DJ AMUSEMENTS,8/58 8/58 ,CHATHANKANDATH HOUSE vs. INCOME TAX OFFICER, PALAKKAD
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
आयकर अपीलीय अ�धकरण �ायपीठ, कोचीन IN THE INCOME TAX APPELLATE TRIBUNAL, COCHIN माननीय इंटूरी रामा राव, लेखा सद� एवं माननीय �ी मनु कुमार �ग�र, �ा�यक सद� के सम� BEFORE HON’BLE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI HON’BLE MANU KUMAR GIRI, JUDICIAL MEMBER आयकर अपील सं./ ITA No.758/Coch/2025 �नधा�रण वष� /Assessment 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.
ITA No. 758/Coch/2025 DJ Amesements
:- 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.
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.
ITA No. 758/Coch/2025 DJ Amesements
:- 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.
ITA No. 758/Coch/2025 DJ Amesements
:- 4 -:
In the result, appeal filed by the assessee is allowed for statistical purposes.
Order pronounced on 28th day of November, 2025 at Cochin.
Sd/- Sd/- (इंटूरी रामा राव) (मनु कुमार �ग�र) (Inturi Rama Rao) (Manu Kumar Giri) लेखा सद� /Accountant Member �ा�यक सद� / Judicial Member Cochin, �दनांक/Dated: 28th November, 2025. EDN, Sr. P.S आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकर आयु�त/CIT, 4. �वभागीय ��त�न�ध/DR 5. गाड� फाईल/GF
