Section 194A of Income-tax Act, 1961 (“the Act”) stipulates deduction of tax at source (TDS) on interest other than interest on securities if the aggregate of amount of such interest credited or paid to the account of the payee during the financial year exceeds the specified amount.
The Board has received references expressing difficulties in implementation of provisions of section 194A of the Act in a situation where in the course of the proceedings before Supreme Court/High Court/ any other court or tribunal (hereinafter “the court”), one or more than one litigant (hereinafter ‘the depositor’) is directed by the court that a specified amount (hereinafter “deposit”) be deposited in the bank either directly or through the court in order to protect the interest of litigants. Such deposits (usually time deposits) are kept in the bank in the names of Registrar/Prothonotary and Senior Master or any other name as per the order of the court. Difficulties are faced in making TDS on the interest periodically accruing on such deposits/time deposits and about the person(s) as deductee who is entitled to TDS certificate in Form 16A.
- The matter has been examined in the Board and it has been decided that, subject to para 4 below, this circular shall be applicable to cases where one or more than one litigant is directed by the court that a specified amount be deposited in the bank directly or through the court. The bank shall in accordance with the provisions of the Act, deduct tax at source on the interest accruing on the above mentioned deposit(s) as per existing procedure and at the rates in force. The certificate of deduction of tax shall be issued by the bank in the name of ‘the depositor’. If more than one person has been directed to deposit any specified amount, the amount of TDS shall be corresponding to each such depositor for the portion of interest accrued in its respective share in the total amount deposited and TDS certificates shall be accordingly issued by the bank.
- At the time of making deposit of the amount ordered by the court, the depositor(s) shall submit a prescribed declaration with the court for record purpose and to facilitate the administration of TDS. The Registrar/Prothonotary and Senior Master or any person authorized by the court will pass the information furnished therein to the bank concerned for TDS properly in the name of the depositor(s) in accordance with the provisions of the Act.
- Some of the instances covered by this circular are:
- In the course of appellate proceedings, the court directs an insurance company (the depositor) to deposit a part of compensation awarded by Motor Accident Claims Tribunal. This amount is deposited as Time Deposit in a bank in such name as per the directions of the court, the credit of TDS on interest accruing on such deposit will be allowed to the Insurance company which has made the said deposit.
- The Court while deciding the cases of land compensation directs the authority concerned (liable for making payment of compensation) to deposit any sum in time deposit in any bank, the TDS on time deposit shall be in the name of the authority making deposit, if such authority is an entity liable for charge to Income-tax on its income. In case the deposit in the bank is by Central or State Government no tax will be deducted.
- The court adjudicating upon financial dispute during pendency of proceedings direct any party (ies) to deposit any amount as security in time deposit, the TDS on interest accruing on such deposit will be in name of the depositor irrespective of the fact that at the directions of the court such time deposit has been drawn in the name of the officer of the court or joint name or any other name.
- The above procedure shall not apply to:
- any deposit in the bank held or dealt by the court or any other person appointed by the court in the capacity of being an administrator or receiver or any authority of similar nature; or
- any deposit which has not been made by any specific depositor but has arisen due to attachment made by the Court; or
- the cases of “representative assessee” within the meaning of section 160 of the Act.
Format of Declaration to Be Filed By The Depositor And To Be Forwarded By The Registrar/Prothonotary & Senior Master Etc.
A case of the following description is pending in the Court of ______________ and during the pendency of the case, the court vide order dated ___________ (copy enclosed) has directed the below mentioned person(s) to make a deposit of the amount mentioned in (d) with the bank mentioned in (e) below:—
The title of case with complete details such as case No. and the year to which it pertains, complete details of the parties to the case.
Name and address of the person directed by the court to make deposit (separate declaration should be filled if more than one person has been directed by the court to make the deposit, indicating their respective share).
Date of order of the court by which directions were issued to make the aforesaid deposit.
Amount ordered to be deposited.
Name/branch of the depository bank, if known.
Whether assessed to income-tax, if yes, Permanent Account Number (PAN)
Any other information
It is certified that the information above is true to best of my knowledge and belief.
(SIGNATURE OF THE DEPOSITOR)
Forwarded to the Bank concerned for proper compliance of the TDS provisions of the Income-tax Act, 1961.Tax is to be deducted in the name of the depositor mentioned above in accordance with rule 37(BA) of the Income-tax Rules,1962. The information provided above is correct as per the records in the case mentioned above.
REGISTRAR/PROTHONOTARY and SENIOR MASTER
NOTE: If more than one person has been directed to deposit any specified amount, separate declaration by each depositor may be submitted.
Reference: Section 144C of the income Tax Act, 1961
Reference to dispute resolution panel
(1) The Assessing Officer shall, notwithstanding anything to the contrary contained in this Act, in the first instance, forward a draft of the proposed order of assessment (hereafter in this section referred to as the draft order) to the eligible assessee if he proposes to make, on or after the 1st day of October, 2009, any variation in the income or loss returned which is prejudicial to the interest of such assessee.
(2) On receipt of the draft order, the eligible assessee shall, within thirty days of the receipt by him of the draft order,—
(a) file his acceptance of the variations to the Assessing Officer; or
(b) file his objections, if any, to such variation with,—
(i) the Dispute Resolution Panel; and
(ii) the Assessing Officer.
(3) The Assessing Officer shall complete the assessment on the basis of the draft order, if—
(a) the assessee intimates to the Assessing Officer the acceptance of the variation; or
(b) no objections are received within the period specified in sub-section (2).
(4) The Assessing Officer shall, notwithstanding anything contained in section 153 or section 153B, pass the assessment order under sub-section (3) within one month from the end of the month in which,—
(a) the acceptance is received; or
(b) the period of filing of objections under sub-section (2) expires.
(5) The Dispute Resolution Panel shall, in a case where any objection is received under sub-section (2), issue such directions, as it thinks fit, for the guidance of the Assessing Officer to enable him to complete the assessment.
(6) The Dispute Resolution Panel shall issue the directions referred to in sub-section (5), after considering the following, namely:—
(a) draft order;
(b) objections filed by the assessee;
(c) evidence furnished by the assessee;
(d) report, if any, of the Assessing Officer, Valuation Officer or Transfer Pricing Officer or any other authority;
(e) records relating to the draft order;
(f) evidence collected by, or caused to be collected by, it; and
(g) result of any enquiry made by, or caused to be made by, it.
(7) The Dispute Resolution Panel may, before issuing any directions referred to in sub-section (5),—
(a) make such further enquiry, as it thinks fit; or
(b) cause any further enquiry to be made by any income-tax authority and report the result of the same to it.
(8) The Dispute Resolution Panel may confirm, reduce or enhance the variations proposed in the draft order so, however, that it shall not set aside any proposed variation or issue any direction under sub-section (5) for further enquiry and passing of the assessment order.
Explanation.—For the removal of doubts, it is hereby declared that the power of the Dispute Resolution Panel to enhance the variation shall include and shall be deemed always to have included the power to consider any matter arising out of the assessment proceedings relating to the draft order, notwithstanding that such matter was raised or not by the eligible assessee.
(9) If the members of the Dispute Resolution Panel differ in opinion on any point, the point shall be decided according to the opinion of the majority of the members.
(10) Every direction issued by the Dispute Resolution Panel shall be binding on the Assessing Officer.
(11) No direction under sub-section (5) shall be issued unless an opportunity of being heard is given to the assessee and the Assessing Officer on such directions which are prejudicial to the interest of the assessee or the interest of the revenue, respectively.
(12) No direction under sub-section (5) shall be issued after nine months from the end of the month in which the draft order is forwarded to the eligible assessee.
(13) Upon receipt of the directions issued under sub-section (5), the Assessing Officer shall, in conformity with the directions, complete, notwithstanding anything to the contrary contained in section 153 or section 153B, the assessment without providing any further opportunity of being heard to the assessee, within one month from the end of the month in which such direction is received.
(14) The Board may make rules for the purposes of the efficient functioning of the Dispute Resolution Panel and expeditious disposal of the objections filed under sub-section (2) by the eligible assessee.
The following sub-section (14A) shall be inserted after sub-section (14) of section 144C by the Finance Act, 2012, w.e.f. 1-4-2013 :
(14A) The provisions of this section shall not apply to any assessment or reassessment order passed by the Assessing Officer with the prior approval of the Commissioner under sub-section (12) of section 144BA.
(15) For the purposes of this section,—
(a) “Dispute Resolution Panel” means a collegium comprising of three Commissioners of Income-tax constituted by the Board for this purpose;
(b) “eligible assessee” means,—
(i) any person in whose case the variation referred to in sub-section (1) arises as a consequence of the order of the Transfer Pricing Officer passed under sub-section (3) of section 92CA; and
(ii) any foreign company.