SBI wins over Rs. 1,000 cr income tax case

The Income Tax Appellate Tribunal has held that
State Bank of India was not required to deduct
any tax at source (TDS) on over Rs. 11,000 crore
in the Site Restoration Fund (SRF) account
maintained by Oil and Natural Gas Corporation
(ONGC) from 2002.
Total stakes involved in his case including tax,
interest and penalty in all the assessment years
from 2003 could well exceed Rs.1, 000 crores.
As a sequel to this verdict, SBI would be entitled
to receive refund of whatever amount had been
coercively recovered by the Income Tax
Department.
SRF account was opened by ONGC with SBI
Dehradun branch in 2002. SBI did not deduct
any tax at source on interest credited on these
deposits from 2002 and the corpus of the SRF
account swelled into thousands of crores
including interest.
In February 2013 Income Tax Department
initiated proceedings against SBI on account of
TDS default for several assessment years. While
some assessments were completed,
assessments for several years were still pending.
The assessing officer observed that the
assessee/ deductor had not deducted TDS on
the above payments under Section 194A of the
I.T. Act. The dispute whether TDS should be
deducted or not for the deposits maintained in
the SRF account was taken to the ITAT by way of
appeals by both the SBI and the department.
The ITAT comprising C.M. Garg, Judicial Member
and S.V. Mehrotra, Accountant Member, in its
order said “it is evident that there is no fixed
period prescribed in regard to these deposits in
SRF account and that an assessee has to give
notice to the bank for making withdrawal from
this deposit account. The withdrawal is to be
made as per requirement of subsection (3) to
section 33ABA. Therefore, it cannot be said to be
for a fixed period.”
Agreeing with the submissions of senior counsel
Bishwajit Bhattacharya, appearing for the SBI,
the ITAT pointed out that there was no maturity
period and, therefore, it was not ‘time deposit’.
Therefore, if a deposit was not in the nature of
time deposit, then it was not amenable to the
provisions of section 194A of the IT Act. Further
not even a single paisa had been withdrawn for
the last 12 years from the corpus of the fund that
had now swelled approximately to Rs. 11,000
crores. This was assessable as income from
other sources and not as business income and
hence not liable for TDS, the Tribunal held. It
dismissed the department’s appeal and allowed
the one filed by SBI.