ASSISTANT COMMISSIONER OF INCOME-TAX, MANGALORE vs. M/S. KODAGU DISTRICT CO-OPERATIVE BANK LTD, KODAGU

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ITA 169/BANG/2017Status: DisposedITAT Bangalore22 September 2017AY 2012-135 pages
AI SummaryDismissed

What did the Tribunal hold?

The tribunal held that if the deductee has already offered the interest income to tax and paid the taxes, the deductor cannot be deemed an assessee in default under Section 201(1). Consequently, the order under Sections 201(1) and 201(1A) is not sustainable.

What were the facts?

The assessee, a co-operative bank, failed to deduct tax on interest paid to a non-resident Indian. The Assessing Officer treated the bank as an assessee in default under Sections 201(1) and 201(1A). The CIT(Appeals) allowed the assessee's appeal, noting the deductee had paid the tax.

What were the issues?

Whether the deductor can be deemed an assessee in default when the deductee has already paid the tax on the income.

Which sections of the Income-tax Act were involved?

Section 201(1),Section 201(1A),Section 195

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Income Tax Appellate Tribunal, BANGALORE BENCH ‘ C ’

Before: SHRI VIJAY PAL RAO & SHRI INTURI RAMA RAO

For Appellant: Shri Sunil Kumar Agarwal, Addl. CIT (D.R)

Per Shri Vijay Pal Rao, J.M. : This appeal by the revenue is directed against the order dt.09.11.2016 of Commissioner of Income Tax (Appeals)-12, Bangalore for the Assessment Year 2012-13.

2.

The revenue has raised the following grounds :

2 IT(IT)A No.169/Bang/2017

3.

The assessee is a co-operative central bank and assessed at Delhi having its Head Office in Madikeri, Kodagu, Karnataka. The Asst.

1.

Commissioner of Income Tax (International Taxation), Mangalore on verification found that the bank has not deducted tax on interest

3 IT(IT)A No.169/Bang/2017 payment made to Dr. Chondamma Vijayakrishnan, a non-resident Indian having PAN AVAPV 8221F on her Fixed Deposit in the bank. Accordingy, the Assessing Officer proceeded to assess the assessee as assessee in default under Sections 201(1) & 201(1A) of the Income Tax Act, 1961 (in short 'the Act') and passed the order dt.14.1.2016. The assessee challenged the action of the Assessing Officer before the CIT (Appeals) and raised various objections including the objection against the jurisdiction of the Assessing Officer. The CIT (Appeals) noted that as per the CBDT Notification No.57 of 2014 the jurisdiction is vested with the officer under whose supervision and control the matter including to non- resident person requiring deduction of tax under Section 195 of the Act fails. Accordingly, the learned CIT (Appeals) dismissed the said ground of the assessee however the CIT (Appeals) noted the fact that the deductee paid the tax on income and filed return of income then a deductor cannot be deemed to be the assessee in default. Accordingly, the CIT (Appeals) allowed the claim of the assessee that the assessee cannot be deemed to be the assessee in default under Sections 201(1) & 201(1A) of the Act when the deductee/recipient of interest has already paid the tax.

4 IT(IT)A No.169/Bang/2017 4. Before us, the learned Departmental Representative has submitted that the CIT (Appeals) has allowed the appeal of the assessee without verification of the fact that whether the interest amount was actually offered to tax by the deductee. He has relied upon the order of the Assessing Officer.

5.

On the other hand, the ld. AR has filed a copy of Note / Reply filed by the assessee through its CA as well as a copy of the return of income of the deductee Dr. Chondamma Vijayakrishnan. We find that in the return of income and in particularly in the statement of income the recipient has shown the income under the head “income from other sources” on account of bank interest of Rs.40,11,161. Thus when the recipient of the interest has already filed the return of income and included the bank interest in the total income of the deductee then the assessee cannot be deemed to be assessee in default. The ld. AR has relied upon the decision of the Hon'ble Supreme Court in the case of Hindustan Coca Cola Beverage Pvt. Ltd. Vs. CIT 293 ITR 226 wherein the Hon'ble Supreme Court has held in paras 9 to 11 as under : “ 9. We have already noticed that the order passed by the Tribunal to reopen the matter for further hearing as regards Ground No. 7 has attained its finality. In the 5 IT(IT)A No.169/Bang/2017 circumstances, the High Court could not have interfered with the final order passed by the Income-tax Appellate Tribunal.

10.

Be that as it may, the Circular No. 275/201/95-IT(B), dated 29-1-1997 issued by the Central Board of Direct Taxes, in our considered opinion, should put an end to the controversy. The circular declares "no demand visualized under section 201(1) of the Income-tax Act should be enforced after the tax deductor has satisfied the officer-in- charge of TDS, that taxes due have been paid by the deductee-assessee. However, this will not alter the liability to charge interest under section 201(1A) of the Act till the date of payment of taxes by the deductee-assessee or the liability for penalty under section 271C of the Income-tax Act."

11.

In the instant case, the appellant had paid the interest under section 201(1A) of the Act and there is no dispute that the tax due had been paid by deductee-assessee (M/s. Pradeep Oil Corporation). It is not disputed before us that the circular is applicable to the facts situation on hand.”

In view of the fact when the deductee / recipient of interest has already offered the amount to tax as part of the returned income then the order passed by the Assessing Officer under Sections 201(1) & 201(1A) of the Act is not sustainable. Accordingly, we do not find any reason to interfere with the impugned order of the CIT (Appeals) qua this issue.

6.

In the result, the appeal of the revenue is dismissed.

Order pronounced in the open court on 22nd Sept., 2017.

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