The Delhi High Court has imposed the cost of Rs. 50,000/- and allowed Punjab and Sind Bank’s (Assessee) and allowed the claim seeking refund of the amount deposited with the Revenue on the ground of involvement of public funds despite being guilty of delay and laches in approaching the court for the relief.
The court found that assessee has slept over its rights but since public money is involved and both the Assessee as well as payee (NOIDA) falls in the category of entities which deal with public funds, the Revenue should repay the money to Assessee for onward transmission to NOIDA as the issue pertaining to deduction of tax at source on payments towards interest made to a local authorities such as NOIDA.
The assessee was subjected to TDS order under Section 201(1)/201(1A) on Feb 28, 2013 for AY 2005-06 leading to demand of Rs.1.36 Cr on account of non- deduction of tax at source under Section 194A on payments towards interest made to NOIDA.
Subsequently, SC ruling in Canara Bank (including Assessee’s own appeal for AY 2011-12) settled the controversy pertaining to non-deduction of tax at source on payment towards interest made to local authorities and observed that deduction of tax at source under Section 194A is not applicable on interest paid by the banks to statutory local authorities in view of Section 194A(3)(iii)(f).
The Assessee filed writ petition and assailed the TDS order whereas the Revenue contended that the Assessee approached HC after enormous delay and is therefore, guilty of delay and laches.
The High Court observed that having regard to the fact that public funds are involved, law and justice should meld, accordingly, quashes order passed under Section 201/201(1A) read with Section 194A.
The court remarked that “NOIDA has been following up the matter, despite which, the petitioner-bank did not act with alacrity. Given this position, NOIDA may have a case for recovering the interest from petitioner-bank if we were to grant the relief, as sought in the writ petition…”.
The court directed the department to refund the amount deposited by the Assessee within three weeks and opines that NOIDA may have a case for recovery of compensatory interest from the Assessee for the injury caused to it, accordingly, directs the registry to dispatch the order to the registered office of NOIDA.
The court directed Assessee to ensure that copy of judgement be placed before the concerned officer dealing with the matter in NOIDA
The court said that “NOIDA will be at liberty to take recourse to an appropriate remedy as it deems fit for recovering the compensatory interest from Assessee as per law”.
Case Title: Punjab And Sind Bank V/S Addl. Commissioner Of Income Tax-TDS