Allahabad High Court
The Commissioner Of Income ... vs Central Bank Of India,Naya ... on 20 July, 2017
Bench: Pankaj Mithal, Umesh Chandra Tripathi
HIGH COURT OF JUDICATURE AT ALLAHABAD
?AFR
Court No. - 3
Case :- INCOME TAX APPEAL No. - 352 of 2016
Appellant :- The Commissioner Of Income Tax(Tds),Kanpur And Another
Respondent :- Central Bank Of India,Naya Bans,Sector-15,Noida,U.P.
Counsel for Appellant :- Gaurav Mahajan
Counsel for Respondent :- Abhishek Tandon
And
Case :- INCOME TAX APPEAL No. - 353 of 2016
Appellant :- The Commissioner Of Income Tax(Tds),Kanpur And Another
Respondent :- Central Bank Of India,Naya Bans,Sector-15,Noida,U.P.
Counsel for Appellant :- Gaurav Mahajan
Counsel for Respondent :- Abhishek Tandon
And
Case :- INCOME TAX APPEAL No. - 354 of 2016
Appellant :- The Commissioner Of Income Tax(Tds),Kanpur And Another
Respondent :- Central Bank Of India,Naya Bans,Sector-15,Noida,U.P.
Counsel for Appellant :- Gaurav Mahajan
Counsel for Respondent :- Abhishek Tandon,Abhishek Tandon
And
Case :- INCOME TAX APPEAL No. - 355 of 2016
Appellant :- The Commissioner Of Income Tax(Tds),Kanpur And Another
Respondent :- Central Bank Of India,Naya Bans,Sector-15,Noida,U.P.
Counsel for Appellant :- Gaurav Mahajan
Counsel for Respondent :- Abhishek Tandon
And
Case :- INCOME TAX APPEAL No. - 361 of 2016
Appellant :- The Commissioner Of Income Tax(Tds),Kanpur And Another
Respondent :- Central Bank Of India,Naya Bans,Sector-15,Noida,U.P.
Counsel for Appellant :- Gaurav Mahajan
Counsel for Respondent :- Abhishek Tandon
And
Case :- INCOME TAX APPEAL No. - 362 of 2016
Appellant :- The Commissioner Of Income Tax(Tds),Kanpur And Another
Respondent :- Central Bank Of India,Naya Bans,Sector-15,Noida,U.P.
Counsel for Appellant :- Gaurav Mahajan
Counsel for Respondent :- Abhishek Tandon
Hon'ble Pankaj Mithal,J.
Hon'ble Umesh Chandra Tripathi,J.
In all these appeals a common order of the Income Tax Appellate Tribunal dated 8.1.2016 has been challenged in so far as the tribunal has deleted the penalty imposed under Section 271 C of the Income Tax Act, 1961 (hereinafter referred to as the Act).
The only substantial question of law which has been raised in these appeals is whether the tribunal is justified in reversing the order of the CIT (Appeals) confirming the levy of penalty imposed under Section 271 C of the Act upon the assessee for the failure to deduct tax at source.
The respondent assessee is a Bank. It was having fixed deposits of the NOIDA. On the interest earned on those fixed deposits it failed to deduct tax at source. Thus, penalty was imposed under Section 271 C of the Act.
The defence of the respondent assessee is that NOIDA is an Authority under the State Act that is exempt from deduction of tax at source under Section 194-A (1) of the Act.
A Division Bench of this Court in Income Tax Appeal No. 64 of 2016 (Commissioner of Income Tax (Tds) and another Vs. Canara Bank) vide judgment and order dated 4.4.2016 has held that NOIDA is a corporation established by the U.P. Industrial Development Act, 1976 therefore is exempt from payment of tax at source.
In view of the above decision, the respondent assessee was not supposed to deduct any tax at source on the deposits made by the NOIDA and when no such tax was deductable at source, the question of its payment and imposition of penalty does not arise.
Further, Section 273 B of the Act provides that no penalty shall be imposable on the assessee for the failure referred to in Section 271 C of the Act if he proves that there was reasonable cause for the failure.Therefore, if the assessee proves that there was reasonable cause for not deducting the tax at source, he is not liable for penalty under Section 271 C of the Act.
In view of the dispute as to whether NOIDA is a Corporation exempt from liability of deduction of tax at source there was a reasonable cause for the respondent assessee not to deduct the tax at source.
In the case of Commissioner of Income Tax (TDS) Vs. G.M. (Telecom) BSNL Income Tax Appeal No. 39 of 2014 decided on 13.2.2014 the assessee was under a bonafide believe that tax was not liable to be deducted on commission/trade discount in view of decision in Idea Cellular Ltd. Vs. DCIT (2009) 121 TTJ (Del) 352. The Division Bench of this Court held that it was a reasonable cause for failure to deduct tax. This exactly is the position in the case at hand.
Accordingly, even in the light of the provisions of Section 273 B of the Act no penalty could have been imposed upon the respondent assessee under Section 271 C of the Act.
In view of the aforesaid facts and circumstances, the question framed above is answered in favour of the assessee and against the revenue and it is held that the tribunal was justified in holding the penalty imposed under Section 271 C of the Act as the assessee not only had a reasonable cause for not deducting tax at source but also as NOIDA was exempt for payment of tax at source.
The appeal as such lacks merit and is dismissed.
Order Date :- 20.7.2017
SKS
