TMI Blog2015 (3) TMI 882X X X X Extracts X X X X X X X X Extracts X X X X ..... he discussion did not turn on the interpretation of Sec.194A(3)(i)(b) of the Act vis-a-vis Sec.194A(3)(v) of the Act. It is thus clear that the preponderance of judicial opinion on this issue is that co-operative societies carrying on banking business when it pays interest to its members on deposits need not deduct tax at source in view of the provisions of Sec.194A(3)(v) of the Act For the reasons given above, we hold that the Assessee which is a co-operative society carrying on banking business when it pays interest income to a member both on time deposits and on deposits other than time deposits with such co-operative society need not deduct tax at source under section 194A by virtue of the exemption granted vide clause (v) of sub-section (3) of the said section - Decided in favour of assessee. - I.T.A No.1191 to 1194/Bang/2014, C.O.Nos. 25 to 28/Bang/2015 - - - Dated:- 20-3-2015 - Shri. N. V. Vasudevan And Shri. Jason P. Boaz JJ. For the Appellant : Shri. G.V.Desai, CA For the Respondent : Dr.P.K.Srihari, Addl.CIT ORDER Per Bench: ITA Nos. 1191 to 1194/Bang/2014 are appeals by the Revenue against common order dated 9.6.2014 of CIT(A), Hubli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chever is earlier, deduct income-tax thereon at the rates in force : (2) .. (3) The provisions of sub-section (1) shall not apply- (i) where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year by the person referred to in sub-section (1) to the account of, or to, the payee, does not exceed- (a) ten thousand rupees, where the payer is a banking company to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution, referred to in section 51 of that Act); (b) ten thousand rupees, where the payer is a co-operative society engaged in carrying on the business of banking; (c) ten thousand rupees, on any deposit with post office under any scheme framed by the Central Government and notified by it in this behalf; and (d) five thousand rupees in any other case: .. (ii) to (iv) .. (v) to such income credited or paid by a co-operative society to a member thereof or to any other co-operative society; (vi) (vii) .. (viia) to such income credited or paid in respect of,- (a) deposits with a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ended that the expression member is defined in s. 2(19) of the Maharashtra Co-operative Societies Act, 1960. The said definition of member includes nominal, associate or sympathiser member also. Under Circular No. 9 of 2002, issued by the CBDT, it is an accepted fact that the provisions of TDS are not enforceable in respect of interest paid by the co-operative society/bank to its members or cooperative societies. But the Circular mandated that TDS has to be deducted from the interest paid to members who have joined in application for the registration of co-operative society and those who are admitted to the membership after registration in accordance with the bye-laws and rules. The members eligible for exemption under s. 194A(3)(v) must have subscribed to and fully paid for at least one share of the co-operative bank, must be entitled to participate and vote in general body meeting or special general body meeting of the co-operative bank and must be entitled to receive share from the profits of the co-operative bank. Acting upon the aforesaid circular the AO held that provisions of Sec.194A(3)(v) of the Act are applicable only when the payment of interest is made by a co-opera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ative society, which is subsequently registered or a person duly admitted to membership of a society after registration and includes a nominal, associate or sympathizer member. There is no distinction between duly registered member and nominal, associate and sympathizer member. The impugned circular issued by CBDT, which is in the form of clarification with regard to rights and privileges of a duly registered member and nominal member is outside the scope of s. 119. No doubt, s. 119 generates some power in CBDT. But the power so generated by virtue of s. 119 is required to be utilized in a prescribed manner. CBDT is empowered to issue only administrative instructions to the subordinate authorities for the purpose of proper administration and enforcement of the provisions of the IT Act, 1961. Under the garb of s. 119 CBDT has crossed its authority. What is not contemplated in exemption clause under s. 194A(3)(v), cannot be imported to deprive the exemption granted to co-operative society by issuing the impugned circular. By impugned circular, the co-operative society cannot be deprived of its right of exemption given under IT Act, 1961. The CBDT has overstepped its authority and has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be made because, as demonstrated by the AO, there arises a conflict between two provisions viz., cl. (v) and cl. (viia), if such interpretation is not adopted. The co-operative society as mentioned in cl. (v) is a general species, whereas the other five categories of co-operative societies which are specifically referred to in other provisions are specific co-operative societies, meaning thereby, they are specific species. It is a settled principle of interpretation that when a conflict occurs between a specific provision of the law vis-a-vis the general provision of the law, then, precedence will have to be given to the specific provision of the law. Therefore, in view of the above it becomes necessary that the term co-operative society in cl. (v) be interpreted as co-operative society other than co-operative bank. The Tribunal drew support for its conclusion as above from the decision of the Hon ble Kerala High Court in the case of Moolamattom Electricity Board Employees' Co-operative Bank Ltd. vs. ITO 238 ITR 630 (Ker). 3. In the case of Moolamattom electricity Board Employees Cooperative Bank Ltd. (supra), the petitioners were primary credit societies registered unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO held that the Assessee was under an obligation to deduct tax at source on interest paid u/s.194A(1) of the Act and since the Assessee failed to so deduct tax at source, the Assessee was liable to be treated as an Assessee in default u/s.201(1) of the Act and was also liable to pay interest on tax not deducted at source u/s.201(1A) of the Act. 11. On appeal by the Assessee the CIT(A) cancelled the order of the AO holding that co-operative societies carrying on banking business when it pays interest to its members on deposits need not deduct tax at source in view of the provisions of Sec.194A(3)(v) of the Act. Aggrieved by the order of the CIT(A), the revenue has preferred the present appeals before the Tribunal. 12. We have heard the rival submissions. At the time of hearing of the appeal, it was brought to our notice by the learned counsel for the Assessee that the Bangalore Bench of ITAT in the case of Bagalkot District Central Co-op Bank, Vs. JCIT (2014) 48 Taxmann.com 117 (Bangalore-Trib) held that cooperative societies carrying on banking business while paying interest to members on time deposits and deposits other than time deposits need not deduct tax at source u/s.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view expressed by the Pune ITAT SMC in the case of Bhagani Nivedita Sahakari Bank Ltd. (supra) when it says that CoITA operative society as mentioned in cl. (v) is a general species, whereas the other five categories of co-operative societies which are specifically referred to in other provisions are specific co-operative societies. The further conclusion in the said decision that the term co-operative society in cl. (v) of s. 194A(3) has to be interpreted as co-operative society other than co-operative bank, is again unsustainable. The law is well settled that by a process of interpretation one cannot add on words that are not found in the text of the statute. Such a course is permitted only when there is causus omisus . We do not think that the provisions of Sec.194A(3)(v) suffers from any causus omisus as has been interpreted by the ITAT Pune Bench SMC. 16. We are also of the view that the decision of the Hon ble Kerala High Court in the case of Moolamattom Electricity Board Employees Coop Bank Ltd. (supra) supports the plea of the Assessee before us. The petitioners in that case were primary credit societies registered under the Kerala Co-operative Societies Act. In view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s made on or after 1st July, 1995) with a co-operative society engaged in carrying on the business of banking. 2. Representations have been received in the Board seeking clarification as to whether a member of a co-operative bank may receive without TDS interest on time deposit made with the cooperative bank on or after 1st July, 1995. The Board has considered the matter and it is clarified that a member of a cooperative bank shall receive interest on both time deposits and deposits other than time deposits with such co-operative bank without TDS under section 194A by virtue of the exemption granted vide clause (v) of sub-section (3) of the said section. The provisions of clause (viia) of the said sub-section are applicable only in case of a non-member depositor of the co-operative bank, who shall receive interest only on deposits other than time deposits made on or after 1st July, 1995 without TDS under section 194A. 3. A question has also been raised as to whether normal members, associate members and sympathizer members are also covered by the exemption under section 194A(3)(v). It is hereby clarified that the exemption is available only to such members who have joined in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessee has brought to our notice that the ITAT Vishakapatnam Bench in the case of The Visakhapatnam Cooperative Bank ITA No.5 and 19 of 2011 order dated 29.8.2011 has held that co-operative societies carrying on banking business when it pays interest to its members on deposits it need not deduct tax at source in view of the provisions of Sec.194A(3)(v) of the Act. Similar view has also been expressed by the Pune Bench of the ITAT in the case of Ozer Merchant Co-operative Bank ITA No.1588/PN/2012 order dated 30.10.2013. We may add that in both these decisions the discussion did not turn on the interpretation of Sec.194A(3)(i)(b) of the Act vis-a-vis Sec.194A(3)(v) of the Act. It is thus clear that the preponderance of judicial opinion on this issue is that co-operative societies carrying on banking business when it pays interest to its members on deposits need not deduct tax at source in view of the provisions of Sec.194A(3)(v) of the Act 21. For the reasons given above, we hold that the Assessee which is a co-operative society carrying on banking business when it pays interest income to a member both on time deposits and on deposits other than time deposits with such co-ope ..... X X X X Extracts X X X X X X X X Extracts X X X X
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