TDS exemption for statutory board interest upheld; bona fide non-deduction shielded the payer from default consequences.

Delay of 239 days in filing the appeal was condoned because the merger of the predecessor bank, change of premises, and time taken for head office approval showed sufficient cause and no negligence. Interest paid to the Karnataka Building & Other Construction Workers Welfare Board was held to fall within the exemption in section 194A(3)(iii)(f), as the Board was treated as a statutory body covered by the notified class for that provision. Accordingly, no tax was deductible at source, and the assessee could not be treated as an assessee in default or charged interest under sections 201(1) and 201(1A).

---

---

Issues: (i) Whether the delay of 239 days in filing the appeal deserved condonation. (ii) Whether interest paid to the Karnataka Building & Other Construction Workers Welfare Board attracted tax deduction at source under section 194A, or fell within the exemption in section 194A(3)(iii)(f), so as to invalidate the order treating the assessee as an assessee in default under sections 201(1) and 201(1A).

Issue (i): Whether the delay of 239 days in filing the appeal deserved condonation.

Analysis: The delay was explained on the basis of the merger of the predecessor bank with the appellant bank, change of office premises, and the time taken to obtain approval from the Head Office. The explanation was accepted as showing absence of negligence and sufficient cause.

Conclusion: The delay was condoned in favour of the assessee.

Issue (ii): Whether interest paid to the Karnataka Building & Other Construction Workers Welfare Board attracted tax deduction at source under section 194A, or fell within the exemption in section 194A(3)(iii)(f), so as to invalidate the order treating the assessee as an assessee in default under sections 201(1) and 201(1A).

Analysis: The payment was made to a Board constituted under section 18 of the Building and Other Construction Workers' (Regulation and Employment and Conditions of Service) Act, 1996. On the reasoning adopted in an earlier Tribunal decision, such a Board was treated as an institution, association, body, or class of bodies notified for the purposes of section 194A(3)(iii)(f). The Board was regarded as a body corporate created under a statutory framework, and the contrary authorities relied upon were distinguished on facts. The assessee's understanding that no tax was deductible was held to be bona fide.

Conclusion: The payment fell within the exemption, and the assessee could not be treated as an assessee in default or charged interest under sections 201(1) and 201(1A).

Final Conclusion: The appeal succeeded in full, and the impugned TDS default and interest demand were set aside.

Ratio Decidendi: A statutory board notified within the scope of section 194A(3)(iii)(f) is outside the TDS obligation on interest payments, and a payer acting on a bona fide, reasonable construction of that exemption cannot be treated as an assessee in default under section 201.

---