I-T - No TDS on interest on deposits ordered by courts -Board accepts High Court Order
SECTION 194A of Income Tax Act, 1961 stipulates deduction of tax at source (TDS) on interest other than interest on securities. Board had received references expressing difficulties in implementation of provisions of Section 194A of the Act in a situation where in the course of the proceedings before Supreme Court/ High Court/ any other court or tribunal, one or more than one litigant is directed by the court that a specified amount be deposited in the bank either directly or through the court in order to protect the interest of litigants.
CBDT in Circular No. 8/2011, dated 14.10.2011 clarified that Banks should deduct tax at source on the interest accruing on the above deposit(s).
The Himachal Pradesh High Court had quashed the CBDT Circular in
The Delhi High Court also quashed this circular in
CBDT has now accepted the judgement of the Delhi High Court.
Board clarifies that interest on FDRs, made in the name of the Registrar General of the Court or the depositor of the fund on the directions of the Court, will not be subject to TDS till the matter is decided by the Court. However, once the Court decides the ownership of the money lying in the fixed deposit, the provisions of section 194A will apply to the recipient of the income.
Board directs that such issues may not be contested in appeal and pending litigation, if any, on this issue before various Courts/Tribunals may be withdrawn/not pressed upon.
CBDT Circular No. 23/2015., Dated: December 28, 2015