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2023 (10) TMI 908 - AT - Income TaxTDS liability u/s 194A - assessee in default - principle of Res-judicata - tds liability on interest payments to the nominal members - HELD THAT:- Law is settled on the issue of nominal members are to be considered as members of the cooperative society. Meaning thereby, the assessee was not required to deduct tax at source on interest payments to the nominal members. On parity of facts, following the judgment of CIT vs. Punjab State Co-operative Bank Ltd. [2008 (3) TMI 45 - HIGH COURT PUNJAB AND HARYANA], has also held that the assessee was not required to deduct tax at source on interest payments to the nominal members, who are members of the society. As in the case of ‘The Jalgon District Central Bank Vs Union of India and Ore [2003 (9) TMI 56 - BOMBAY HIGH COURT] have adjudicated upon the question of whether the exemption granted to the co-operative society under Section 194A(3)(v) can be taken away be creating a distinction between duly registered member and a nominal member, which is unknown to the exemption clause contained in Section 194A(3)(v), gave a clear opinion that CBDT has no authority to make a crack in the exemption clause contained in Section 194A(3)(v) by issuing the impugned circular and that the CBDT cannot usurp the powers of Parliament by virtue of Section 119 of the IT Act, 1961. Meaning thereby that the CBDT, under the garb of Section 119 of the IT Act, 1961, cannot exercise wider powers than the powers bestowed on it. CBDT has no power to introduce a substantial change or alteration in the provisions of the IT Act. 1961, by importing the ideas unknown to the IT Act. 1961. The impugned circular, therefore, does not stand to the legal test. Accordingly, the impugned Circular No. 9 of 2002 dt. 11th Sept., 2002 [F. No. 275/106/2000/IT(B)--Annexure A] was quashed and set aside. Thus, in our view, the reliance of the Worthy CIT(A) NFAC, Delhi on this circular is against law. Hon’ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd. [2021 (1) TMI 488 - SUPREME COURT] has also observed that the expression “member” is not defined in the Act. Since a cooperative society has been established under the provisions of the law made by the State Legislature in that regard, the expression “member” in section 80-P(2)(a)(i) must therefore, be construed in the context of the provisions of the law enacted by the state Legislature under which the cooperative society claiming exemption has been formed. Also in the assessee’s own case for the proceeding in respect of the Assessment Year 2014-15, CIT(A) NFAC has accepted nominal members as members and held that interest paid to them is not liable for TDS u/s. 194 of the Income Tax Act, 1961 (Copy of Order filed on record). In view of the matter, we hold that the CIT/NFAC has acted against Res Judicata. We accept the grievance of the assessee genuine.
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