GST Helpdesk   Subscription   Demo   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2015 (4) TMI 329 - ITAT PANAJI

2015 (4) TMI 329 - ITAT PANAJI - TMI - TDS liability on Interest - disallowance u/s 40(a)(ia) - Exemption on interest paid on deposit to members u/s 194A(3)(v) denied - assessee is a cooperative society engaged in carrying on the business of banking - Held that:- if the amount more than ₹ 10,000/- is credited as an interest on time deposits, then the urban cooperative Bank is liable to deduct the TDS as is laid down in the said provisions of section 194A and that urban co-operative Bank is .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

come received from the assessee society and shown the same in his income tax return. - matter remanded back. - ITA No. 347/PNJ/2014 - Dated:- 25-3-2015 - P. K. Bansal, AM And D. T. Garasia, JM,JJ. For the Appellant : Shri Ashok G Mudnur, CA For the Respondent : Shri Nataraj S, DR ORDER Per D. T. Garasia,J. M. This appeal by the assessee against the order of ld. CIT (A), Belgaum dated 05/08/2014 for the A.Y. 2011-12. 2. The following grounds have been raised:- "1. The learned Commissioner of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

g Officer order of denying exemption u/s 194A(3)(v) of the Income Tax Act ,1961 which is opposed to the law and settled judicial opinion. We find support in the following cases: (i) Jalgaon DCC Bank Ltd Vs Union of India (2004) 265 ITR 423 (Bom) HC (ii) Gujarat Urban Coop Bank Federation Vs Union of India (2012) 209 Taxman 340 (Guj) HC. (iii) The Bagalkot DCC Bank Ltd Vs Joint Commissioner of Income Tax, Bijapur Range, Bijapur ITA No 1572/Bang/2013 dt 30.05.2014. (iv) ACIT, Circle 1(1) Visakhapa .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e Tax, Bijapur Range, Bijapur ITA No 1572/Bang/2013 dt 30.05.2014. 4. The learned Commissioner of Income Tax (Appeals), Belgaum and Assessing Officer have erred in making disallowance u/s 40(a)(ia) on the amounts paid rather than on amount payable - as held in CIT Vs Vector Shipping Services (P) Ltd., 357 ITR 642 (All) HC. 5. The appellants craves leave to add/alter any of the grounds of appeal on or before the date of final hearing." 3. Short facts of the case are that the assessee is a co .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

income at ₹ 1,65,96,840/-. The Assessing Officer made the addition of ₹ 70,52,023/- on account of interest on term deposits in excess of ₹ 10,000/- u/s. 40(a)(ia) of the Act. The Assessing Officer has observed that the assessee has paid interest on term deposit in excess of ₹ 10,000/- without making TDS and the total interest so paid of ₹ 70,52,023/-, is liable to be disallowed u/s. 40(i)(ia) of the Act. The Assessing Officer was of the view that the assessee bank c .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

T (2008) 87 ITD 569. 4. The matter was carried to the learned CIT(A) and the learned CIT(A) has dismissed the appeal of the assessee by observing as under:- "I have carefully considered the facts of the case, submissions made by the assessee and also perused the assessment order. The only ground of appeal raised by the appellant is regarding disallowance made u/s 40(a)(ia) in respect of interest paid on term deposit in excess of ₹ 10,000/- without making TDS u/s 194A amounting to S .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

order are as under: (i) The appellant is a co-operative society engaged in carrying on banking business and the assessee bank's case clearly falls under the ambit of sub-clause (b) of clause (c) of subsection (3) of section 194A and hence, TDS provisions are attracted. As per the said provisions of sub-clause (b) of clause (I) of Section 194A(3) of the Income Tax,1961, any co-operative society Which is engaged in the business of banking shall have to deduct tax on interest paid or payable t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

includes different types of co-operative societies engaged in- different types of activities. Where eve a reference is made to any co-operative society, the Income Tax Act, 1961 has clearly distinguished and specified the type of co-operative society based on the type of activity carried out. Such a distinction was required as the Legislature intends to extend rent benefits to different types of co-operative societies through the Income Tax Act. Thus, Assessing Officer, the appellant is claiming .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ank Ltd. (1999) 238 ITR 630. (ii) The A.O in his Assessment Order has mentioned that in order to understand the legislative intent in this regard, it is necessary to refer to the explanatory notes to Finance (No. 2) Act, 1991 given in the circular No. 621 dated 19-12-1991 which among others, provides that" With a view to imp roving tax compliance, Sec. 194A of the Act has been amended to secure deduction of tax at source from interest on time deposits with the aforesaid banking companies an .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

c clauses. As per AD the-re are a number of judicial pronouncements wherein it has been held that a specific provision override a general provision. For this purpose reliance has been placed by the AD on Kirloskar Pneumatic Co. Ltd. Vs. Commissioner of Surtax (1994) 210 ITR 485 (Born) and CIT vs. Mahanagar Telephone Nigam Ltd. (2002) 254 ITR 627 Del.) Reliance has also been placed by the A.O on the decision of the jurisdictional Karnataka High Court in the case of M. L. Vasudeva Murthy & Son .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ase is covered by the specific provision in clause (i) & (viia), rather than the general proi5ions of clause (v) of Sec.194A(3). While coming to this conclusion, the Assessing Officer has relied on the decision ITAT, Pune Bench, Pune in Shagani Nivedita Sahakari bank Ltd v ACIT (2003) 87 ITD 569 wherein, it has been heard that the term 'co-op society' in sub-clause (v) to be interpreted as 'co-op society other than co-operative bank and further the provisions which are specific i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

yee i.e. member, non-member, co-op society, urban co-op bank etc are all covered under the ambit of cause (I) of section 194A(3), who ever receives interest from the appellant. (v) Regarding the heavily relied upon decision in the case of Jalagon District Central Co-operative Bank Ltd. & Anr. Vs. Union of India (2004) 265 ITR 423 by the appellant, the AG has mentioned that in the said case, the Hon'ble High Court was concerned with as to whether the exemption granted to the Co-operative .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s 119 which would override or detract from the provisions of the Income Tax Act. Nowhere in the above decision, was the applicability of the provisions of sub-clause (v) to the co-operative societies engaged in the business of banking discussed specifically. Therefore, the said decision does not help the case of the appellant. 5.2.1 After discussing various aspects of the issue as discussed above, the AD has to the conclusion that the assessee has failed to deduct tax at source from interest on .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ction 40(a)(ia) of the IT. Act, 1961. 5.2.3 It san undisputed fact that the appellant has paid interest on term deposits to the tune of ₹ 70,52,023/- to depositors without deducting tax at source. The appellant contended that the provisions of TDS are not attracted in view of clause-(v) of subsection (3) of section 194A as the interest payments to the extent of ₹ 70,52,023/- have been made to the members of the bank. In this regard, the AC has interpreted the word 'co-operative s .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e appellant bank for the reasons mentioned above. 5.2.4 On going through the provisions of section 194A(3), it is seen that the Assessing Officer is justified in disallowing the interest payments above the threshold limit of ₹ 10,000 paid to the depositors as the appellant bank had failed to deduct tax at source thereby rendering Itself liable for disallowance under section 40(a)(ia) of the IT. Act, 1961. The submissions to the appellant are not acceptable in view of the decision of Hon .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

oviso to section 194A(3)(i). Further, the Hon'ble Kerala High Court in the case of Moolamattom Electricity Board Employees Co-op Bank Ltd 238 ITR 630 has made a clear distinction between primary credit society and a co-op society engaged in banking business. Thus, section 194A deals with co-op societies engaged in the business of banking, co-operative societies engaged in providing credit facilities to the members, etc. As has been rightly held by the Assessing Officer that the moment the am .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

.194A(3) which are specific in nature and the appellant cannot put forth its claim under section 194(3)(v) which are general in nature. As the appellant is co-operative society engaged in the business of banking, it is covered under these specific clauses and as has been held by the Hon'ble TAT, Pune Bench, Pune in Bhagani Nivedita Sahakari bank Ltd v. ACIT (2003) 87 ITD 569 that the term co-op society' in sub-clause (v) to be interpreted as 'co-op society other than co-operative ban .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r No.9 of 2002 issued by the CBDT relied upon by the appellant, the Board vide said circular had sought to interpret the definition of word member' claying that the word 'member' does not include word 'nominal member'. It was held by the Bombay Nigh Court in the case of Jalgaon District Central Co-op Bank Ltd & Mr v. Union of India 265 ITR 423 (Born), that the Board has no power to interpret the provisions of law by way of circular. The issue at hand of the Bombay High Co .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

pellant's reliance on the said circular is found to be ill founded. 5.2.8 In order to understand the legislative intent in this regard, it is necessary to refer to the explanatory notes to Finance (No. 2) Act, 1991 given in the circular No. 621 dated 19-12-1991 which among others, provides that "With a view to improving tax compliance, Sec. 194A of the Act has been amended to secure deduction of tax at source from interest on time deposits with the aforesaid banking companies and co-ope .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

A. 5.2.9 In a recently delivered judgment, the Hon'ble ITAT Panaji Bench, Panaji in the case of the Bailhongal Urban Co-op. Bank L Vs. KIT Range 1, Belgaum in I.T.A.No. 85/PNJ/2013 dated 28.08.2013 has upheld the decision of the Assessing Officer and the Commissioner of Income tax (Appeals) in disallowing u/s. 40(a)(ia) of the Act the interest amount paid by the assessee Co-operative Bank on term deposit in excess of ₹ 10,000/- without making TD5 u/s. 194A(3)(i) and not allowing assess .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

own by the member depositor in his return of income or not and if the depositor has already paid the taxes, then the assessee cannot be deemed to be default for deduct the tax at source. The Assessing Officer has not made any attempt to verify if the payee members had declared the tax on impugned amount in the return of income, therefore the Assessing Officer is without jurisdiction. The learned AR submitted that the Department cannot be permitted to calculate the tax on the same income twice. M .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

was earlier subjected to TDS, the deductor can be held to be an assessee in default u/s. 201(1) of the Act. Section 201(1) of the Act provides that in the event of failure to deduct tax at source on payments which ought to have been subjected to TDS, the deductor shall be held to be an assessee in default. However, sec. 201(1) cannot be read in isolation but has to be read with sec. 191 of the Act, which make it a precondition that for the deductor to be held to be assessee in default, the asses .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

them that the liability can be casted on the deductor to pay such taxes on his own account. Section 201(1) provides that any person, including the principal officer of a company, who fails to deduct the tax at source, on the sum paid to a resident or on the sum credited to the account of a resident shall not be deemed to be an assessee in default, if such resident has furnished his return of income u/s. 139 of the Act and has taken into account such sum for computing income in such return of in .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ncome, then and only then the assessee can be held in default. The assessee held to be in default even on amount which might actually be exempt in the hands of the payee under any provisions of the Act. Once an amount is exempt in the hands of the assessee, the question of deduction of tax at source does not arise. The learned AR submitted that in this case assessee has already submitted the certificate obtained from the assessee, which proves that the payee have already discharged their tax lia .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ber depositors are not in accordance with law and required to be set aside. 6. Learned DR has relied upon the orders of Revenue Authorities. 7. We have heard rival contentions of both the parties and looking to the facts and circumstances of the case, we find that the assessee is liable to deduct the tax at source on the term deposit of members of the cooperative societies as per the provisions of sec. 194A(3)(viia)(b) of the Act. Section 194A(3)(viia)(b) deals with cooperative societies engaged .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

. We have taken the consistent view taken by the ITAT, Panaji Bench in the case of Saraswat Co-operative Bank Ltd vs. ITO, TDS Ward, Belgaum in I.T.A.Nos. 233 to 236/PNJ/2014, which reads as under:- "2.6. We have heard the rival contention of both the parties, it is undisputed fact that assessee has paid interest on term deposit to ₹ 18,39,0031/- to depositor without deducting the tax at source. The assessee contended that the provisions of TDS are not attracted in view of clause (v) .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

aid 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 6 ten thousand rupees.......................... (v) to such income credited or paid by a co- operative society 5 [to a member thereof or] to any other co- operative society;] (viia) to such income credited or paid in respect of,- (a) deposit with a primary agricultural credit society or a primary credit society or a co-operative land mo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the Hon'ble High Court has interpreted the Co-operative Bank by observing as under: Nature Co-operative society registered under Banking Regulation Act, 1949 Co-operative Society registered under Karnataka CO-operative Society Act, 1959 Registration Under the Banking Regulation Act, 1949 and Co-operative Societies Act, 1959 Co-operative Societies Act, 1959 Nature of business 1. As defined in Section 6 of Banking. Regulation Act. 2. Can open, savings bank account, current account, overdraft .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

er of credit, discounting bills of exchange, issue cheque, demand drafts, pay orders, gift cheques, lockers, bank guarantees etc. 3. Society cannot act clearing agent, for cheques, DDs, pay orders and other forms. 4. Society are bound by rules and regulations as specified by in the co-operative societies act. Filing of returns. Co-operative banks. have to submit annual return to RBI every year Society has to submit the annual return to Registrar of Societies. Inspection RBI has the power to insp .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

society Moreover, we find that in the said judgment the Hon'ble High Court has held as under: "If a Co-operative Bank is exclusively carrying banking business, then the income derived from the said business cannot be deducted in computing the total income of the assessee. The said income is liable for tax. A Co-operative bank as defined under the Banking Regulation Act includes the primary agricultural credit society or a primary co-operative agricultural rural development bank. The Leg .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

o-operative bank. It is a Co-operative society which also carries on the business of lending money to its members which is covered under Section 80P(2)(a)(i) i.e., carrying on the business of banking for providing credit facilitates to its members. The object of the aforesaid amendment is not to exclude the benefit extended under Section 80P(i) to the society." Looking to the facts and circumstances of the case the Hon'ble High Court has interpreted the difference between Co-operative B .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ectricity Board Employees Co-operative Bank Ltd. 630 has made a clear distinction between primary credit society and a co-operative society engaged in banking business. Section 194A dealt with Co-operative Society engaged in business as banking. We find that the assessee bank is covered by the provisions of sub-clause (b) of clause (i) of Sec.194A(3) as well as the provisions of clause (viia) of Section 194(3)A which are specific in nature and 194(3)(v) which are general in nature. We find that .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e appellant to deduct the income-tax out of the interest paid by them on time deposits, in respect of every payment exceeding ₹ 10,000, at the relevant point of time. The learned single judge as per the impugned judgment, quashed the notices holding that going by the provisions contained in section 194A(3)(viia)(a) of the Income Tax Act, for short "the Act" ,the writ petitioners were not liable to deduct income-tax at source in respect of the interest so paid, as sub-section (3) .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

at clause. Admittedly, sub-section (1) of section 194A cast the liability on all those institutions other than individuals and Hindu Undivided Family to deduct income-tax at source, when such institutions pay interest on deposits exceeding the prescribed limit. Sub-section (3)(viia) reads as follows : Sub-section 3 of section 194A of the Act makes it clear that "the provisions of sub-section (1) shall not apply" in respect of several situations mentioned under that clause. Admittedly, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

mortgage bank or a co-operative land development bank; (b) deposits (other than time deposits made on or after the 1st day of July, 1995) with a co-operative society, other than a co-operative society or bank referred to in sub-clause (a), engaged in carrying on the business of banking;" The result will be that interest paid on time deposits by a co-operative society, other than a co-operative society or bank referred to in sub-clause (a), engaged in carrying on the business of banking will .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ome-tax, as such society is under sub-section (3) taken out of the purview of section 194A(1) of the Act. Therefore, the writ appeal fails, dismissed. W.A. No. 2270 of 1998: A reading of the impugned judgment discloses that the writ petitioner, the first respondent, was concede to be an agricultural co-operative society. Consequently, it comes within the purview of clause (viia)(a) of sub-section (3) of section 194A of the Income-tax Act, 1961. Naturally, the first respondent-society will not be .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

gaon District Central Co-operative Bank Ltd. & Anors. vs. Union of India 265 ITR 423, that the Board has no power to interpret the provisions of law by way of circular. The issue in hand of Hon'ble Bombay High Court was the definition of word "member" as appearing in clause-(v)of Section 194A(3) and power of Central Board of Direct Tax to issue circular u/s 119 which would override or detract from the provisions of Income Tax Act. The Circular No.9/2002 dated 11.9.2002 issued b .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e Minister and his object for suggesting TDS to such deposit in following words to enable the Government to identify income earners, most of whom would not otherwise declare their income or would not declare their full income, I propose to extend the scheme of tax deduction at source to cover new areas of payments in the nature of commissions, interest paid by banks on time deposits and withdrawals from the National Savings Scheme. To minimise the inconvenience for small depositors, tax will be .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

dget speech in 1992 expressed that "The system of tax deduction at source is a useful tool and one of the well recognised methods of enforcing tax compliance in many countries. However, a harassed Finance Minister has to be sensitive to the opinions of Honourable Members of Parliament even when they differ from his own convictions." He accordingly withdrawn the provision relating to deduction at source in respect of interest on term deposit with the bank and commission w.e.f., June 199 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

carrying on the business of banking, "including co-operative land mortgage bank or co-operative land development bank" This was brought into w.e.f., 1.4.1992. Finance Act 1995 w.e.f., 1st July 1995 again withdrawn the exemption for interest on time deposit payable by bank. The amendment Section 194A now provides for deduction of tax at source at the rate in force from payment for interest exceeding ₹ 10,000/-in a financial year on time deposits made on or after 1st July,1995 with .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ce. Reference in this connection may be made to circular no. 715 dated 8th August, 1995 and explanatory circular no. 717 dated 14th August, 1995. The Finance Act 2001 by amendment in provision to sub-section (3) of Section 194 has omitted the provision therein providing the specific limit of ₹ 10,000/- in respect of time deposit made with banking company with reservation that overall limit of ₹ 5,000/- provided in main portion of sub-section 3 would apply to such deposit w.e.f. 19th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

income credited or paid by the Co-operative Society. They have interpreted the word "member" mentioned in Section 194A(3)(v) of the Act. The Tribunal has also relied upon the decision of Hon'ble Bombay High Court and the circular issued by CBDT and they relied upon circular issued by CBDT following the judgement of Jalgaon District Central Co-operative Bank Ltd. & Anors. Vs. Union of India, they were of the opinion that the Co-operative Bank are not subject to TDS under 194A. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the case of the assessee otherwise the provision of section 194A (viia) will become redundant. The section cannot be read in this manner. For the sake of clarity, we have analyse the Section 194A(3)(v) and (viia) which read as under: "(3) The provisions of sub- section (1) shall not apply- (i) 5 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 referre .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e on or after the 1st day of July, 1995) with a co-operative society, other than a co-operative society or bank referred to in sub-clause (a), engaged in carrying on the business of banking The TDS on time deposits is dealt in clauses (vii) & (viia) of 194A (3) which are extracted below: (3) The provisions of sub-section (1) shall not apply (vii) : to such income credited or paid in respect of deposits (other than time deposits made on or after the 1st day of July, 1995) with a banking compa .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tive society or bank referred to in sub-clause (a), engaged in carrying on the business of banking" *emphasized+ From a plain reading of above clauses, it is clear that while clause (vii) deals with interest payment by a banking company the clause (viia) deals with interest payment by a certain category cooperative societies including a cooperative society engaged in carrying on the business of banking. It is also clear that, as regards a co-operative society engaged in carrying on the busi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

uch 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 o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e is anything to restrict their applicability only to non-members and therefore they apply to all depositors. Going by the above understanding, the co-op bank is required u/s 194A(1) to make TDS from the interest paid to all depositors. However co-op bank holds the view that clause (viia) applies only to non-members and not to the members. However, on perusal of clause (viia), nothing in it to restrict its application only to non-members. The stand taken by co-op bank is that the interest paid t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ct 1968, inserted clause (v) in 194A(3) to exempt interest paid by on co-op society to another co-op society from TDS purview. b. The Finance Act 1970, inserted clause (vii) in section 194A(3) which for the first time, created a new type of co-operative society engaged in carrying on the business of banking, as distinct from the cooperative society as envisaged in clause (v). By this amendment, a specific specie called a 'cooperative society engaged in carrying on the business of banking' .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s clause, the provisions of section 194A are not applicable to income by way of interest credited or paid in respect of deposits with a banking company to which the Banking Regulation Act, 1949 applies (including any bank or banking institution referred to in section 51 of that Act), or with a co-operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank or a co-operative land development bank). All such banking institutions are, therefore, no l .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

stand of appellant is that, even after insertion of specific clause(vii), the general clause(v) will continue to apply to the cooperative banks. If that stand is accepted, the cooperative banks were required to deduct tax from interest paid to depositors who are not its members, rendering clause (vii) redundant. e. The by Finance Act 1991, for the first time introduced TDS on time deposits by substituting above mentioned clause (vii) with two separate clauses (vii) & (viia). While clause (vi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tible at source from the interest income on the deposits with. (i) a banking company, or (ii) a co-operative society engaged in carrying on the business of banking, other than a co-operative land mortgage bank, a co-operative land development bank, primary agricultural credit society or a primary credit society (emphasized) The above circular clearly states that, it was only by introduction of clause (viia), a cooperative society engaged in the business of banking was brought under the purview o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

law has been explained in the explanatory notes to Finance Act 1995, contained in CBDT Circular No. 717 dated 14-8-1995 as under. Para 46.2: The (Finance)Act amends Section 194A of the Income-tax Act relating to deduction of income-tax at source from interest other than interest on securities in the case of residents. The amendment provides for deduction of income-tax at source at the rate in force from payment of interest exceeding ten thousand rupees in a financial year on time deposits made .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

that "a special provision normally excludes the operation of a general provision". The Hon'ble Supreme Court in the, case of South Indian Corpn. (P) Ltd. vs. Secretary, Board of Revenue AIR 1964 SC 207 has held that "a special provision should be given to the extent of its scope leaving the general provision to control cases where the special provision does not apply" Therefore, in terms clause (v) which is general in nature will not apply to the co-op bank. The provisio .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

earned AR has relied upon the decision of Hon'ble Allahabad High Court in the case of Jagaran Prakashan Vs. DCIT (TDS) reported in 345 ITR 288 wherein the Hon'ble High Court has interpreted the provisions of sec. 4, 190, 191 & 201 of the Act. We have gone through the decision of the Hon'ble High Court and we find that the Hon'ble High Court has passed this order in a writ petition, therefore they have not laid down any law, hence, this judgment will not helpful to the assesse .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ed that tax deductor cannot be treated as assessee in default till it is found that the assessee has also failed to pay such tax directly. As we have already held that it is the duty of the assessee to show to the Income-tax authorities that the payee has already declared the impugned interest in his return of income. As per the proviso u/s. 201(1) of the Act which was added by the Parliament, it is clear that in the event of payee has already declared in his return of income and paid the taxes, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Bench at Aurangabad on the occasion to interpret in sec. 194A of the Act in the case of The Marathawada Urban Bank Co-op Association Ltd. Vs. Union of India and others in W.P. No. 4935/2003, held as under:- "4. We have gone through the said provision and the impugned Circular. Section 194A mandates that any person other than an individual or a Hindu Undivided family responsible for paying any income by way of interest other than income by way of interest on securities at the time of credit .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

siness of banking, the provisions of section 194A , requiring the said co-operative society doing a banking business to deduct TDS, will not apply. The said provision exempting operation of section 194A (3) is limited to the extent of the income being paid by the payee to the extent of ₹ 10,000/- and no further. Reliance placed by the learned Counsel for the petitioner on sub-clause (v) of clause (iii) of sub-section (3) of section 194A is misplaced. The said sub-clause (v) would only appl .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ts the exemption to deposits other than the time deposits. 6. It is a settled proposition of law that various sub-sections in a provision have to be read in harmony. A head on collision between subsections of the same provision has to be avoided. They cannot be read in a manner which would render one provision superfluous or a dead letter. Reading clause (viia) and clause (v) conjointly and in harmony, the only irresistible conclusion that can be drawn is that interest above ₹ 10,000/- cre .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version