THE KERALA STATE FINANCIAL ENTERPRISE LIMITED vs. THE COMMISSIONER OF INCOME TAX

On facts suffice it to notice that the appellant while carrying on chitty business accepts fixed deposits of the price amounts in lieu of other security. On deposit being made, interest accrues on such deposits, which is adjusted towards the instalments of the chitty of the respective subscribers. Whether the tax deduction at source have to be carried out from the interest accrued is the essential question on which the dispute arose. There is absolutely no doubt that tax deduction at source has to be made except in cases where the subscribers, who are the depositors and who earn the interest income, submits Form 15G or Form 15H, as applicable. Admittedly, the assessee did not produce such documents executed by the depositors and when produced, they were defective.

The Assessing Officer treated the assessee to be in default and made a demand of Rs.7,64,60,118/-. The assessee was in appeal before the First Appellate Authority. The issue is dealt with in para 9 of Annexure B order by the First Appellate Authority. In 127 cases, it was found by the First Appellate Authority that the interest payment exceeded the minimum taxable limit. Hence, there could not have been any 15G or 15H Forms with respect to that. The second category of cases numbering 176, where cases in which there was no signatures available in Form 15H. Then, there are 517 number of 15H Forms where the declaration was not filled up and no signature of the depositor. Again, there were 52 cases where verification has not been signed and filled by the declarants. There cannot be any interference caused on these aspects.

With respect to 1768 cases, declarations were made in Forms 15H and 15G introduced with effect from 01.08.2003 only. The subject assessment year was 2003-04 and there was no question of the new Forms being in vogue in the previous year to the assessment year. With respect to the said 1768 cases, the First Appellate Authority rejected the same on the contention that there was no explanation as to how these Forms introduced with effect from 01.08.2003, were submitted in the previous assessment year. We find the said rejection to be proper, since on monthly or quarterly payment of interest, tax deduction at source has to be made and to have the relief under Section 197A of the Act, there should be 15G and 15H Forms filed at the commencement of the previous year to the assessment year and only then the payer would be absolved from the liability to deduct such tax.

Then, there were 156 cases, where the declaration was not filed before the end of the previous year and the verification made in 1999 or 2000. These were also found to be defective and not enabling the assessee from being absolved from making deductions by virtue of Section 194A.

On the findings as rendered by the First Appellate Authority on facts, which has been affirmed by the Tribunal, we do not see any question of law arising. The assessee, as has been noticed at the first instance, had also raised a question as to whether a further opportunity had to be then granted. We do not see any subsequent opportunity absolving the assessee from deducting tax at source in the financial year 2002-03, which is the previous year relevant to the subject assessment year. We hence reject the appeal of the assessee. No order as to costs. K.VINOD CHANDRAN JUDGE ASHOK MENON dkr JUDGE