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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Before: Shri Chandra Poojari, AM & Shri George George K, JM
Per George George K, JM
These appeals at the instance of the assessee are directed against four orders of the Commissioner of Income- tax (Appeals), all dated 21.02.2018. The relevant assessment years are 2011-2012 to 2014-2015. Common issues are raised in these appeals, hence, they were heard together and are being disposed of by this consolidate order.
There is a delay of 97 days in filing these appeals. The assessee has filed a petition for condonation of delay. The learned AR has also filed affidavit stating that the delay in
ITA No.386-389/Coch/2018 2 M/s.Alleppey District Co-op.Bank Ltd. filing the appeal has occurred as he was suffering from back ailment. The learned AR has also filed a medical certificate of Sree Ramakrishna Pharmacy & Hospital, wherein it is stated that Mr.R.Krishnan, Chartered Accountant, was for treatment of back ailment during the relevant period. We have perused the reasons stated in affidavit for filing the appeals belatedly. We find that there is sufficient cause for the delayed filing of the appeals and no latches can be attributed to the assessee. Hence, we condone the delay and proceed to dispose of the appeals on merits.
We shall adjudicate first, the common issue raised in all appeals, namely, disallowance of interest payment for non- deduction of tax by invoking provisions of section 40(a)(ia) of the I.T.Act. The brief facts in relation to the above issue are as follows:-
The assessee is a Co-operative Bank. It is engaged in the business of banking. The assessee accepts deposits under various schemes and pays interest on such deposits taken by it. The assessments were completed for assessment years 2011-2012 to 2014-2015 by disallowing certain interest payments for the reason that no tax was deducted at source u/s 194A of the I.T.Act for such interest expenditure. The disallowance was made by invoking the provisions of section 40(a)(ia) of the I.T.Act.
Aggrieved by the disallowance made u/s 40(a)(ia) of the I.T.Act, the assessee filed appeals before the first appellate
ITA No.386-389/Coch/2018 3 M/s.Alleppey District Co-op.Bank Ltd.
authority. The CIT(A) disposed of the appeals of the assessee. The findings of the CIT(A) with regard to the legal principles relating to deduction of tax at source from the interest payment made by the assessee are summarized as under:-
A. As per section 194A of the Act, the assessee is required to deduct tax at source when the aggregate interest payment made exceeds Rs.10,000 during the relevant financial year.
B. As per the proviso to section 194A(3) of the Act, the limit of Rs.10,000 is to be computed with respect to payment made to a deductee by the branch of the Bank and not by account wise.
C. A deductee who fulfills the conditions specified in the section 197A of the Act may seek exemption from TDS on the interest payment received from the assessee deductor by filing the respective form 15G or 15H with the deductor.
D. The declaration under section 197A i.e. Form 15G or Form 15H shall not be valid unless the deductee furnishes PAN in the Form 15G or Form 15H respectively. Further, the deductor is required to deduct tax as per sub section (1) of 206AA if PAN is not furnished in the Form 15G or Form 15H, as the case may be.
E. The assessee is statutorily liable to ensure after verification that permanent account number has been duly and correctly quoted by the deductee in Form 15G/15H and failure to do discharge such statutory duty will attract the consequences.
F. The assessee is liable to deduct tax at source on the total interest paid to the deductee by the Branch during the
ITA No.386-389/Coch/2018 4 M/s.Alleppey District Co-op.Bank Ltd. relevant financial year exceeds the maximum amount not chargeable to tax during the same period.
G. On failure to deduct tax as required under the provisions, the assessee cannot take the plea that no tax is payable on the net income of the deductee for the relevant previous year and therefore, not liable for consequences of failure to deduct tax.
H. The provisions of section 206AA would prevail over provisions of section 139A of the Act and the assessee deductor is required to comply with the provisions of section 206AA to for discharging its liability under chapter XVII of the Act.
I. Even though the defects in Form 15G/15H are curable but if they were unsigned or unverified or those forms came into existence only subsequent to the close of the relevant financial year, defects cannot be cured.
4.1 The assessee had submitted during the course of hearing before the first appellate authority that there was no proper opportunity granted by the Assessing Officer, therefore, the assessee could not collect / gather full declaration in Form 15G / 15H from various branches, and hence, only limited declaration could be filed during the assessment proceedings. The CIT(A), in view of the submission of the assessee, restored the issue to the Assessing Officer and directed the assessee to furnish all the declaration collected from various branches within 15 days of receipt of this order by the Assessing Officer. The CIT(A) further directed the assessee to submit before the A.O. the summarized statement of interest payment covered as well as
ITA No.386-389/Coch/2018 5 M/s.Alleppey District Co-op.Bank Ltd. exempted from the provisions of section 40(a)(ia) of the I.T.Act. The A.O. was directed to scrutinize the declaration made by the assessee and pass appropriate orders. The relevant finding of the CIT(A) in restoring the issue to the Assessing Officer reads as follow:-
(a) The assessee may produce all the declaration collected from various branches within 15 days of receipt of this order before the Assessing Officer along with summarized statement of interest payments covered as well as exempted from the provisions of section 40(a)(ia) of the Act. (b) The Assessing Officer is directed to scrutinize the declarations and compute the disallowance under section 40(a)(ia) of the Act keeping in view the legal principles summarized at para 5.1, as above.
The assessee being aggrieved by the orders of CIT(A), has filed these appeals before the Tribunal. The assessee has filed a paper book enclosing the summary list of persons to whom the assessee has paid interest. The assessee has also furnished sample copies of declaration in Form No.15G / 15H. The grounds raised in all the appeals are more or less identical except for variance in figures. The assessee has also raised additional grounds and a petition has also been filed for admission of the additional grounds. The learned Counsel for the assessee has only argued the issues raised in the additional grounds. The learned Counsel submitted that 15 days given by the CIT(A) to produce the declaration in Form No.15G / 15H is too short a period. It was submitted that the assessee has got various branches throughout the District of Alleppey and large number of depositors. Therefore, to scrutinize the list of depositors and get declaration in Form
ITA No.386-389/Coch/2018 6 M/s.Alleppey District Co-op.Bank Ltd. No.15G /15H from the depositors from each of the branches of the assessee would require more time. The learned Departmental Representative was duly heard.
We have heard the rival submissions and perused the material on record. The CIT(A), in the interest of justice and equity, directed the assessee to produce before the Assessing Officer the summarized statement of interest payment, which does not require disallowance u/s 40(a)(ia) of the I.T.Act. The CIT(A) had granted the assessee 15 days time to the assessee to produce the relevant statement before the Assessing Officer. We are of the view that the direction by the CIT(A) to produce the necessary certificate / declaration is too short a period. The assessee is having number of branches and numerous depositors in each of the branches. Therefore, we strike down the direction by the CIT(A) to produce Form 15G / 15H within 15 days. We leave it to the discretion of the Assessing Officer to take a decision as regards the time limit for the production of summarized statement of the interest payment, and declaration under Form No.15G and 15H.
In the result, the assessee’s grounds in relation to the issue of disallowance u/s 40(a)(ia) of the I.T.Act in respect of all the assessment years, namely, assessment years 2011- 2012 to 2014-2015 is allowed for statistical purposes.
The only other issue to be adjudicated is with regard to the restriction of deduction u/s 36(1)(viia) of the I.T.Act in respect of ITA No.388/Coch/2018 concerning assessment
ITA No.386-389/Coch/2018 7 M/s.Alleppey District Co-op.Bank Ltd. year 2013-2014. The Assessing Officer had restricted the deduction u/s 36(1)(viia) of the I.T.Act to Rs.2,05,58,030. The assessee was eligible for deduction under the said section only at 7.5% of the total income computed before allowing the said deduction. It was held that the assessee was not eligible to claim deduction at 10% of the advances relating to rural branches as there was no branches in the case of the assessee. The view taken by the assessee was confirmed by the Assessing Officer. The learned AR fairly conceded that the issue in question is covered by the judgment of the Hon’ble Kerala High Court in the case of CIT v. Lord Krishna Bank Ltd. [(2011) 339 ITR 606 (Ker.)]. The Departmental Representative was duly heard.
We have heard the rival submissions and perused the material on record. The learned AR has fairly conceded that the issue of deduction of advances made by the rural branches is covered against the assessee by the judgment of the Hon’ble jurisdictional High Court in the case of CIT v. Lord Krishna Bank Ltd. (supra). In view of the submission made by the learned AR, the appeal filed by the assessee for assessment year 2013-2014 with regard to the issue of deduction u/s 36(1)(viia) of the I.T.Act raised before the Tribunal is rejected.
In the result, the appeals filed by the assessee for assessment year 2011-2012, 2012-2013 and 2014-2015 are
ITA No.386-389/Coch/2018 8 M/s.Alleppey District Co-op.Bank Ltd. allowed for statistical purposes, and for assessment year 2013-2014 is partly allowed for statistical purposes.
Order pronounced on this 04th day of September, 2019.
Sd/- Sd/- (Chandra Poojari) (George George K) ACCOUNTANT MEMBER JUDICIAL MEMBER
Cochin ; Dated : 04th September, 2019. Devdas*
Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The Pr.CIT, Kottayam. 4. The CIT(Appeals) Kottayam. 5. DR, ITAT, Cochin 6. Guard file.
BY ORDER,
(Asstt. Registrar) ITAT, Cochin