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Background

  1. The assesee is a regional rural bank whose income tax returns for the year 2008-09 were reopened in 2015 on account of verification for non-payment of TDS
  2. Upon verification, AO concluded that the assesse had failed to categorize the interest paid above INR 10,000 and below INR 10,000. He also noted that Forms 15G/15H have not been furnished to substantiate interest payments without TDS and hence made the entire interest amount taxable.
  3. Assessee appealed against this decision to the CIT(A). The CIT(A) held that in the relevant year TDS was not required to be paid on interests below INR 10000. However, as Forms 15G/15H were not furnished by the assesse, interests paid above INR 10000 were to be disallowed in accordance with Section 40(a)(ia).
  4. Revenue filed appeal before ACIT against this decision.

Revenue’s arguments

The CIT(A) has erred by not taking into account interest below INR 10,000 as complete depositor details for verification, specifically Forms 15G/15H were not available.

Assessee’s arguments

The Assessee argued that Forms 15G/15H for the purpose of verification can only be asked within a period of 7 years post furnishing declaration under Rule 29C (1) of Income Tax Rules. As more than 7 years have elapsed since this declaration, the assesse is not bound to furnish the same.

Tribunal’s holding

  • The tribunal perused Rule 29C and concluded that tax authorities can require furnishing of declarations for verification only within 7 years of furnishing of such declaration
  • As more than 7 years have passed, the assesse cannot be mandatorily required to furnish the same.
  • On a perusal of Section 194A, tribunal also held that the TDS threshold limit in FY 2008-09 was INR 10,000 and hence interests below INR 10,000 are not subject to TDS.
  • Appeal was dismissed.

Written by Soumya Shekhar, legal writer @ Riverus

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