ALLAHABAD BANK,SHIMLA vs. INCOME TAX OFFICER (TDS), SHIMLA

IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “A”, CHANDIGARH HEARING THROUGH: HYBRID MODE BEFORE: SHRI MANOJ KUMAR AGGARWAL, AM & SH. RAJESH DAMODARLAL SHARMA, JM आयकर अपील सं./ ITA No. 196/Chd/2026 �नधा�रण वष� / Assessment Year : 2011-12 बनाम Allahabad Bank, ITO (TDS), Bhangra Niwas, Shimla The Mall Road, Shimla TAN NO: PTLAI0151B अपीलाथ�/Appellant ��थ�/Respondent िनधा�रती की ओर से/Assessee by : Sh. Vishal Mohan, Sr. Advocate a/w Sh. Parveen Sharma, Adv. and Sh. Chander Prakash Negi, Sr. Manager, Allahabad Bank (Virtual) – Ld. ARs राज� की ओर से/ Revenue by : Sh. Vivek Vardhan, Addl. CIT Sr. DR सुनवाई की तारीख/Date of Hearing : 05.08.2026 उदघोषणा की तारीख/Date of Pronouncement : 19.08.2026 आदेश/Order PER RAJESH DAMODARLAL SHARMA, J.M: Aforesaid appeal by the assessee for Assessment Year (AY) 2011-12 is directed against the order dt. 24.11.2025 of the learned Addl. /Joint Commissioner of Income Tax (Appeals)-1, Gurugram [hereinafter referred to as "CIT(A)"], passed under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as "the Act") confirming demand raised by Ld. AO vide common order u/s 201(1) / 201(1A) of the Act on 30.11.2017. The order passed by Ld. AO is common order for AYs 2011-12 to 2016-17. 2. The main issue as identified by Ld. AO for AY 2011-12 was non- deduction of tax at source u/s 194A on FDRs interest as paid by the assessee to M/s Himachal Pradesh Power Corporation Ltd. (HPPCL). Since the assessee did not deduct tax at source (TDS), it was held to be assessee-

2 196/Chd/2026 in-default which resulted into impugned demand of Rs.22,25,161/- against the assessee. 3. During first appeal, the assessee contended that HPPCL was a corporation established by the State Act and all of its shares were held by the State Govt. Therefore, the assessee was not required to deduct TDS in terms of Sec.194(3)(iii)(f) of the Act. However, Ld. CIT(A) referred to CBDT Circular No.18/2017 dated 29.05.2017 and held that the assessee did not produce any evidence showing that HPPCL was enjoying unconditional exemption under any clause of Sec.10 nor was it excluded from filing return of income u/s 139 of the Act. Merely being Govt. owned-funded society does not, by itself, confer exemption u/s 194A(3). Accordingly, the demand was confirmed against which the assessee is in further appeal before us. 4. The primary contention of Ld. Sr. Counsel is that the case of the assessee would fall u/s 194A(3)(iii)(f) and the said Circular do not have any applicability, at all, to the case of the assessee. The Ld. Sr. Counsel stated that Ld. CIT(A) erred in referring to the CBDT Circular, which is not the case of the assessee. It has been reiterated that HPPCL was established by State Act and all of its shares are held by the Government. The case is, therefore, covered u/s 194A(3)(iii)(f) read with Notification S.O. 3489 [No. 170 (F.No.12/164/68-ITCC/ITJ).], dated 22-10-1970 which read as under:

SECTION 194A(3)(iii)(f) OF THE INCOME-TAX ACT, 1961 - DEDUCTION OF TAX AT SOURCE - INTEREST OTHER THAN "INTEREST ON SECURITIES" - NOTIFIED INSTITUTION NOTIFICATION S.O. 3489 [NO. 170 (F.NO. 12/164/68-ITCC/ITJ).], DATED 22-10-1970 In pursuance of sub-clause (f) of clause (iii) of sub-section (3) of section 194A of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notify the following for the purposes of the said sub-clause:- (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.

The Ld. Sr. Counsel stated that HPPCL is completely covered under the above notification and therefore, the demand raised by Ld. AO was illegal.

3 196/Chd/2026 The Ld. Sr. DR fairly stated that the said claim could be re-examined by lower authorities. 5. We concur with the submissions made by Ld. Sr. Counsel. The case of the assessee is not covered under CBDT Circular No.18/2017 dated 29.05.2017 but the claim of the assessee is apparently covered under above notification. This Circular applies only to those entities whose income is exempt u/s 10 which is not the claim of the assessee. The assessee’s case, apparently, is covered u/s 194A(3)(iii)(f) which grant blanket exemption to payer assessee from rigors of TDS to specified entities. 6. The provisions of Section 194A(3)(iii)(f) specifically provides that the provisions of section 194A(1) shall not apply to such income credited or paid to such other institutions, associations or bodies or class of institutions, associations or bodies as may be notified by the Central Government in the Official Gazette. In exercise of the said statutory power, the Central Government issued Notification dated 22.10.1970 as extracted above. Once the recipient falls within any of the categories specified in the aforesaid Notification, the interest paid or credited to such recipient falls outside the requirement of deduction of tax at source under section 194A. 7. In the present case, the assessee has specifically pleaded that HPPCL is a Government-owned corporation / company and that its entire shareholding is held by the Government. The Revenue has not brought any material on record to controvert this specific factual assertion. More importantly, the Assessing Officer as well as the learned CIT(A) have not examined the applicability of the Notification dated 22.10.1970 to HPPCL. The learned CIT(A), instead, proceeded on the basis of CBDT Circular No. 18/2017 dated 29.05.2017 and observed that the assessee had not established that HPPCL was enjoying unconditional exemption under section 10 of the Act or was excluded from filing its return under section 139 of the Act. In our considered opinion, the approach adopted by the learned CIT(A) is legally unsustainable. The applicability of section 194A(3)(iii)(f), read with the Notification dated 22.10.1970, is not dependent upon the recipient being an entity whose income is exempt under section 10

4 196/Chd/2026 of the Act. The two provisions operate in different fields. The statutory exemption from TDS under section 194A(3)(iii)(f) is available by virtue of the recipient falling within a class of entities specifically notified by the Central Government. Therefore, the question whether HPPCL's income is exempt under section 10 or whether HPPCL was required to file its return under section 139 cannot be made the basis for denying the benefit of section 194A(3)(iii)(f), when the recipient is otherwise covered by the Notification issued specifically under that provision. The CBDT Circular No. 18/2017 dated 29.05.2017 do not deal with assessee’s case but the case is founded upon the independent statutory exemption contained in section 194A(3)(iii)(f), read with the specific Notification dated 22.10.1970. Therefore, the learned CIT(A) fell into error in treating the said Circular as determinative of the issue without examining whether HPPCL was covered by the Notification issued under section 194A(3)(iii)(f). 8. Finally, on the given facts, we set aside the impugned order and direct Ld. CIT(A) to re-examine the claim of the assessee in terms of notification dated 22.10.1970. The assessee is directed to establish that HPPCL fall within the ambit of notified entities. 9. The appeal stand allowed for statistical purposes. Order pronounced on 19/08/2026. Sd/- Sd/- (MANOJ KUMAR AGGARWAL ) (RAJESH DAMODARLAL SHARMA ) ACCOUNTANT MEMBER JUDICIAL MEMBER rkk आदेश की �ितिलिप अ�ेिषत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��थ�/ The Respondent 3. आयकर आयु�/ CIT 4. िवभागीय �ितिनिध, आयकर अपीलीय आिधकरण, च�ीगढ़/ DR, ITAT, CHANDIGARH 5. गाड� फाईल/ Guard File

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