Income Tax Appellate Tribunal - Cochin
The Chirakkal Service Co-Op Bank Ltd, ... vs The Ito (Tds), Kannur on 22 March, 2018
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IN THE INCOME TAX APPELLATE TRIBUNAL
COCHIN BENCH, COCHIN
BEFORE S/SHRI CHANDRA POOJARI, AM & GEORGE GEORGE K., JM
I.T.A. Nos. 231 & 232 /Coch/2016
Assessment Years : 2007-08 & 2008-09
M/s. Chirakkal Service Co- Vs. The Income Tax Officer (TDS),
operative Bank Ltd., Kannur.
Chirakkal P.O.,
Kannur- 670 011.
[PAN:AAAAC 0458M]
(Assessee-Appellant) (Revenue-Respondent)
Assessee by Shri George Thomas, CA
Revenue by Shri M.V. Rudran, Addl. CIT, DR
Date of hearing 21/03/2018
Date of pronouncement 22/03/2018
ORDER
Per GEORGE GEORGE K., JM:
These appeals at the instance of the assessee are directed against the consolidated order of the CIT(A), Kozhikode dated 11/02/2016. The relevant assessment years are 2007-08 and 2008-09.
2. Since common issues are raised in these appeals, hence they were heard together and are being disposed of by this consolidated order.
I.T.A. Nos. 231 & 232./C/2016
3. Identical grounds are raised in these appeals which read as follows:
i) The order of the Income Tax Officer (TDS), Kannur is against the facts and circumstances of the appellant's case and hence opposed to the provisions of the Income Tax Act, 1961.
ii) The Learned Income Tax Officer (TDS) ought to have considered the fact that the appellant is contributing to a provident fund recognized by the Government of Kerala and as per the guidelines issued by the State Co-operative Department.
iii) Without prejudice to the above, the appellant is not liable to deduct tax on the interest accrued on PF deposits of the employees' u/s. 192 of the Income Tax act as section 192 is not applicable to interest. Moreover the PF amount is deposited in the apex bank on which the employer has no control.
iv) On the above grounds and such other grounds as may be adduced at the time of hearing, it is prayed that justice be done to the appellant by squashing the said order.
4. Briefly stated the facts of the case are as follows:
The assessee is a co-operative society. For the assessment years 2007-08 and 2008-09, it was noticed by the AO that the assessee while making TDS on salaries u/s. 192 of the Act, there were short deductions of tax. The reason for short deductions of tax was that while computing taxable salary, the assessee was deducting u/s. 80C of the Act, contributions to unrecognized Provident Fund.
According to the Assessing Officer, the contributions to unrecognized Provident Fund were not eligible for deduction u/s. 80C of the Act. Further, the Assessing Officer held that interest accrued on employees' contribution to unrecognized Provident fund is also taxable under the head 'Income from other sources'. The Assessing Officer passed orders u/s. 201(1) and 201(1A) of the Act, making the 2 I.T.A. Nos. 231 & 232./C/2016 assesse in default for the above two short deductions and making it liable for interest.
5. Aggrieved by the orders passed u/s. 201(1) and 201(1A) of the Act, the assessee filed appeals before the first appellate authority. The CIT(A), after an elaborate analysis of the relevant provisions, decided the issues against the assessee and dismissed the appeals.
6. Aggrieved by the order of the CIT(A), the assessee has preferred the present appeals before the Tribunal.
7. The Ld. Counsel for the assessee fairly admitted as regards the issue of contributions to unrecognized PF, the Tribunal in the case of Kodakkad Service Co-operative Bank Ltd. vs. Income Tax Officer(TDS) in ITA Nos. 335 & 336/coch/2016 dated 03/03/2017 had decided the issue against the assessee.
7.1 As regards the issue of deduction of interest on PF deposits for the purpose of TDS u/s. 192 of the Act, it was submitted that as per the provisions of sec.
192 sub-sec. (2B) of the Act, it is for the assessee's employee to report to the assessee-employer for any income that he is in receipt of for inclusion in total for the purpose of deduction u/s. 192 of the I.T. Act. Therefore, it was submitted 3 I.T.A. Nos. 231 & 232./C/2016 that the assessee-employer cannot be compelled to make deduction u/s. 192A of the Act with respect to the interest earned on the PF deposits.
8. The Ld. DR on the other hand submitted that both the issues are squarely covered by the order of the Tribunal in the case of Kodakkad Service Co-
operative Bank Ltd. vs. Income Tax Officer(TDS) in ITA Nos. 335 & 336/Coch/2016 dated 03/03/2017.
9. We have heard the rival submissions and perused the material on record. An identical issue was considered by the Tribunal in the case of Kodakkad Service Co-operative Bank Ltd. vs. Income Tax Officer(TDS) (supra) wherein it was held that the contribution to the PF Fund that was not recognized by the Chief Commissioner or Commissioner in accordance with the rules contained in the Part A of the Fourth Schedule or under a scheme framed under the Employees Provident Fund Act, 1952, is not entitled to deduction u/s. 80C of the Act. It was further held by the Tribunal that the interest accrued to the assessee on the contributions to such unrecognized PF was also liable for tax deduction u/s. 192 of the Act. The relevant finding of the Tribunal reads as follows:
9. "I have heard the rival contentions and perused the material on record.
The assessees while making TDS on salaries u/s. 192 of the Act had claimed contributions to the Provident Fund as eligible deduction u/s. 80C (2) (vi) of the Act. The Assessing Officer held that the contributions to Provident Fund are not recognized u/s. 2(38) of the Act and were not eligible for deduction u/s. 80C of the Act, hence, there were short deductions u/s. 192 of the Act.
4I.T.A. Nos. 231 & 232./C/2016 Further, it was held by the Assessing Officer that interest on the Provident Fund was liable to be taxed under the head 'Income from other sources'. To understand the issue in a correct perspective, the relevant provisions namely, sections 80C (2) (vi), 2(38) and 192 of the I.T. Act need to be analysed.
"80C(1) In computing the total income of an assessee, being an Individual or a Hindu undivided family, there shall be deducted, in accordance with and subject to the provisions of this section, the whole of the amount paid or deposited in the previous year, being the aggregate of the sums referred to in sub-section (2), as does not exceed one lakh rupees.
(2) (i)xxxx-
................
(vi) as a contribution by an employee to a recognized provident fund."
9.1 Section 2(38) of the Income Tax Act which defines a recognized provident fund reads as follows:-
"recognized provident fund" means a provident fund which has been and continues to be recognized by the Chief Commissioner or Commissioner in accordance with the rules contained in the Part A of the Fourth Schedule, and includes a provident fund established under a scheme framed under the Employees' Provident Funds Act, 1952 (19 of 1952)."
9.2 Admittedly, the assessees' contributions to the Provident Fund are not recognized by the Chief Commissioner or Commissioner in accordance with the rules contained in the Part A of the Fourth Schedule. It is to be further examined whether the Provident Fund is established under a scheme framed under the Employees Provident Fund Act, 1952 (19 of 1952) or not.
9.3 In the instant case, the Assistant Commissioner of Provident Fund vide his letter dated 14/02/2017 (which is placed on record) very categorically states that the Provident Fund of the assessees is not established as per the scheme framed under the Employees Provident Funds Act, 1952. Assessee also does not have case that its PF is established under a scheme framed under the Employees Provident Fund Act, 1952 (19 of 1952). That being the case, admittedly, the assessees' contributions to the Provident Fund are not recognized Provident Fund u/s. 2(38) of the Act and the contributions are 5 I.T.A. Nos. 231 & 232./C/2016 not entitled to deduction u/s. 80C (2)(vi) of the I.T. Act. If the contributions are not eligible for deduction u/s. 80C of the Act, there are resultant short deductions of tax u/s. 192 of the Act. Consequently, the interest accrued on the Provident Fund is also liable to be taxed as 'Income from other sources'.
9.4 Section 192(1) of the Income Tax Act states that "Any person responsible for paying any income chargeable under the head "Salaries" shall, at the time of payment, deduct income tax on the amount payable at the average rate of income-tax computed on the basis of the rates in force for the financial year in which the payment is made, on the estimated income of the assessee under this head for that financial year". The above section makes abundantly clear that the employees are bound to deduct tax at source at the time of payment of salaries. Since admittedly, the contributions of the assessees to the Provident Fund are not a recognized Fund, the same are not eligible for deduction u/s. 80C (2) (vi) of the I.T. Act. Therefore, the estimations made by the assessees are not correct and since there were short deductions of tax, the Assessing Officer had rightly passed the orders u/s. 201(1) and 201(1A) of the I.T. Act.
9.5 It is also to be noted that the assessees were not able to show that any of the employees of the assessee-society had filed returns and had paid tax correctly to the Government account. Therefore, the case laws relied on by the assessees cannot come to their aid.
9.6 Further, the order passed by the Delhi Bench of the Tribunal in the case of DCIT vs. HCL Infosystems Ltd. (supra) relied on by the assessees is of no help since in the instant case it cannot be stated that assessee's estimation is bonafide or honest estimation of salary income of its employees. Admittedly, the contributions made by the assessees to the Provident Fund were not a recognized Fund and were not eligible for deduction u/s. 80C of the Act which had resulted in short deductions of tax. For the above said reasons, I reject the contentions raised by the assessees and dismiss the appeals of the assessees. It is ordered accordingly.
10. In the result, the appeals of the assessees are dismissed."
6I.T.A. Nos. 231 & 232./C/2016 9.1 In view of the order of the Tribunal in the case of Kodakkad Service Co-
operative Bank Ltd. vs. Income Tax Officer(TDS) (supra) which is identical to the facts of the instant cases, we hold that the CIT(A) is justified in confirming the orders passed u/s. 201 and 201(1) of the I.T. Act. It is ordered accordingly.
10. In the result, the appeals filed by the assessee are dismissed.
Order pronounced in the open Court on this 22nd March, 2018.
sd/- sd/-
(CHANDRA POOJARI) (GEORGE GEORGE K.)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Place:
Dated: 22nd March, 2018
GJ
Copy to:
1. M/s. Chirakkal Service Co-operative Bank Ltd., Chirakkal P.O., Kannur- 670 011.
2. The Income Tax Officer(TDS), Kannur.
3. The Pr. Commissioner of Income-tax(Appeals), Kozhikode.
4. The Pr. Commissioner of Income-tax, Kozhikode.
5. D.R., I.T.A.T., Cochin Bench, Cochin.
6. Guard File.
By Order (ASSISTANT REGISTRAR) I.T.A.T., Cochin 7