YES BANK LTD,MUMBAI vs. ITO (TDS)3(5), MUMBAI

This is an appeal by the assessee against the order dated 20th January 2014, passed by the learned Commissioner (Appeals)-16, Mumbai, for the assessment year 2008–09. The assessee is basically aggrieved with the demand raised under section 201 and levy of interest under section 201(1A) of the Income Tax Act, 1961 (for short "the Act") for short deduction of tax at source.

M/s. Yes Bank Limited 2 2. Briefly stated the facts are, the assessee is a banking company. On verifying the TDS return filed by the assessee for the F.Y. 2007–08, the Assessing Officer found that in the second quarter of the relevant F.Y., the assessee has made short deduction of tax to the extent of ` 23,69,430. He, therefore, issued show cause notice to the assessee to reconcile the same. However, as observed by the Assessing Officer, as the assessee failed to rectify the defect in terms with the show cause notice, the Assessing Officer passed an order on 8th January 2011, raising a demand of ` 23,69,403, on account of short deduction of tax and levied interest thereon under section 201(1A) of an amount of ` 9,64,420. He further levied interest on short payment amounting to ` 3,57,520. Thus, the total demand raised by the assessee was to the tune of ` 36,91,370. Being aggrieved of the aforesaid order, the assessee preferred an appeal before the first appellate authority.

M/s. Yes Bank Limited 3 petition under section 154 of the Act which is still pending. In respect of other deductees also, the assessee submitted explanation / reconciling the allegation of short deduction of tax. As far as short deduction of tax in respect of interest payment to Tata Motors Ltd., it was submitted by the assessee that it received FD/Term deposit from a trust which has been managing fund for other beneficiaries. It was submitted, at the time of receiving deposits from the trust the assessee was not aware as to who is the final beneficiary, therefore, the assessee deducted tax @ 10.30% on the interest paid. It was submitted the Assessing Officer noticing that the final beneficiary is a company i.e., Tata Motors Ltd., a corporate deductee and the rate at which tax should have been deducted is 20.60% raised a demand on the assessee. It was submitted by the assessee that as per Explanation to section 191, a deductor would be treated as an assessee in default under section 201(1) of the Act if the deductee has also failed to pay such tax directly. It was submitted by the assessee that since the deductee Tata Motors Ltd. has declared interest income received from the assessee in its return of income for the relevant assessment year and paid tax the assessee cannot be treated as an assessee in default under section 201(1) of the Act. In support of such contention, the assessee relied upon the decision of the Hon'ble Supreme Court in Hindustan Cocacola Beverages Pvt. Ltd v/s CIT

M/s. Yes Bank Limited 4 [2007] 293 ITR 226 (SC) and the decision of the Tribunal, Mumbai Bench, in Vodafon Essar Ltd. v/s Dy. Commissioner of Income Tax, 45 SOT 82 (URO).

M/s. Yes Bank Limited 5 5. The learned Counsel for the assessee reiterating the stand taken before the first appellate authority, submitted that the interest payments on which short deduction of tax is alleged by the Assessing Officer was made to a trust whose beneficiary is Tata Motors Ltd. It was submitted that though, assessee was required to deduct tax @ 20.60% considering the corporate status of the beneficiary but that fact was not known to assessee at the time of making payment. It was submitted, as the deductee has declared the interest income received from the assessee in the return of income filed the assessee cannot be treated as an assessee in default in view of the decision of the Hon'ble Supreme Court in Hindustan Cocacola Beverages Pvt. Ltd. (supra). It was further submitted, to prove such fact, assessee has also furnished the confirmation from Tata Motors Ltd. before the first appellate authority.

M/s. Yes Bank Limited 6 7. The learned Departmental Representative though agreed on the proposition that no demand under section 201(1) can be raised if the deductee has shown the income and paid taxes thereon in view of the principle laid down in Hindustan Cocacola Beverages Pvt. Ltd. (supra), but he submitted, assessee is liable to pay interest under section 201(1A) of the Act.

M/s. Yes Bank Limited 8 operative Society Ltd. (supra) is prior to the decision of the Hon'ble Supreme Court in Hindustan Cocacola Beverages Pvt. Ltd. (supra), wherein the Hon'ble Supreme Court upheld the applicability of circular no.275/201/95–IT(V) dated 29th January 1997, issued by the CBDT stating that liability to charge interest under section 201(1A) of the Act till the date of payment of tax by the deductee would remain. We, therefore, while deleting the demand under section 201(1) of the Act, direct the Assessing Officer to compute interest under section 201(1A) of the Act till the date of payment of tax by the deductee.