High Court Of Rajasthan
CIT vs. Manager, State Bank Of India
Section 10(15)(iv)(fa), 194A, 194-I, 195
Financial years 2001-02 & 2002-03
N.P. Gupta & Kishan Swaroop Chaudhari, JJ.
IT Appeal Nos. 5 & 97 of 2006
26th August, 2008
Counsel appeared :
K.K. Bissa, for the Appellant
Kishan Swaroop, J. :
Both these appeals, arise out of consolidated order of Tribunal dt. 29th Aug., 2003, by which appeals of assessee respondent were accepted, and demand raised for the financial years 2001-02 and 2002-03 by AO in respect of interest paid on TDR/STDR and rent paid, were set aside. Since the questions involved in these appeals are same and they pertain to the very same assessee but for different financial years, these appeals are being decided by this common order. Survey was conducted at the business premises of assessee respondent on 5th March, 2002, and it was noticed that TDS was not deducted on interest paid on TDR/STDR, and TDS was not deducted on rent paid for the office building to four co-owners for the years 2000-01 and 2001-02, and thus levied tax and interest. On appeal, learned CIT(A), vide order dt. 4th April, 2003, partly accepted the appeals but confirmed the order of assessing authority pertaining to the liability to deduct tax on TDR/STDR and rent. Learned Tribunal, by the impugned order, accepted appeals of assessee and set aside the demand raised by AO on account of aforesaid liability. Appeals were admitted on 9th Jan., 2006, and following substantial questions were framed :
“1. Whether on the facts and in the circumstances of the case, the learned Tribunal is justified in law in holding that the interest paid by the bank to the NRIs on deposits in Indian currency was exempt under s. 10(15)(iv)(fa) of the IT Act, 1961 and thereby not subject to TDS under s. 195 of the IT Act ?
2. Whether on the facts and in the circumstances of the case, the learned Tribunal was legally justified in holding with regard to TDS under s. 194-I of the Act that when there are a number of owners of a property, the limit or ceiling will apply to each and every owner separately notwithstanding the fact that the amount has been paid by creating (sic.-crediting) the aggregate sum in the joint account of the owners.” Heard learned counsel for the parties and perused record. Learned counsel for the appellant submitted that interest paid on TDR/STDR does not fall under s. 10(15)(iv)(fa) of the IT Act, hence deduction was not admissible, and learned Tribunal has committed error in accepting appeals on this ground. He further submitted that rent was payable for office building to the co- sharers, whose shares were not definite and ascertainable, hence TDS was to be deducted on payment of rent, and learned Tribunal has committed error in accepting appeals. On the other hand, learned counsel for the respondent assessee has supported order of learned Tribunal, and submitted that as per provisions of s. 10(15)(iv)(fa), the interest income was exempt from taxable income and share of co-owners in rented premises was definite, thus, learned Tribunal has not committed any error in accepting the appeals, hence the present appeals are liable to be dismissed. Learned counsel for the appellant submitted that s. 10(15)(iv)(fa) is not applicable in this case. Sec. 10(15)(iv)(fa), reads as under : “(fa) by a scheduled bank to a non-resident or to a person who is not ordinarily resident within the meaning of sub-s. (6) of s. 6 on deposits in foreign currency where the acceptance of such deposits by the bank is approved by the RBI.” This provision makes it abundantly clear that interest payable by a scheduled bank to a nonresident, or to a person, who is not ordinarily resident, on deposits in foreign currency, is exempt from tax and this income is not part of taxable income. Apex Court, in the case of Transmission Corporation of A.P. Ltd. & Anr. vs. CIT (1999) 155 CTR (SC) 489 : (1999) 239 ITR 587 (SC) has held that tax is to be deducted at source only on the sum, on which income-tax is leviable, and which income could be assessed to tax under the Act. When interest income received by the depositors under TDR/STDR was not subject to tax as per s. 10(15)(iv)(fa), question of deduction of income-tax at source did not arise. Learned Tribunal has elobrately discussed this issue in its order and has rightly held that provisions of s. 10(4)(ii) are not applicable to the present case, and as such, we find no error in the order of learned Tribunal on this count and thus, question No. 1 is answered in favour of assessee respondent. As per deduction of TDS on rent is concerned, orders of CIT(A) and learned Tribunal, make it clear that the property was of late Smt. Tej Roop Kumari, who created registered trust in her lifetime on 10th Oct., 1990, according to which, her three sons and one grandson became absolute owners of the property in definite shares.
Learned counsel for the appellant has placed reliance on Smt. Bishaka Sarkar vs. Union of India & Anr. (1996) 134 CTR (Cal) 558 : (1996) 219 ITR 327 (Cal) in which it was held that rent paid to co-owners cannot be split up and co-owners would come within the expression “other cases”, so deduction of tax at the rate of 20 per cent was justified. It appears that learned Judge of Calcutta High Court did not take note of law laid down by apex Court in CIT vs. Bijoy Kumar Almal (1995) 125 CTR (SC) 418 : (1995) 215 ITR 22 (SC), in which it was held that where property is owned by two or more persons and their respective shares are definite and ascertainable, they shall not, in respect of such property, be assessed as an AOP and that the share of each such person in the income from that property shall be included in his total income, meaning thereby, liability to deduct tax on rental income received by each co-owners was to be judged. Thus, limit of Rs. 1,20,000 was applicable to each co-owner, and thus, no tax was to be deducted at source, and learned Tribunal has not committed any error in accepting the appeals of the assessee. Thus, question No. 2 is answered in favour of assessee. In light of aforesaid discussion, both the appeals filed by appellant are dismissed.
[Citation : 323 ITR 93]