J&K Roads Development Agency Is Exempted From TDS Deduction On TD Account Interest: Jammu & Kashmir High Court

The Jammu & Kashmir High Court has held that the J&K State Rural Roads Development Agency (JKSRRDA) is exempt from TDS deduction on interest income accrued on Term Deposit Accounts.

The bench of Justice Sanjeev Kumar and Justice Puneet Gupta has observed that JKSRRDA is a society registered under the J&K Societies Registration Act, 1998, and is a body wholly financed by the Central Government for implementation of PMGSY and, therefore, exempt from TDS in terms of Notification No. 3489 dated October 22, 1970, issued by the Central Government under Section 194A(3)(iii)(f) of the Income Tax Act.

It came to the attention of the Assessing Officer that the respondent-assessee, Jammu and Kashmir Bank Ltd., was not deducting tax at source on interest paid or accrued on Term Deposit Accounts under the Savings Bank Account of the JKSRRDA.

After putting the assessee on a show cause notice, an order under Section 201(1) and Section 201(1A) of the Act was passed by the Assessing Authority for the Assessment year 2009-10, creating a demand of Rs. 2,11,19,843.

The CIT (A) deleted the addition made by the Assessing Officer by holding that no tax was required to be deducted by the assessee in respect of JKSRRDA being a Society covered by Notification No. 3489 dated October 22, 1970.

The court noted that J&K SRRDA is a society registered under the J&K Societies Registration Act, 1998; therefore, unless there is a specific notification issued by the Central Government, there would be no automatic exemption in favour of JKSRRDA.

"We will still uphold the order of CIT (A) confirmed by the ITAT, Amritsar Bench, on the sole ground that both the Forums below, i.e., CIT (A) and ITAT Amritsar, have, on facts, found that the money or funds, which as per the MoU were converted into FDRs, were the funds or money belonging to the Government of India and, therefore, exempt from the operation of sub-section (1) of Section 194A of the Act," the court said.

Case Title: The Commissioner of Income Tax v/s The Jammu and Kashmir Bank Ltd.

Case No.: ITA No. 11/2016 c/w ITA No. 10/2016

Date: 14.07.2023

Counsel For Petitioner: Pariksha Parmar

Counsel For Respondent: Subash Dutt

Click Here To Read The order