MARY'S CHARITY FUND Vs. BRANCH MANAGER

JUDGEMENT

(1.) EXTS . P3, P8 and P9 notices issued by the first respondent are under challenge in this petition.

(2.) THE petitioner is the registered Charitable Society registered under the Travancore Cochin Literary, Scientific and Charitable Societies Act, 1955. According to the petitioner, it is also registered as a charitable institution under Section 12AA of the Income Tax Act, 1961 with effect from 28.11.1977 as per the order of the Commissioner of Income Tax. According to the petitioner, it was having fixed deposits and other banking accounts with the first respondent since 18.3.1999 and is currently having one savings account and fixed deposits. The first respondent has been giving interest on fixed deposits without deducting tax at source based on the production of 12AA Registration Certificate issued by the Income Tax Department by the petitioner for the past several years. On 18.11.2011, the first respondent issued Ext. P3 notice on the petitioner asking to remit a sum of Rs. 89,830/ - purported to be due because of non -deduction of tax at source out of interest paid to the petitioner by the first respondent.

(3.) IN the statement filed by the respondents 2 and 3 they have submitted that the first respondent bank comes under the purview of Section 194A(1) which requires deduction of income tax at source. However, the first respondent has not deducted tax on payment of interest to the petitioner as well as the Kerala State Co -operative Housing Federation Ltd. Accordingly, show cause notice was issued to the bank. According to them, tax and interest under Section 201(1) was levied as per the provisions of the Income Tax Act, 1961 in respect of the financial year 2008 -2009 and 2009 -2010 as the assessee bank has failed to deduct tax at source under Section 194A of the Income Tax Act, 1961 from the payment of interest paid/credited to the payees which includes the petitioner's fund. According to them, interest under Section 201(1A) is correctly raised against the deductor as per the provisions of the Act and it is a compensatory measure for withholding of tax which is mandatory. Therefore, they prayed for a dismissal of the petition.