Court directs no TDS on FD interest during CBI case. Tax liability post-proceedings.

The court allowed the petition, directing respondents 3 to 5 not to deduct TDS on the interest accruing on the petitioner's fixed deposits until the conclusion of the CBI proceedings. The court clarified that the petitioner's liability to pay taxes on the interest income would arise only after the proceedings concluded. Any TDS already deducted prior to the interim order dated 09.09.2019 would not be affected by this judgment.

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Issues Involved:
1. Whether respondents 3 to 5 should be directed not to deduct TDS on hypothetical interest income from fixed deposits during the pendency of the CBI attachment order.
2. Whether respondents 1 and 2 should collect taxes on accumulated arrears of interest income from the respective bank accounts after the conclusion of the CBI proceedings.

Detailed Analysis:

Issue 1: TDS Deduction on Hypothetical Interest Income
The petitioner sought a writ of mandamus to prevent respondents 3 to 5 from deducting TDS on hypothetical interest income from fixed deposits during the pendency of the CBI attachment order. The court noted that the fixed deposits were frozen/attached by the CBI, and therefore, the petitioner was not receiving any actual income from these deposits. The court referenced Section 194A of the Income Tax Act, which mandates TDS deduction only when income is credited to the account of the payee. Since the fixed deposits were frozen, the petitioner was not receiving any income, and thus, TDS deduction was not applicable.

The court also relied on the Delhi High Court's decision in UCO Bank vs. Union of India, which held that TDS should not be deducted in situations where the recipient of the interest is not ascertainable, and the interest income is hypothetical. The Central Board of Direct Taxes (CBDT) had reiterated this principle in its circular dated 28.12.2015.

Issue 2: Collection of Taxes on Accumulated Arrears
The petitioner alternatively sought a direction for respondents 1 and 2 to collect taxes on accumulated arrears of interest income from the respective bank accounts after the conclusion of the CBI proceedings. The court held that the petitioner's liability to pay taxes on the interest income would arise only after the conclusion of the CBI proceedings. Until then, the interest income could not be treated as actual income for the purpose of TDS deduction.

Conclusion:
The court allowed the petition, directing respondents 3 to 5 not to deduct TDS on the interest accruing on the petitioner's fixed deposits until the conclusion of the CBI proceedings. It clarified that the petitioner's liability to pay taxes on the interest income would arise only after the proceedings concluded. The court also noted that any TDS already deducted prior to the interim order dated 09.09.2019 would not be affected by this judgment.

Order:
1. The petition is allowed.
2. Respondents 3 to 5 are directed not to deduct TDS on the interest accruing on the petitioner's fixed deposits until the conclusion of the CBI proceedings.
3. The petitioner's liability to pay taxes on the interest income will arise after the conclusion of the CBI proceedings.
4. The order does not affect any TDS already deducted by respondents 3 to 5 before the interim order dated 09.09.2019.

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