interest should be charged from the first day of the assessment year

till the date of payment of tax by the deductee assessee. However, it was

submitted that the Assessing Officer had verified the details of filing of the

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returns by the deductee assessee and had deleted the short deduction of Rs.

42,17,763/-. The dedcutee assessee had paid the entire tax due on the total

Income on 31/05/2009 as per form 26AS. Hence, based on the Supreme Court

judgment in the case of Hindustan Coco Cola supra, interest under section 201(1A) should be charged only for two months (1st April 2009 to 31st March

2009). It was submitted that the assessing officer in the original assessment

order had charged interest from the first day of the assessment year till the date of passing of order (1st April 2009 to 31st March 2015) which is against the

judgment of the Supreme Court in the case of Hindustan Coco Cola supra.

However, it was submitted that the CIT(A) upheld the interest charged under

Section 201(1A) based on the decision of the Kerala High Court in Dhanlekshmi

Weaving Mills supra but failed in quantifying the interest to be charged. It was

submitted that even in the case of Hindustan Coco cola supra, the Supreme

Court had held that interest should be charged under section 201(1A) but held

that it should be for the period from the first day of the assessment year till the

date of payment of tax by the deductee assessee. The Supreme Court had in

para 10 of the judgment in the case of Hindustan Coco Cola supra clearly held

that interest should be charged till the date of payment of tax by the dedcutee

assessee. To quote "Be that as it may, the Circular No 275/201/95-ITB issued by

the Central Board of Direct Taxes, in our considered opinion should put an end to

the controversy. The circular declares "no demand visualized under section

201(1) of the Income Tax Act should be enforced after the tax deductor has

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satisfied the officer in charge of TDS, that taxes due have been paid by the

deductee assessee. However this will not alter the liability to charge interest

under Section 201(1A) of the Act till the payment of taxes by the deductee-

assessee or the liability of penalty under Section 271C of the Income Tax Act".

In the present case, the assessing officer was convinced that the deductee

assessee had included the interest paid by the assessee in the total income and

paid tax thereon. Based on the evidence produced, the Assessing Officer had

deleted the demand on account of the short deduction of Rs.42,17,763/-. Thus,

it was submitted that the dedcutee assessee had paid the tax due on the total

income on 31/05/2019 and based on the judgment of the Supreme Court in the

case of Hindusthan Coco Cola supra, interest should only be charged for two

months and hence, it was requested the decision of the CIT(A) in upholding the

charging of the interest from the first day of the assessment year till the

completion of assessment be cancelled and interest under Section 201(1A ) be

charged from the first day of assessment year (01/04/2009) to the date of

payment of tax by the deductee assessee (31/05/2009).

disputed issue is with regard to period of computation of interest u/s. 201(1A) of

the Act. The contention of the Ld. AR is that the Supreme Court in the case of

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Hindusthan Coca-Cola Beverages Pvt. Ltd. vs. CIT (293 ITR 226) held that

interest u/s. 201(1A) of the Act is to be charged till the date of payment of tax

by deductee-assessee. In the present case, the Assessing Officer has to consider

the short deduction of TDS and thereafter, he shall charge interest u/s. 201(1A)

of the Act from the date of deductible tax till the date on which the deductee-

assessee paid the tax on its total income. With this observation, we remit this

issue to the file of the Assessing Officer to re-compute the interest u/s. 201(1A)

of the Act.

purposes. Order pronounced in the open Court on this 26th September, 2019

sd/- sd/- (GEORGE GEORGE K.) (CHANDRA POOJARI) JUDIICAL MEMBER ACCOUNTANT MEMBER

Place: Kochi Dated 26th September, 2019 GJ Copy to: 1. Canara Bank, Cantonment Branch, Trivandrum. 2.The Deputy Commissioner of Income-tax (TDS), Trivandrum. 3. The Commissioner of Income-tax(Appeals), Trivandrum. 4. The Pr. Commissioner of Income-tax, Trivandrum. 5. D.R., I.T.A.T., Cochin Bench, Cochin. 6. Guard File. By Order

(ASSISTANT REGISTRAR) I.T.A.T., Cochin

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