Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, DIVISION BENCH’A’, CHANDIGARH
Before: SMT. DIVA SINGH & DR. B.R.R. KUMAR
IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH’A’, CHANDIGARH
BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND DR. B.R.R. KUMAR, ACCOUNTANT MEMBER
ITA No.1017 & 1018/Chd/2017 Assessment Year: 2012-13 & 2013-14
Canara Bank Vs. The ITO (TDS) C/o Sai Enclave Panchkula Rampur, Bhushar, Shimla
PAN No. PTLC11986C
(Appellant) (Respondent)
Assessee By : Sh. Hardesh Kant Sh. Akhilesh Kant Revenue By : Smt. Chandrakanta
Date of hearing : 17/01/2018 Date of Pronouncement : 14/03/2018
ORDER PER B.R.R. KUMAR A.M. Both the above appeals have been filed by the Assessee against the common order of Ld. CIT(A) , Shimla dt. 30/03/2017.
Since the grounds raised in both the above appeals are common therefore we take grounds of appeal in ITA No. 1017/Chd/2017 for A.Y. 2012-13 which are as under:
The Ld. CIT(A) has erred din law and facts of the case while not considering the at the Assessing officer had no power of survey under section 133A. Hence the survey should be considered ultravires and proceedings of survey and the order passed by quashed. 2. The Ld. CIT(A) has erred in law and facts of the case while not considering that the sections 201(1) and 201(1A) are not the sections to pass an order and hence these orders should not be considered binding upon the assessee. 3. The Ld. CIT(A) has erred in law and facts of the case while not considering that there was no valid notice served upon the deductor and in the absence of valid notice no demand being enforced upon the assessee. 4. The Ld. CIT(A) has erred in law and facts of the case while rejecting implementation of circular no. 03/2010 dt. 02/03/2010 and charged interest on payments made in later quarters.
The assessee has not pressed Ground No. 1,2 & 3 hence required no adjudication.
Brief facts of the case are that the assessee is a Branch of Canara Bank, a public sector bank in the country. In this case, a survey u/s 133A of the I.T. Act was conducted on 11.02.2014 at the premises of the aforementioned bank branch namely Canara Bank, Rampur Bhushahr, Distt. Shimla to verify compliance of TDS provisions. During the survey, complete books of accounts, bills/vouchers, interest details & 15G/15H were not readily available, hence, summon u/s 131 of the I.T.Act, 1961 was issue to file the same. During the post survey proceedings, the A.O. noticed that the TDS deducted on the interest payments made on FDRs/KDRs was not as per the provisions of section 194A of the Income Tax Act, 1961. The A.O. held that the provisions of section 201(1)/201(1A) of the I.T. Act have been violated. The A.O. held the branch to be in default as the bank branch itself has admitted that it had been deducting TDS on quarterly basis on all these KDRs/FDRs till F.Y. 2011-12. The claim of change from quarterly deduction of TDS to annual deduction of TDS in view of the provisions as mentioned in CBDT circular after March 2012 was not accepted by the A.O. by holding that the circular was issued to help bona fide deductors to help implement the CBS software for the purpose of macro provision only.
The Ld. CIT(A) confirmed the order of the ITO(TDS).
Before us the Ld. AR argued that the TDS has been duly deducted when the interest has been paid. He has explained with documentary evidences regarding deduction of the TDS and also relied on the CBDT Circular No. 3/10/2010 which reads as under:
Sub: Tax Deduction at Source on payment of interest on time deposits under Section 194A of the Income Tax Act, 1961 by banks following Core- Branch Banking Solutions (CBS) software – reg. As per provisions of section 194A of the Income Tax Act 1961, income tax has to be deducted at source at the time of credit of interest income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, at the rates in force if such interest amount exceeds specified limit. Further, Explanation to section 194A states that “for the purpose of this section, where any income by way of interest as aforesaid is credited to any account, whether called ‘Interest payable account’ or ‘Suspense Account’ or by any other name, in the books of account of the person liable to pay such income, such
crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly”.
Representations have been received from Indian Banks Association (IBA) seeking clarification regarding deduction of tax at source from payment of interest on time deposits by banks using Core-Branch Banking Solutions (CBS) software. In case of banks using CBS software, interest payable on time deposits is calculated generally on daily basis or monthly basis and is swept & parked accordingly in the provisioning account for the purposes of macro-monitoring only. However, constructive credit is given to the depositor’s / payee’s account either at the end of the financial year or at periodic intervals as per practice of the bank or as per the depositor’s / payee’s requirement or on maturity or on encashment of time deposits; whichever is earlier.
The matter has been considered by the Board. Explanation to section 194A was introduced with effect from 1.4.1987 by the Finance Act, 1987 to plug the loophole of avoiding deduction of tax at source by crediting interest in the books of accounts under accounting heads ‘interest payable account’ or ‘suspense account’ instead of to the depositor’s / payee’s account. Therefore, the Explanation is not meant to apply in cases of banks where credit is made to provisioning account on daily/monthly basis for the purposes of macro monitoring only by the use of CBS software.
In view of the above position, it is clarified that since no constructive credit to the depositor’s / payee’s account takes place while calculating interest on time deposits on daily or monthly basis in the CBS software used by banks, tax need not be deducted at source on such provisioning of interest by banks for the purposes of macro monitoring only. In such cases, tax shall be deducted at source on accrual of interest at the end of financial year or at periodic intervals as per practice of the bank or as per the depositor’s / payee’s requirement or on maturity or on encashment of time deposits; whichever event takes place earlier; whenever the aggregate of amounts of interest income credited or paid or likely to be credited or paid during the financial year by the banks exceeds the limits specified in section 194A.
The backdrop of the CBDT Circular the order of the Ld. CIT(A) is perused.
“In view-of the above Circular of CBDT clarifying TDS provisions by banks using "Core-Branch Banking Solutions" Software (CBS), the position is very clear that while deducting tax at source from the payments of interest on time deposits by bank using CBS software, interest payable on time deposits usually calculated on daily basis or monthly basis and is swept and parked in provisioning account for the purposes of macro-monitoring. Actually, the credit is given to the depositor's account either at the end of financial year or on a fixed periodic intervals as per practice or rules framed for the same, or as per the depositor's requirement or on maturity or encashment of time deposits, as the case may be. In such a situation, the TDS is not deducted at the time of calculation of interest payable on daily basis or monthly basis under the scheme of swept and parked in provisioning account for the purposes of macro-monitoring. The Board has clearly clarified the position.”
While correctly interpreting the Circular that TDS is to be deducted whenever
the aggregate of amounts of interest credited or paid or likely to be credited or
paid, the Ld. CIT(A) held that the assessee could not establish that no interest is
accrued and credited to the specific accounts during the year, in spite of
furnishing of copy of a few accounts to substantiate their contention by the assessee.
Hence based on the Circular cited above and the documents filed by the assessee which goes to prove that the assessee has deducted TDS whenever interest is credited or paid, we hereby delete the interest levied by the ITO(TDS).
In the result, both the above appeals of the assessee are allowed.
Order pronounced in the open court.
Sd/- Sd/- (DIVA SINGH) (B.R.R.KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 14/03/2018 AG Copy to: The Appellant, The Respondent, The CIT, The CIT(A), The DR