TMI Blog2014 (9) TMI 508X X X X Extracts X X X X X X X X Extracts X X X X ..... cided in favour of assessee. Interest to depositors & payment to contractors Failure to comply with permission of Chapter XVII B Held that:- The AO has made disallowance paid as interest, having noted that TDS was not deducted on the payments in the light of the provisions of section 40(a)(ia) of the Act, which was later on confirmed by the ld. CIT(A) relying upon ACIT vs. Visakhapatnam Cooperative Bank Ltd. [2011 (8) TMI 319 - ITAT VISAKHAPATNAM] - if the co-operative society makes payment of interest on deposits received from its members only and it was not required to deduct TDS in view of the provisions of section 194A(3)(v) of the Act - This aspect was not examined by the CIT(A) while confirming the disallowance though the assessee has contended that interest was paid only to the members of the assessee-society in the light of the fact that no other person except the members of the society can open an account with the assessee-bank - this aspect cannot be examined in the absence of relevant information, this issue requires a proper adjudication by the AO thus, the matter is remitted back to the AO for re-adjudication Decided in favour of assessee. Restriction o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at no reserve was to be created to increase the profit ignoring the fact that Bank has lent the amount in its natural course of Banking Business. 5. The Learned CIT has erred on facts in law in confirming of charging of interest u/s 234 B of IT Act 1961 in the present case. 6. The Learned CIT did not allow proper or sufficient opportunity for making compliance to requirement before him in the present case. 2. Apropos ground No.1, it is noticed that the Assessing Officer has made disallowance of ₹ 2 lakhs being Director s allowance paid to the Directors on the basis of the Auditor s Report, in which the Auditor has made disallowance in the light of provisions of section 40(b)/40(ba) of the Income-tax Act, 1961 (hereinafter called in short the Act ). 3. Assessee preferred an appeal before the ld. CIT(A), but did not find favour with him. 4. Now the assessee is before us and has submitted that the Auditor has made disallowance by invoking the wrong provisions of the Act. Provisions of section 40(b)/40(ba) are applicable in the case of a firm and AOP or body of individuals (other than a company or a co-operative society or a society). But in the instant case, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as noticed that the assessee-bank has paid interest of ₹ 12,56,09,476/- to its customers. Besides, the payments to contractors for civil work, services, etc. have also not been subjected to deduction of tax at source on the prescribed rates. The Assessing Officer accordingly made disallowance of ₹ 1.10 crores on account of non-deduction of TDS. 8. Before the ld. CIT(A), assessee has conceded the disallowance of ₹ 10 lakhs in relation to payment to customers/services and it was submitted that disallowance of ₹ 10 lakhs was also a part of total disallowance of ₹ 1.10 crores, therefore, the issue of disallowance of ₹ 1 crore is to be examined, as it was interest paid to the customers. It was also contended before the ld. CIT(A) that interest paid to several customers was less than ₹ 10,000/-, therefore, TDS was not deducted thereon. As regards interest on fixed deposits, it was also submitted that either the depositors have furnished declaration in form No.15G/15H for non deduction of tax or the interest paid to each individual did not exceed ₹ 10,000/-. Before the ld. CIT(A), the details of payments made to contractors/services, were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s details were not furnished by the assessee. He has also placed reliance upon the order of the Tribunal in the case of ACIT vs. Visakhapatnam Cooperative Bank Ltd., 47 SOT 295 in support of his contention that if the co-operative society makes payment of interest on deposits received from its members only and it was not required to deduct TDS in view of the provisions of section 194A(3)(v) of the Act. This aspect was not examined by the ld. CIT(A) while confirming the disallowance of ₹ 1 crore though the assessee has contended that interest was paid only to the members of the assessee-society in the light of the fact that no other person except the members of the society can open an account with the assessee-bank. Since this aspect cannot be examined in the absence of relevant information, we are of the view that this issue requires a proper adjudication by the Assessing Officer. We accordingly set aside the order of the ld. CIT(A) and restore the matter to the file of the Assessing Officer with a direction to re-adjudicate the issue in the light of provisions of section 194A(3)(v) of the Act and also amount of payment of interest, for which whether the assessee was required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he claim raised by the assessee is not in accordance with law and the ld. CIT(A) is justified in disallowing the same. The ld. D.R. further contended that in the light of the aforesaid order of the Tribunal, the disallowance deserves to be confirmed. 17. The ld. counsel for the assessee has reiterated his contentions as raised by the assessee before the ld. CIT(A). 18. Having carefully examined the orders of the lower authorities in this regard and the Tribunal s order, we find that this issue has already been examined by the Tribunal in the assessee s own case for assessment year 2008-09 in I.T.A. No.20/LKW/2012 in the light of RBI guidelines and various judicial pronouncements and has finally confirmed the disallowance. The relevant observations of the Tribunal are extracted hereunder for the sake of reference:- 13. Having heard the rival submissions and from a careful perusal of record, we find that the Assessing Officer has made disallowance following his earlier order for assessment year 2006-07, which was later on upheld by the ld. CIT(A) and following the same the ld. CIT(A) has also confirmed the disallowance. During the course of hearing of the appeal, a speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c purpose and section 45Q of the RBI Act categorically states that Chapter III-B shall override all the intents and purposes and anything inconsistent with any other Act for the time being in force or any instrument having effect by virtue of any such law shall fade into oblivion on account of that fact. It was also held that the directions issued by the RBI by virtue of powers vested in it by section 45JA which is to be exercised in public interest or to regulate the financial system of the country to its advantage or to prevent the affairs of any NBFC being conducted in manner detrimental to the interest of the depositors or in a manner prejudicial to the interest of the NBFC are binding on the concerned authorities. 15. Similar view was also expressed by the Hon'ble Uttaranchal High Court in the case of CIT vs. Nainital Bank Limited (supra) by holding that the RBI Act, 1934 was incorporated for specific purpose and section 45Q categorically brings out the intention of the Legislature inasmuch as it states that Chapter III-B shall override other provisions. 16. In the case of CIT vs. The Lord Krishna Bank Ltd. (supra), the Hon'ble Kerala High Court has held that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A), it appears that the ld. CIT(A) has confirmed the disallowance following the disallowance made in assessment years 2006-07 and 2007-08 and nothing has been placed on record as to what has happened to the said disallowance. Whether it was challenged before the appellate authorities or it was accepted by the assessee. In any case, as per advice of the RBI provision of the aforesaid investment amount of ₹ 5.88 crores is possible during the first three years i.e. financial years relevant to the assessment years 2004-05, 2005-06 and 2006-07 and thereafter its provision cannot be allowed without any further instruction of the RBI. The assessee has claimed provision of ₹ 1,17,60,000 during the impugned assessment year without any advice of the RBI against the provisions of the Income-tax Act. Therefore, we are of the view that the claim raised by the assessee is not in accordance with the law and the ld. CIT(A) is justified in disallowing the same. We accordingly find no merit in the arguments of the assessee and confirm the order of the ld. CIT(A). 19. Since the Tribunal has taken a particular view in a similar set of facts, we find no reason to take a contrary vie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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