Deposits in Banks on Court Orders - TDS - CBDT Clarifies
IN the course of the proceedings before Supreme Court/ High Court/ any other court or tribunal, one or more than one litigant (‘the depositor') is directed by the court that a specified amount ('deposit') be deposited in the bank either directly or through the court in order to protect the interest of litigants. Such deposits (usually time deposits) are kept in the bank in the names of Registrar/Prothonotary and Senior Master or any other name as per the order of the court.
Difficulties are faced in making TDS on the interest periodically accruing on such deposits/ time deposits and about the person(s) as deductee who is entitled to TDS certificate in Form 16A.
CBDT clarifies:
The bank shall in accordance with the provisions of the Act, deduct tax at source on the interest accruing on the deposit(s) as per existing procedure and at the rates in force. The certificate of deduction of tax shall be issued by the bank in the name of ‘the depositor'. If more than one person has been directed to deposit any specified amount, the amount of TDS shall be corresponding to each such depositor for the portion of interest accrued in its respective share in the total amount deposited and TDS certificates shall be accordingly issued by the bank.
At the time of making deposit of the amount ordered by the court, the depositor(s) shall submit a prescribed declaration with the court for record purpose and to facilitate the administration of TDS. The Registrar/ Prothonotary and Senior Master or any person authorized by the court will pass the information furnished therein to the bank concerned for TDS properly in the name of the depositor(s) in accordance with the provisions of the Act.
Some of the instances of such deposits:
++ In the course of appellate proceedings, the court directs an insurance company (the depositor) to deposit a part of compensation awarded by Motor Accident Claims Tribunal. This amount is deposited as Time Deposit in a bank in such name as per the directions of the court, the credit of TDS on interest accruing on such deposit will be allowed to the Insurance Company, which has made the said deposit.
++ The Court while deciding the cases of land compensation directs the authority concerned (liable for making payment of compensation) to deposit any sum in time deposit in any bank, the TDS on time deposit shall be in the name of the authority making deposit, if such authority is an entity liable for charge to Income Tax on its income. In case the deposit in the bank is by Central or State Government, no tax will be deducted.
++ The court adjudicating upon financial dispute during pendency of proceedings direct any party(ies) to deposit any amount as security in time deposit, the TDS on interest accruing on such deposit will be in name of the depositor irrespective of the fact that at the directions of the court such time deposit has been drawn in the name of the officer of the court or joint name or any other name.
This procedure shall not apply to:
++ Any deposit in the bank held or dealt by the court or any other person appointed by the court in the capacity of being an administrator or receiver or any authority of similar nature; or
++ Any deposit which has not been made by any specific depositor but has arisen due to attachment made by the Court; or
++ The cases of “representative assessee” within the meaning of section 160 of the Act.
CBDT Circular No. 8/2011, Dated: October 14, 2011