ACIT, NAGERCOIL vs. M/S. KRISHNAVAKA BENEFIT FUND LTD., NAGERCOIL

This appeal of the Revenue is directed against the order of the Commissioner of Income Tax (Appeals) -3, Madurai, dated 13.06.2016 and pertains to assessment year 2012-13 deleting the filed cross-objection in respect of the same order of the CIT(Appeals). Therefore, we heard both the appeal and the cross- objection together and disposing of the same by this common order.

There was a delay of 16 days in filing the cross-objection by the assessee. The assessee has filed a petition for condonation of delay. We have heard the Ld. representative for the assessee and the Ld. D.R. We find that there was sufficient cause for not filing the cross-objection before the stipulated time. Therefore, we condone the delay and admit the cross-objection.

Shri AR.V. Sreenivasan, the Ld. Departmental Representative, submitted that the assessee is a mutual benefit company engaged in the business of finance. The company was declared as Nidhi company by Ministry of Corporate Affairs.

On the contrary, Shri N. Subramonian, the Ld. representative for the assessee, submitted that the depositors furnished Form 15G / 15H, therefore, the assessee has not deducted any tax at source at the time of paying or crediting interest on the deposit. Referring if the law requires to deduct tax and the assessee fails to deduct the same, then there can be disallowance. In this case, according to the Ld. representative, when the recipients of the interest on the deposit filed Form 15G / 15H, then the law does not require the assessee to deduct tax, therefore, there cannot be any disallowance under Section 40(a)(ia) of the Act. Referring to Section 272A(2)(f) of the Act, the Ld. representative submitted that this Section provides for levy of penalty in case Form 15G / 15H was not furnished to the Commissioner / Chief Commissioner as the case may be. So, according to the Ld. representative, at the best, the Department may levy penalty for not furnishing Form 15G / 15H received by the assessee from the depositors and definitely there cannot be any disallowance of interest under Section 40(a)(ia) of the Act.

We have considered the rival submissions on either side and perused the relevant material available on record. As rightly submitted by the Ld. D.R., the assessee has not deducted tax at the time of crediting or paying interest on the deposits. When the assessee received Form 15G / 15H from the depositors, then the assessee cannot deduct tax. It is also obligatory on the part of the depositors to the respective Commissioner / Chief Commissioner within the prescribed time. In this case, it is not in dispute that the assessee received Form 15G / 15H but admittedly it was not filed before the Commissioner / Chief Commissioner before the prescribed date. Therefore, this Tribunal is of the considered opinion that when the assessee received Form 15G / 15H, there is no necessity to deduct tax. The law does not require the assessee to deduct tax when the depositors file 15G / 15H. However, there was negligence on the part of the assessee in furnishing the copies of Form 15G / 15H to the respective Commissioner / Chief Commissioner. As rightly submitted by the Ld. representative for the assessee, Section 272A(2)(f) of the Act provides for levy of penalty in case such forms were not furnished before the Commissioner / Chief Commissioner. Therefore, at the best, penalty may be levied under Section 272A(2)(f) of the Act and definitely there cannot be any disallowance under Section 40(a)(ia) of the Act.

In view of the above, we are unable to uphold the orders of the lower authorities. The orders of both the authorities below are set aside and the addition made by the Assessing Officer is deleted.

The cross-objection filed by the assessee is only in support of the order of the CIT(Appeals), therefore, it becomes infructuous.

In the result, both the appeal filed by the Revenue and the cross-objection filed by the assessee stand dismissed.