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Facts
The assessee challenged a demand under Sections 201(1) and 201(1A) for non-deduction of TDS on rent paid to local authorities (Punalur Municipality and Orkkatteri Panchayat). The assessee argued that payments to local authorities, whose income is exempt under Section 10(20) and who are not required to file returns under Section 139, are not subject to TDS as per CBDT Circular No. 4/2002.
Held
The Tribunal found that the Ld. CIT(A) failed to adjudicate these crucial grounds, including the applicability of CBDT Circular No. 4/2002, thereby violating natural justice. Consequently, the Tribunal set aside the CIT(A)'s order and remitted the matter back for fresh adjudication, with directions to consider all submissions and the said circular.
Key Issues
Whether the CIT(A) erred by not adjudicating the applicability of CBDT Circular No. 4/2002 concerning TDS on payments to local authorities whose income is exempt under Section 10(20) and who are not required to file returns under Section 139.
Sections Cited
201(1), 201(1A), 10, 10(20), 139
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, COCHIN
Before: HON’BLE SHRI INTURI RAMA RAO & SHRI HON’BLE MANU KUMAR GIRI
Year: 2014-15 DJ Amusements, The Income Tax Officer, Mankara P.O, Vs. Ward-1 & TPS, Palakkad – 678 614. Palakkad. Kerala PAN: AAHFD 2211P (अपीलाथ�/Appellant) (��यथ�/Respondent) अपीलाथ� क� ओर से/ Appellant by : Shri Sivadas Chettoor, C.A ��यथ� क� ओर से /Respondent by : Smt Leena Lal, Snr AR सुनवाई क� तार�ख/Date of Hearing : 06.11.2025 घोषणा क� तार�ख /Date of Pronouncement : 28.11.2025 आदेश / O R D E R PER MANU KUMAR GIRI (Judicial Member):
This appeal filed by the assessee is directed against the order of the Ld. Commissioner of Income Tax (Appeals) ADDL/JCIT(A) PANAJI [CIT(A)] dated 19.08.2025 for Assessment Year 2014-15.
:- 2 -:
The assessee has raised multiple grounds of appeal challenging the confirmation of demand under Sections 201(1) and 201(1A) of the Income Tax Act. One of the principal grievances of the assessee is that the Ld. CIT(A) failed to adjudicate several specific grounds, including non-consideration of availability of PANs of the payees, non-consideration of assessee’s written submissions, misapplication of the judgments of Transmission Corporation of AP Ltd. and Eli Lilly & Co., and most importantly, failure to consider CBDT Circular No. 4/2002 dated 16.07.2002, which categorically states that no TDS is required to be deducted on payments made to local authorities whose income is exempt under Section 10 and who are not required to file returns under Section 139.
3. The assessee contended that the rent payments were made to Punalur Municipality and Orkkatteri Panchayat, both of which are “local authorities” as defined under Section 10(20) of the Act. Therefore, in view of the binding CBDT Circular, no TDS was deductible, and consequently, the order passed under Sections 201(1) and 201(1A) is unsustainable in law.
:- 3 -:
We find from the order of the Ld. CIT(A) that the above grounds and legal submissions, especially regarding the applicability of CBDT Circular No. 4/2002 were not adjudicated at all. The impugned appellate order does not contain any discussion or reasoning on these crucial issues. Failure to adjudicate specific grounds raised before the first appellate authority constitutes a violation of the principles of natural justice.
We are therefore of the considered view that the matter requires fresh adjudication by the Ld. CIT(A) after considering CBDT Circular No. 4/2002 dated 16.07.2002, assessee’s detailed written submissions, PAN details of payees submitted before the authorities, judicial precedents relied upon by the assessee, and all grounds raised in the appeal.
Accordingly, we set aside the impugned order of the Ld. CIT(A) and remit the matter back to his file with a direction to pass a fresh speaking order after granting adequate opportunity of being heard to the assessee. The assessee is also directed to cooperate in the remand proceedings and furnish any additional evidence, if so required.
:- 4 -:
In the result, appeal filed by the assessee is allowed for statistical purposes.
Order pronounced on 28th day of November, 2025 at Cochin.