2021 (1) TMI 318

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....l issues that the Tribunal may examine upon remand, which we propose to provide, are as under: [A] Whether the HDFC Bank as a payee has deposited entire tax arising out of such payment in advance, and therefore, the ratio laid down in a decision of this Court in case Commissioner of Income-Tax v. Rishikesh Apartments Coop. Housing Society Limited [Supra] would apply. [B] In absence of any such advance payment, should the assessee not pay interest on delayed deposit of tax by the payee, as clarified by the Supreme Court in the case of Hindustan Coca Cola Beverages Private Limited [Supra]. [C] If need be, in other words, if the answer to these questions is against the assessee, the Tribunal would be required to examine the assessee's legal contention that in any case, looking to the nature of payments in question, liability of the assessee to deduct tax at source did not arise at all. For considering the above issues, the impugned judgment of the Tribunal is set-aside. Proceedings are remanded back to the Tribunal for fresh consideration in accordance with law. Tax Appeal stands disposed of accordingly." 3. The relevant facts required f....

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....kdrop of the above stated discussion, we proceed to adjudicate the issue involved in the appeal. 4. The learned DR before us has filed the written submission which are reproduced as under: The above matter was heard on 19.09.2019 by your Honour's. The matter was argued in detail by the Id. counsel of the assessee and the undersigned. 2. The facts of the case are that the assessee company repurchased deep discount bonds from HDFC Bank Ltd. On these deep discount bonds the company paid interest of Rs. 15,71,90,4287- during the financial year 2006-07 on which no tax was deducted at source u/s.193. The Assessing Officer issued notice to the assessee company. In response the assessee company claimed that HDFC bank Ltd falls within the ambit of provisions of section 194A (3(ii)) of the i.T. Act and hence no tax was required to be deducted. The A.O. issued another notice dated 06.11.2012. According to the A.O., the interest paid on deep discount bonds was covered by section 193 of I.T. Act and hence the assessee was under obligation to deduct tax at source on the interest payment. Accordingly, after considering the reply of the assessee the A.O. passed order u/s 2....

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....ind enough to adjourn the matter to 08.11.2019. DEPARTMENT'S STAND 1) The assessee repurchased 391 DDBs from HDFC bank and 9 DDBs form sister concern Nirma Chemical Works Pvt Ltd. Admittedly, no TDS has been deducted on interest payment to both the company. 2) The DDBs were covered by section 193 of the IT Act. 3) The Assessee before the AO as well as before the CIT(A) claimed that the interest on securities is covered for TDS u/s 193A. The CIT(A) in para 8 of the judgment agreed with the contention of the assessee while allowing the appeal However,'the fact is that there is no provision of section 193A in the IT Act. 4) The CIT(A) has accepted the argument of the assessee's that redemption and repurchase are different and hence payment of interest on repurchase of DDBs comes within the purview of section 194A. The contention of the assessee as well as decision of CIT(A) is factually and legally incorrect. HDFC bank is exempt from IDS in respect of loans and advances given by the company under normal course of banking business. The interest earned on investment in deep discount bonds does not come within the ambit of loans or....

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.... the AR before us vehemently supported the order of the authorities below as favourable to them. 7. We have heard the rival contentions of both the parties and perused the materials available on record. The Hon'ble Gujarat High Court has restored the appeal for fresh adjudication with the direction which has already been elaborated somewhere in the preceding paragraph in this order. One of the direction of the Hon'ble Gujarat High Court, bearing number (c) and last in seriatim was to examine whether the assessee was liable to deduct TDS on the deep discount bonds. From the preceding discussion the first controversy that arises for our adjudication whether the assessee is liable to deduct TDS when it has not incurred any interest expenses on the deep discount bonds. The provisions of "Chapter XVII, BDeduction at source" provides that person who is responsible for paying any income to a resident by way of interest, shall, at the time of credit of such income to the account of the payee or at the time of payment whichever is earlier, deduct tax at the rate prescribed under the law. In other words, the question of income in the hands of the payee arises when the assessee is incurrin....