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2014 Supreme(Del) 2418
High Court of Delhi
S. RAVINDRA BHAT, VIBHU BAKHRU, JJ.
UCO Bank
Versus
Union of India & Others
W.P.(C). No. 3563 of 2012 & CM No. 7517 of 2012 & W.P.(C). No. 2714 of 2014 & CM. No. 5633-34 of 2014
Decided On: 11-11-2014
For the Petitioner:Prem Lata Bansal with Sarfaraz Khan, Advocate.
For the Respondents:N.P. Sahni, Anuj Aggarwal with Gaurav Khanna, Advocates.
The main legal point established in the judgment is that the provisions for deduction of tax at source under Section 194A of the Income Tax Act were not applicable in a situation where the recipient of the interest income was not ascertainable and not liable to be assessed for the deposits.
Headnote:
Income Tax - Applicability of Chapter XVII of the Income Tax Act, 1961 - Section 194A - Section 201(1) - Section 201(1A) - Section 263 - Section 4 - Section 190 - Section 191 - Section 199 - Section 202
Fact of the Case:
The case involves a challenge to a notice issued by the Assistant Commissioner of Income Tax directing a bank to submit details of deposits made by litigants in the name of the Registrar General of the Court and an order holding the bank to be an assessee in default for not deducting tax at source on the interest accrued on fixed deposits.
Finding of the Court:
The court found that the provisions of Chapter XVII of the Income Tax Act, particularly Section 194A, were not applicable in the case as the Registrar General was not the recipient of the interest income and was not liable to be assessed for the deposits made with the bank. The court set aside the impugned notice, circular, and order.
Issues: The main issue was the applicability of Chapter XVII of the Income Tax Act to the interest payable on fixed deposits maintained by the Court in the name of the Registrar General.
Ratio Decidendi: The court held that the provisions for deduction of tax at source under Section 194A were not applicable as the Registrar General was not the recipient of the interest income and was not liable to be assessed for the deposits made with the bank.
Final Decision: The writ petitions were allowed, and the impugned notice, circular, and order were set aside.
Vibhu Bakhru, J.
1. The writ petition (W.P.(C) No.3563/2012) has been filed challenging a notice dated 25.04.2012 issued by the Assistant Commissioner of Income Tax, Delhi (hereafter ‘ACIT’) whereby the petitioner bank was directed to submit the details of deposits made with the petitioner bank by all litigants in the name of Registrar General of this Court during the Financial Years 2005-06 to 2010-11. The petitioner bank also impugns a circular bearing no. 8/2011 dated 14.10.2011 (hereafter ‘impugned circular’) issued by Central Board of Direct Taxes (CBDT) whereby it was clarified that in cases where deposits were made in terms of directions issued by Court, the Banks were required to deduct tax at source and issue tax deducted at source (hereafter ‘TDS’) certificates.
2. The writ petition (W.P.(C) No.2714/2014) has been filed impugning an order dated 10.03.2014 passed by the Deputy Commissioner of Income Tax, holding the petitioner bank to be an assessee in default within the meaning of Section 201(1) of the Income Tax Act, 1961 (hereafter the ‘Act’) for a sum of Rs.7,78,34,950 determined under Section 201(1)/(lA) of the Act.
3. The brief facts necessary for considering the present petitions are that the petitioner bank, on 29.09.2004, accepted a Fixed Deposit (FD) for a sum of Rs.7,07,45,550/- in the name of Register General of this Court and issued a Fixed Deposit Receipt (FDR) bearing no. 163275. The said FD was made in compliance of a direction passed by this Court in Execution Petition No. 216/1999 titled as ‘Union of India v. Oriental Building Furnishing Co. Ltd.’ The said FD was initially for a period of one year, however, before maturity of the said FD, certain amount was paid to M/s CJ International Hotel on 27.10.2004 and the remaining amount of Rs.6,93,87,888/-(being balance principal and accrued interest) was again accepted as a FD for a period of one year. The said FD was renewed annually except once when instead of 30.10.2007, it was renewed on 06.02.2008.
3.1 In relation to proceedings pending against M/s Oriental Building Furnishing Company Limited, the Deputy Director, Income Tax (Investigation) issued summons dated 14.03.2011 under Section 131(1A) of the Act directing the petitioner bank to furnish details of the interest accrued with respect to the FDR No.163275, TDS deducted on the interest accrued and renewal of FD with respect to the company – M/s Oriental Building Furnishing Company Limited. The petitioner bank complied with the said direction and by its letter dated 15.03.2011 intimated the details and status of the above stated FDR.
3.2 Subsequently, the ACIT issued a show cause notice dated 21.03.2011 to the petitioner bank for not deducting TDS on the interest accrued and to show cause why the petitioner bank be not treated as an assessee in default under Section 201(1)/201(1A) of the Act. The petitioner, by its reply dated 22.03.2011, submitted that the said FD was in the name of Register General of this Court as a custodian and no TDS was deducted on the accrued interest because the actual beneficiary was not known as the matter was sub judice. It was also submitted that the TDS would be deducted on when payment is made to the beneficiary as may be decided by the Court.
3.3 Thereafter, the ACIT passed an order dated 29.03.2011 considering the petitioner bank as an assessee in default and demanded Rs.40,33,330 and Rs.14,19,804 under Section 201(1) and Section 201(1A) of the Act respectively for the Financial Years 2004-05 to 2010-11. By the said order, the penalty proceedings under Section 271C of the Act were also initiated separately. A separate demand notice dated 29.03.2011 was also issued under Section 156 of the Act for the Financial Years 2004-05 to 2010-11.
3.4 In writ petition-W.P.(C) No.2972/2011, an order dated 29.03.2011 and a demand notice dated 29.03.2011 are impugned. On 15.07.2011, the learned counsel appearing for the Income Tax Authorities made a statement before the C
