G.S. Pannu, A.M.: These four appeals are directed against orders of CIT(A), dt. 30th Sept., 2002 pertaining to financial years 1997-98 to 2000-01. grounds of appeal, which are common in all four years, read as follows: "1. That learned CIT(A)-II, Dehradun, has erred both on facts and in law in confirming order made under ss. 201 and 201(1A) of IT Act. CIT(A) has erred in holding that assessee-trust was obliged in law to have deducted tax at source, in respect of employees of ONGC who had since retired but admittedly remained its members. That CIT(A) has completely overlooked factual substratum of case as also detailed written submissions furnished by assessee, dt. 19th Sept., 2002 and further submissions dt. 20th Sept., 2002, wherein it was explained in detail that there are no income chargeable to tax had accrued to members of trust and as such sum being outside scope of total income, there was no obligation to deduct tax at source. That CIT(A) has further overlooked that amounts of interest credited by appellant in respect of balances outstanding to account of retired employees of M/s ONGC was not in nature of income and as such, provisions of s. 194A of IT Act could not be invoked so as to conclude that assessee had credited any income by way of interest to such of accounts of retired employees of M/s ONGC. It is, therefore, prayed that it be held that order of CIT(A) is erroneous being unsustainable in law. It be thus held that order made under ss. 201 and 201(1A) of IT Act is vitiated being bad both on facts and in law. It be thus held that amount allegedly required to have been deducted at source along with interest aggregating to Rs. 58,74,456 be held in respect of which assessee could not be held to be in default as unsustainable." Although appellant has preferred multiple grounds of appeal but only grievance is with regard to action of CIT(A) in sustaining order of AO holding assessee in default under s. 201/201(1A) of IT Act, 1961 (hereinafter referred to as Act ). appellant-trust is claimed to be exempt organization under Employees Provident Fund and Miscellaneous Provisions Act, 1952. It enjoys recognition from CIT, Meerut, under r. 3(1) of Part of Fourth Schedule to IT Act, 1961. It is constituted for welfare of employees of all units, establishments and institutions under control of M/s Oil & Natural Gas Corporation Ltd. ("ONGC" in short). trust is provident fund wherein subscriptions are received from all employees of ONGC and same is held on their individual accounts along with any contributions n d any interest or increment accruing on such subscriptions, deposits or contributions made under regulations of fund. ITO (TDS) found that assessee was retaining amounts of many employees who had retired or ceased to be in employment with ONGC since long and interest was being credited on their accumulated balances. said interest was not treated as exempt under s. 10(12) of Act by AO. He held that in terms of s. 194A, assessee was liable to deduct tax at source in respect of interest credited on accumulated balances of employees retained after their retirement. Since assessee had not deducted taxes under s. 194A, it was treated as assessee in default under s. 201/201(1A) and tax/interest amounting to Rs. 58,74,456, Rs. 67,34,898, Rs. 1,02,18,652 and Rs. 1,04,19,594 for asst. yrs. 1997-98, 1998-99, 1999-2000 and 2000-01, respectively, was imposed. Aggrieved with order of AO, assessee carried matter in appeal before CIT(A). In appeal, main contentions of assessee were as follows. That amount of interest credited to account of retired employees was outside scope of total income as contemplated under s. 10(12) of IT Act. With regard to membership, contents of cl. 18 of regulation of fund were referred, which read as under: "Retention of membership: member of fund shall continue to be member until he withdraws amount standing to his credit in fund" to argue that membership of retiring employees continued post-retirement unless withdrawn by employee. With regard to objection of AO that assessee had not obtained consent in writing from retiring employees to retain amounts, as required under r. 5 of Part of Fourth Schedule, it was argued that although no request was received in writing as required under r. 5(3) of Part of Fourth Schedule, yet it was regular feature to retain credit of retired employees with fund from year to year; as retired employees did not press for withdrawal of accumulated balance, same be construed as request having been made in writing. It was also submitted that purported non-compliance of not obtaining consent in writing to retain amount as required, was mere technical and venial breach of rule. retention was indeed permissible in terms of cl. 18 of regulations. assessee also argued that trust was recognized provident fund and it credited interest received by it from investment of its funds and as such amount credited to account of employees was merely application of income of trust. As income in hands of trust fund was not otherwise taxable, it was argued that action of taxing same on part of ITO was not justified. assessee made detailed written submissions before CIT(A), copy of which is placed in paper book filed before us. CIT(A), after considering submissions and arguments of assessee, has since sustained order of AO. According to CIT(A), interest credited by assessee on accumulated balance due to employees after cessation of their employment was not eligible for exclusion from total income as per provisions of s. 10(12) and that such interest was liable to tax. It was, therefore, concluded by CIT(A) that since assessee had not deducted tax at source under s. 194A, it was rightly held by AO to be assessee in default. Not being satisfied by order of CIT(A), assessee is in appeal before us. Before us, learned counsel, Shri C.S. Aggarwal appearing on behalf of appellant-trust has reiterated submissions made before CIT(A), which w e have narrated in earlier paragraphs. stand of assessee was articulated by learned counsel on following lines. That sum credited to account of employees who cease to be in employment is not sum chargeable to tax in view of statutory provisions of s. 10(12) of Act read with provisions contained in Part of Fourth Schedule to Act since said employees continued to remain members of fund. In view of cl. 18 of said employees continued to remain members of fund. In view of cl. 18 of regulations of trust, which provides that employee could retain his balance with fund till he withdrew sum and in view thereof, till money is withdrawn, there is in-built provision of there being request in writing of retaining amount with trust. Such employees continued to be members of trust. Thus, on interest credited to accounts of such employees, there was no obligation to deduct tax at source since such income was exempt in hands of employees. That appellant is provident fund, which is since recognized. That purported non-compliance of non-obtaining of consent in writing to retain balance from retiring employees and construing it as non-compliance of r. 5 of Part of Fourth Schedule is not justified. It is thus submitted that assessee has complied with all rules prescribed both under Act and Rules. It was also argued that AO, while passing orders under s. 201/201(1A) of Act has exceeded his jurisdiction inasmuch as he has travelled beyond approval granted by CIT and held that since assessee had failed to obtain declaration in writing, interest paid was income in hands of assessee and, therefore, appellant-trust was obliged to deduct tax at source under s. 194A of Act. It was further submitted that there was no requirement as such of obtaining request in writing as per r. 5(3) of Part of Fourth Schedule to Act as such request in writing may not be in black and white on paper, and could also be gathered from conduct of parties. learned counsel further submitted that in any case such violation is technical violation and argued that having regard to decision of apex Court in case of Collector, Land Acquisition vs. Mst. Katiji & Ors. (1987) 62 CTR (Syn)(SC) 23: (1987) 167 ITR 471 (SC), liberal approach should be adopted. learned counsel submitted that such employees have not been assessed to tax in respect of this interest income as it has been considered exempt in hands of such ex-employees of ONGC within meaning of s. 10(12) of Act. action of lower authorities in treating appellant as assessee in default for its alleged failure to deduct tax at source under s. 194A of Act on interest credited to account of retired employees is unjustified. Reliance was placed on following judicial pronouncements: (i) CIT vs. Divisional Manager, New India Assurance Co. Ltd. (1983) 33 CTR (MP) 248: (1983) 140 ITR 818 (MP) (ii) Gwalior Rayon Silk Co. Ltd. vs. CIT (1983) 37 CTR (MP) 351: (1983) 140 ITR 832 (MP) (iii) CIT vs. Kannan Devan Hill Produce Co. Ltd. (1987) 63 CTR (Ker) 28: (1986) 161 ITR 477 (Ker) (iv) CIT vs. Rishikesh Apartments Co-operative Housing Society Ltd. (2001) 171 CTR (Guj) 288: (2002) 253 ITR 310 (Guj) (v) IAC vs. Tata Chemicals Ltd. (1999) 64 TTJ (Mumbai) 26: (1999) 68 ITD 205 (Mumbai) 232, learned counsel has pressed into service principle of mutuality as follows. That trust fund had received contribution by way of provident fund from various employees and also from employer ONGC. All such amounts were invested in accordance with rules and such income was not taxable. income so earned was merely applied for benefit of employees; participants and contributors remained same, thus, no income could be held to be chargeable to tax on principles of mutuality and thus there was no liability to deduct tax at source. It was also submitted that position canvassed by appellant had duly been accepted by Revenue since inception till financial year 1997-98. As such it was submitted that AO was not justified in changing his opinion and upsetting settled situation. learned counsel also made alternative submission that in event it is held that assessee was liable to deduct tax at source on interest income so credited, then too there was no justification for AO to have held that assessee was in default in having failed to deduct tax at source under s. 194A of Act. It is submitted that at best AO could be justified to make order under s. 194 of Act when payment is made to such employees by trust treating such payments as salaries. Our attention was invited to rr. 8, 9 and 10 of Part of Fourth Schedule in this regard. Reliance was also placed on decision of Hon ble Madras High Court in case of M.C. Muthanna vs. CIT (1989) 76 CTR (Mad) 89: (1989) 177 ITR 501 (Mad) in this regard. It was accordingly pleaded that assessee was not, in law, required to deduct tax at source under s. 194A of Act in respect of interest credited to account of members of fund who have ceased to be in employment of ONGC. On other hand, learned Departmental Representative has defended orders of lower authorities. According to learned Departmental Representative, much emphasis has been laid by assessee in relation to cl. 18 of its regulations to submit that retiring employees could continue to remain members of trust. According to learned Departmental Representative, existence or otherwise of cl. 18 does not deviate from fact that assessee was required to deduct tax on such interest income credited to account of employees who had ceased to be in employment. learned Departmental Representative referred to provisions of s. 10(12) to argue that exemption from tax is available on accumulated balance to extent provided in r. 8 of Part of Fourth Schedule to Act. Therefore, it follows that s. 10(12) of Act does not envisage blanket exemption and aforesaid proposition is reinforced after reading contents of r. 8 of Part of Fourth Schedule which provides for certain conditions to be adhered to before accumulated balance due to employees can be considered as exempt. Learned Departmental Representative emphasized that any accumulated balance due to account of member-employee after cessation of employment cannot be regarded as accumulated balance as envisaged under r. 8 of Part of Fourth Schedule and, therefore, same would not qualify for exemption under s. 10(12). With regard to plea of assessee that once trust fund has been recognized by CIT, impugned action of AO would negate same, it was contended that recognition granted by CIT(A) does not absolve assessee from complying with provisions of tax deduction at source as provided in Chapter XVIII-B of Act. learned Departmental Representative also argued in detail that Provident Fund Rules provided in Part of Fourth Schedule also envisage deduction of tax at source on certain payments as can be inferred from reading of r. 10 thereof. learned Departmental Representative also assailed other arguments of learned counsel for assessee. According to him, whether particular income is liable to be taxed or not in hands of recipient does not determine liability of deductor to deduct prescribed tax at source if relevant provisions so provide. We have considered rival submissions, perused orders of lower authorities along with other material placed before us and authorities cited at Bar carefully. appellant before us is recognized provident fund. short point is whether assessee-fund was liable to deduct tax at source in respect of credits made to account of members of fund who ceased to be employees of ONGC. Revenue holds assessee- fund liable for deduction of tax at source on such credits under s. 194A of Act as interest on account of fact that such income is not exempt under s. 10(12) of Act. Before we proceed to answer above question, it would be appropriate to refer to relevant provisions of Act, which we do hereinafter. Sec. 10(12), which provides for exemption of accumulated balance payable to employee, reads as under: "the accumulated balance due and becoming payable to employee participating in recognized provident fund, to extent provided in r. 8 of Part of Fourth Schedule." Rule 8 of Part of Fourth Schedule, which provides extent and conditions for excluding accumulated balance payable to employee from total income, reads as under: "8. accumulated balance due and becoming payable to employee participant in recognized provident fund shall be excluded from computation of his total income (i) if he has rendered continuous service with his employer for period of five years or more, or (ii) if, though he has not rendered such continuous service, service has been terminated by reason of employee s ill-health, or by contraction or discontinuance of employer s business or other cause beyond control of discontinuance of employer s business or other cause beyond control of employee, or (iii) if, on cessation of his employment, employee obtains employment with any other employer, to extent accumulated balance due and becoming payable to him is transferred to his individual account in any recognized provident fund maintained by such other employer." It would also be appropriate to refer to definition of expression "accumulated balance due to employee" provided in r. 2(f) of Part of Fourth Schedule, which reads as under: " accumulated balance due to employee means balance to his credit, or such portion thereof as may be claimable by him under regulations of fund, on day he ceases to be employee of employer maintaining fund;" Part of Fourth Schedule to IT Act provides rules governing t h e recognized provident funds. Admittedly, assessee before us is recognized provident fund. Sec. 10(12) provides that accumulated balance due to employee is exempt from tax subject to condition that such balance conforms to extent provided in r. 8 of Part of Fourth Schedule to Act. Rule 8 of Part of Fourth Schedule provides that accumulated balance due and becoming payable to employee participating in recognized provident fund is to be excluded from his total income if any of three conditions enumerated in cls. (i), (ii) and (iii) thereof are fulfilled. existence of expression "the accumulated balance due" is noteworthy and having regard to definition of expression "accumulated balance due to employees" as provided in r. 2(f) which means balance due or claimable by employee on day he ceases to be employee of employer maintaining fund, it can be safely deduced that it refers to balances in account of employees during currency of their employment. In instant (case), it is admitted position that impugned credits have been made to constitute accumulated balance due to employees after such members have ceased to be employees of ONGC Ltd., employer, who is maintaining assessee-fund. Even cls. (ii) and (iii) of r. 8 which deal with cessation or termination of employment do not envisage present situation. Clause (ii) provides that benefit would be available if services have been terminated by reason of employee s ill-health or by contraction or discontinuance of employer s business or for any other reason beyond control of employee. Similarly, in terms of cl. (iii), such accumulated balance is to be excluded if on cessation of his employment, employees obtains employment with any other employer and accumulated balance due and becoming payable to such employee is transferred in recognized provident fund maintained by subsequent employer. above situations, which have been envisaged under r. 8, are admittedly not attracted to instant case. In case before us, credits have been made to employees who have since retired or in other words have ceased to be in employment. It is also not case of assessee that cessation of such members is on account of their ill- health or by contraction or discontinuance of employer s business or for any other cause beyond their control. Further, there is also no case made out that on cessation of employment with ONGC, such retiring employees have obtained employment with any other employer and accumulated balances due and becoming payable have been transferred to another provident fund. Therefore, it would not be unjustified to infer that interest credited by assessee to account of such persons does not fall within parameters as provided for in r. 8. In other words, on combined operation of s. 10(12) with r. 2(f) and r. 8 of Part of Fourth Schedule, impugned amounts credited in account of members of trust who have ceased to be employees of ONGC Ltd. are not exempted from tax. It follows, therefore, that assessee-fund was obliged to deduct tax at source on such credits. provisions of Chapter XVII-B envisaging deduction of tax at source are also not alien to various sums which are payable to assessee from recognized provident fund. In fact, r. 9 of Part of Fourth Schedule provides that where accumulated balances due to employee is includible in total income owing to provisions of r. 8 not being applicable, then in such situation as per r. 10 thereof, trustees of provident fund or any other person authorized to make payment of accumulated balance due to employees, shall deduct tax at source on such payment and that all provisions of Chapter XVII-B shall apply as if accumulated balance were income chargeable under head "Salaries". This brings us to next issue raised by assessee to effect that if at all such interest was to be subjected to withholding tax, same should be considered as taxable under head "Salaries" and, therefore, withholding tax should have been governed by provisions of s. 192 of Act. We are unable to accept said argument of assessee. It is indeed correct proposition that interest credited by trustees of provident fund to accounts of members does partake character of "salary" under provisions of Act. However, same is in background of such members continuing in employment of employer who has constituted such provident fund. In cases where there is cessation in certain situations as envisaged under cls. (ii) and (iii) of r. 8 of Part of Fourth Schedule, interest s o credited would also qualify to be part of salary. Significantly, situations in cls. (ii) and (iii) envisage continuity of employment, which allows concerned employee to continue his membership of provident fund constituted by concerned employer. However, if membership is continued in absence of employment with entity who constitutes and maintains provident fund and neither of conditions in cls. (ii) and (iii) of r. 8 are fulfilled, any payment due from such provident fund would not acquire character of "salaries" for purpose of Act. Such amount of interest, therefore, is not liable to be taxed under head Salaries . It is in this background that we approve of action of AO in holding assessee in default for not having deducted tax at source in terms of s. 194A of IT Act. Sec. 194A of IT Act provides for deduction of tax at source on payment made by person, not being individual or HUF, of any income by way of interest in manner prescribed therein. amount credited by fund is nothing but interest. Now, regarding reliance placed by learned counsel for assessee on judgment of Hon ble High Court of Madras in M.C. Muthanna (supra) for proposition that interest credited to account of members partook character of salary under provisions of Act and, therefore, tax deduction at source, if at all, has to be effected under s. 192 and not s. 194A, as contended by Revenue. We have perused judgment of Hon ble High Court of Madras. facts were that assessee was the Hon ble High Court of Madras. facts were that assessee was member of recognized provident fund, he received interest in excess of rate prescribed in cl. (b) of r. 6 of Part of Fourth Schedule. Assessee claimed deduction under s. 80L with respect to such excess. Revenue denied said claim. Hon ble High Court affirmed stand of Revenue. In doing so, Hon ble High Court held that interest payment received by assessee would partake character of salary having regard to application of r. 6(b) of Part of Fourth Schedule and s. 17(1)(vi) of Act. In our view, decision of Hon ble High Court does not aid stand of assessee inasmuch as Hon ble Court was dealing with situation where assessee therein was employee of employer-company and was member of approved provident fund, which was constituted by such company. In case before us, we are dealing with situation where employees have since ceased to be in employment of company, which has constituted appellant provident fund. Therefore, in situation before us, employment of assessee cannot be considered source of impugned amounts. Thus, on facts, said decision of Hon ble High Court of Madras is not attracted to facts of instant case. appellant has taken other arguments narrated by us in earlier paras. In our view, same are also devoid of merit in face of legal position discussed above by us. plea that on account of principle of mutuality no amount received by members of fund is taxable is not acceptable. mutuality principle cannot be extended to taxing of amounts in hands of individual recipients. Further, another plea of appellant that such interest has been considered exempt in hands of ex-employees and same has not been assessed, thus absolving assessee of its liability under s. 194A, is also not tenable. This is for reason that amounts credited to account of members of fund in excess of r. 8 of Part of Fourth Schedule does not enjoy exemption under s. 10(12). Secondly, we also notice that there is no evidence led by assessee in support of above. Thus, aforesaid plea is also not maintainable. plea that impugned default was merely of technical nature and that Department has accepted such position in past are arguments which would not distract from factum of assessee having defaulted in deducting tax at source as required under Chapter XVII-B. In result, we affirm conclusion of CIT(A) that assessee-fund was liable for deduction of tax at source under s. 194A of Act in respect of credits made to account of members of fund who ceased to be t h e employees of ONGC and thus, assessee is in default under s. 201/201(1A) for all financial years under consideration. In result, all appeals of assessee are dismissed. *** ONGC LTD. CPF TRUST v. INCOME TAX OFFICER