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2015 (4) TMI 1040 - AT - Income TaxRevision u/s 263 - assessee challenged the jurisdiction of the ld. CIT in invoking section 263 on the doctrine of merger - non deduction of tds on interest payment to any member as provision contained u/s 194A(3)(v) - Held that:- As can be seen from the facts on record, in course of assessment proceeding, assessee defended itself by contending that tax was not deductible at source on interest payment to any member as provision contained u/s 194A(3)(v) employs the term 'member', therefore, no differentiation can be made between the members while applying the said provision. Though, AO did not accept this contention and held that exemption applies only in case of regular members, however, ld. CIT(A) accepted assessee's claim that exemption provision as contemplated u/s 194A(3)(v) would apply not only to regular members but also to other members like associate/nominal members. While doing so, ld. CIT(A) has followed the decision of the Hon'ble Bombay High Court in case of Jalgaon District Cooperative Society (2003 (9) TMI 56 - BOMBAY High Court ) wherein while quashing the CBDT Circular No. 09 of 2002 dt. 11/09/2002 in no uncertain terms held that exemption granted to a cooperative society u/s 194A(3)(v) cannot be taken away by creating a distinction between different categories of members. It is further evident, SLP filed by the department against the aforesaid judgment of the Hon'ble Bombay High Court was also dismissed by the Hon'ble Supreme Court. Thus, as per the decision of the Hon'ble Bombay High Court as aforesaid, which was also followed by ld. CIT(A), no differentiation can be made between the members of a cooperative society while applying the exemption provision of section 194A(3)(v) of the Act. In fact, ld. CIT himself while issuing notice u/s 263 as well as in more than one place in the impugned order has held the assessment order passed to be erroneous and prejudicial to the interests of revenue on the reasoning that no differentiation between members can be made while applying TDS provision u/s 194A(3). Thus, applying the same logic, it is to be held that ld. CIT(A)'s order holding that interest payment to associate/nominal members is exempt from deduction of tax at source in view of section 194A(3)(v) would also impliedly apply to the regular members as she came to such conclusion on the principle that no differentiation can be made between members of the cooperative society. That being the case, order passed by ld. CIT(A) also covers the issue of application of section 194A(3)(v) to regular members also. Explanation 'c' to section 263(1) clearly spells out that ld. CIT can exercise his power u/s 263 to an issue which is not contested and decided in appeal proceeding. Therefore, as in the present case, the issue in dispute is clearly the subject matter of appeal before ld. CIT(A) and a decision has already been rendered by ld. CIT(A) much prior to the exercise of power u/s 263 of the Act, in our view, assessment order has merged with the order of ld. CIT(A), hence, could not have been revised by invoking the provisions of section 263. Therefore, the exercise of power u/s 263 is invalid. - Decided in favour of assessee
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