The Dehradun Bench of Income Tax Appellate Tribunal has granted relief to Yes Bank holding that the income tax penalty could not be levied under Section 271C of the Income Tax Act 1961 on a non-taxable entity formed by an act of Government.
Section 271C of the Income Tax Act 1961 deals with the imposition of penalty for failure of deducting Tax Deducted at Source.
The TDS officer while examining the records of Uttarakhand Environment Protection and Pollution Control Board (UEPPCB) the observed that it had maintained fixed deposits with the appellant and that the Appellant Bank had not deducted tax at source on the payment of interest on those fixed deposits. The TDS officer passed the order under section 201(1)/ 201(1A) dated 23 January 2015 thereby raising a demand of a sum on the grounds that the bank had not deducted tax at source under section 194A of the Act, on payment of interest on fixed deposits, to UEPPCB.
The penalty under Section 271C of the Income Tax Act, 1961 was imposed for the alleged failure to deduct tax at source on payment of interest on Fixed Deposit Receipts to UEPPCB.
The assessee-Yes Bank Ltd submitted that the Bank, in its capacity as diductor was not required to be deducted at source, on the interest paid to UEPPCB, as it was a corporation established by a Central Act (i.e., Water (Prevention and Control of Pollution) Act, 1974, etc.). He also contented that no tax was deductible on payment of interest to UEPECB accordance with provisions of section 194A(3)(iii)(i) read with of the Notification dated 22.10.1970 and no interest under section 201(1A) of the Act ought to have been charged. The appellant also mentioned the decisions of Uttarakhand and Pollution Control Board v/s Union of India and others in his contentions.
Mayank Prabha Tomar appeared for the revenue.
The bench of B. R. R. Kumar (Accountant Member) Yogesh Kumar US (Judicial Member) relying on the contentions of the assessee bank held that the assessee had been formed by the Act of Government and a non- taxable entity and no penalty would be leviable under Section 271C of the act.
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