Bank Not Obliged To Deduct TDS From FDR Interest To Jammu Development Authority: Jammu & Kashmir And Ladakh High Court

The Jammu & Kashmir and Ladakh High Court has held that the assessee bank shall not be obliged to deduct TDS from the interest payments made to the Jammu Development Authority (JDA) on its amount kept in FDRs.

The bench of Justice Sanjeev Kumar and Justice Javed Iqbal Wani has observed that the JDA is similar to the Agra Development Authority, constituted under the provisions of the Uttar Pradesh Urban Planning and Development Act, 1973, and NOIDA, established under the Uttar Pradesh Industrial Area Development Act, 1976. Both authorities have been constituted under similar Development Acts legislated by the State of Uttar Pradesh.

The Joint Commissioner of Income Tax decided the issue in favour of the department and held that the JDA is a Local Authority that is not exempt from paying tax. Therefore, the assessee bank was under an obligation to deduct the TDS on the deposits of JDA.

The assessee-Bank appealed against the CIT(A) order before ITAT. The ITAT accepted the plea of the assessee-Bank and held that it was not required to deduct any tax at source on its interest payments made to the JDA. The CIT (A) relied upon an earlier judgement of the ITAT, Amritsar Bench, passed in respect of the assessee-Bank in respect of its Shalamar and Gandhi Nagar, Jammu Branches.

Section 194A of the Income Tax Act states that, apart from others, a corporation established by a Central, state, or Provincial Act is exempt from the operation of Section 194A(1), and the corporation is, thus, not obliged to deduct TDS on the interest payment made by it to the payee.

The court held that the ITAT committed no error of law in confirming the order of CIT (A) deleting the non-deduction of TDS on account of interest on fixed deposits paid to the Jammu Development Authority, even when JDA is a taxable entity.

Case Title: PCIT Versus M/S The J&K Bank Ltd.

Case No.: ITA No. 6/2017 c/w ITA No. 4/2017

Date: 13.07.2023

Counsel For Petitioner: Aruna Thakur

Counsel For Respondent: Pariksha Parmar

Click Here To The Order