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2015 (4) TMI 802 - ITAT PANAJI

2015 (4) TMI 802 - ITAT PANAJI - TMI - Dis-allowance of expenses u/s 40(a)(ia) of the Income Tax Act, 1961 - TDS u/s 194A not deducted on interest paid on deposits - Special provision for deduction of TDS in case of Co-operative bank - Payee shown interest in return of income and paid tax - Held that:- The assessee is liable to deduct the tax at source on the term deposit of members and cooperative societies as per the provisions of sec. 194A(3)(vii)(b) of the Act. Section 194A(3)(vii)(b) deals .....

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e (viia) of sec. 194A(3) of the Act. We have taken the consistent view taken by the ITAT, Panaji Bench in the case of Saraswat Co-operative Bank Ltd. [2015 (1) TMI 743 - ITAT PANAJI].Following the this decision, we hold that the assessee in these assessment years has paid interest above ₹ 10,000/-, to each of the depositors, therefore it is liable to deduct tax at source and the assessee is deemed to be default.

Our view was confirmed by the Hon'ble Bombay High Court vide de .....

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ts is less than ₹ 10,000/-. Therefore, we reverse the finding of Ld. CIT(A) and restore this issue back to the file of Assessing Officer to verify this fact as per the decision of Hon'ble Supreme Court in the case of Hindustan Coca Cola Beverages P. Ltd. [2004 (3) TMI 333 - ITAT DELHI] and also the decision of CIT Vs. Eli Lilly & Co. reported in [2009 (3) TMI 33 - SUPREME COURT] whether payee has paid tax on the interest income received from the assessee society and shown the same in h .....

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the A.Ys. 2009-10 to 2010-11. Common issue is involved in these two appeals, so these are being disposed of by this consolidated order. 2. This order shall govern the disposal of both the appeals. For the sake of convenience, facts are taken from ITA No. 87/PNJ/2014. The assessee has raised the following grounds:- "1. The Ld. CIT(A) erred in confirming the disallowance made by Assessing Officer of ₹ 2,11,39,621/- u/s. 40(a)(ia) of the Income Tax Act, 1961 for the reason that the asses .....

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of deducting tax at source on deposits. 4. The Ld. CIT(A) erred in not appreciating that the assessee even though a cooperative society is required to deduct tax at source u/s. 194A of the Act since it is carrying on banking business. 5. The Ld. CIT(A) failed to appreciate that the assessee being a cooperative society is entitled to all benefits contemplated and provided under the Act such as exemption u/s. 194A(3)(v) of the Income Tax Act, 1961 and clauses (i), (v), (viia) and (viia)(b) of sec .....

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Bombay High Court decision in the case of Jalgaon District Central Cooperative Bank 265 ITR 423 which is also affirmed by Supreme Court. 8. The Ld. CIT(A) has erred in not giving benefit of interpretation which is more beneficial to the assessee as laid down by Hon'ble Supreme Court in the case of CIT Vs. Vegetables Products Ltd. 88 ITR 192. 9. Reasons assigned for upholding the disallowance and making the addition are wrong, insufficient and contrary to law and facts of the case. 10. The a .....

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t, 1961 (hereinafter referred to as the 'Act', for short) vide order dated 27/12/2011 by determining the taxable income at ₹ 1,61,140/- after setting off of loss for A.Ys. 2006-07 & 2008-09 of ₹ 3,88,15,119/- and made the addition of ₹ 2,11,39,621/- u/s. 40(a)(ia) of the Act. As regards disallowance of ins u/s. 40(a)(ia) of the Act on term deposit in excess of ₹ 10,000/- amounting to ₹ 2,11,39,621/-, the Assessing Officer has observed that the assessee h .....

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ure and it is well established principle of interpretation that the specific provisions always override the general provisions. The Assessing Officer has relied upon a decision of ITAT, Pune Bench in the case of Bhagini Nivedita Sahakara Bank Ltd. Vs. ACIT (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 assesse .....

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n account of amount transferred from NPA reserve. My observations and findings on the issues are as under:- 5.1 DSALLOWANCEOFINTERESTPA)D ON TERM DEPOSIT NSDFR5.1QDDD- WITHOUT MAKING TDS: The facts leading to the grounds of appeal No. 1 to 4 and the reasoning relating to the disallowance made by the Assessing Officer under section 40(a)(ia) of ₹ 22,11,39,621/- have been discussed by the Assessing Officer in very detail in his assessment order. Briefly, the facts and reasons given by the As .....

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paid or payable to any person on time deposits, if the amount of said interest exceeds ₹ 10,000/-. The A.O has distinguished the status of the appellant assessee as co-operative bank vis a vis other co-operative societies as this became imperative due to the fact that the assessee had claimed to be an ordinary co-operative society within the meaning of clause (v) of Sec.194A(3). The A.O has further dwelled on this issue and has stated that the word "co-operative society" is an om .....

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llant is claiming benefit of sections 36(1)(viia), 26955 and 269T the ground that it is a co-op bank' but for availing exemption from TDS under section 194A, it is claiming itself as an ordinary "co-operative society" within the meaning of 194A(3)(v). While distinguishing between ordinary co operative society and the cooperative society carrying on business of banking, the A.O has relied on the decision of Kerala High Court in the case of Moo Jam atom Electricity Board Employees Co .....

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companies and co-operative societies engaged in currying on the business of banking". (iii) Since the appellant bank is covered by the provisions of sub-clause (b) of clause (i) of Section 194A (3) as well as the provisions of clause (viia) of the said section which are specific in nature, the appellant cannot put forth its claim under section 194(3)(v) which are general in nature. As the appellant is a co-operative society engaged in the business of banking, it is covered under these afore .....

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hy & Sons vs. it. Commissioner of Agricultural Income Tax (1992) 198 ITR 426. 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 the 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. Respectfully following the ratio of the above case laws including that of the Supreme Court, the AD has concluded that the as .....

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ic in nature over ride the provisions which are specific in nature. (iv) The Assessing Officer has further observed that in the provisions of section 194A(3)(i) only the nature of the "payer" has been defined in the respective sub-clause and the proviso thereof which includes the appellant co-operative bank. Since the appellant being the payer' is squarely covered under sub-clause (b) Of clause (i)) of Sec.194A(3) and the provisions of said clause are squarely applicable to any pay .....

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ociety u/s 194A clause (3)(v) can be taken away by creating a distinction between duty registered member and nominal member which is unknown to the exemption clause contained in section 194A(3)(v) of the Income Tax Act, 1961. The issue at hand with the Bombay High Court in the Jalagon District Central Co-operative Bank Ltd., Supra was the definition of the word member' as appearing in clause (v) of section 194(3) arid the powers of the Central Board of Direct Taxes to issue circulars u/s 119 .....

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s exceeding ₹ 10,000/- and therefore, the provisions of section 40(a)(ia) of the income Tax Act, 1961 are squarely applicable in its case. Accordingly, the entire expenditure of ₹ 2,11,39,621/- claimed by the assessee towards interest payments exceeding ₹ 10,000/- on term deposits to individual members as well as non-members has been disallowed by the Assessing Officer. 5.2.2 In view of the above, the Assessing Officer disallowed a sum of ₹ 2,11,39,6211- under section 40( .....

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as employed in sec.1944(3)(v) to mean co-operative society other than co-operative bank as decided by the TAT, Pune Bench, in Shagani Nivedita Sahakari bank Ltd v. ACT 81 ITD 569 wherein, the Hon'ble TAT has held that the term co-operative society' mentioned in section 194A(3)(v) to be interpreted as co-operative society other than co-operative bank. Thus, the AO disallowed the entire interest payments exceeding ₹ 10,000/- made to the members and non-members by the appellant bank .....

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n the case of Bhagani Nivedita Sahakari bank Ltd cited supra wherein, it is clearly held that section 194A(3)(viia)(b) makes no distinction between members and non-members of cooperative hank for purpose of deduction of tax at source or interest on time deposits credited and therefore, co-operative bank would be liable to deduct tax at source under sec. 194A(1) on interest on time deposits paid/credit to its depositors, if such interest amount exceeded the limit prescribed in proviso to section .....

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d to any depositor during the year exceeds ₹ 10,000, the provisions of section 194A(1) shall apply and the co-operative society engaged in the banking business shall have to deduct tax on such payments. From the facts of the case, it is seen that the Assessing Officer categorically brought out the material on record to prove that the appellant 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 Sec.194A(3) which ar .....

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ble for TDS provisions under section 194A. 5.2.5 The appellant's argument that clause(v) to sec.194A(3) may be taken as applying to members and other clauses to the said section may be taken to apply to non members is without any basis ii as much as clauses (i) and (viia) apply to both the members as well as non members. Where ever the legislature intends to apply a particular provision to member or to a member, it has done so expressly. Now coming to the circular No.9 of 2002 issued by the .....

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er' as appearing in clause (v) of section 194(3) and the powers of the Central Board of Direct Taxes to issue circulars u/s 119 which would override or detract from the provisions of the income Tax Act. The circular No.9 of 2002 dated 11-09-2002 issued by the CBDT has been Quashed and set aside by the Hon'ble High Court. 5.2.7 Therefore, the circular No.9 of 2002 dated 1-09-20O2 issued by the CBDT does not help the case of the appellant. The appellant's reliance on the said circular .....

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business of banking". This Circular of the CBDT explains in no uncertain terms that the intention of the legislature in amendment of Section 194A, inter alia was to secure deduction of tax at source from interest on time deposits with the banking companies and co-operative societies engaged in carrying on the business of banking. The appellant being a co-operative society engaged in carrying on the business of banking is liable to make TDS u/s 194A. 5.2.9 In a recently delivered judgment, t .....

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tax at source by virtue of the provisions of section 194A(3)(v) of the I.T.Act. 5.2.10 in view of the above discussion and taking into consideration the various reasons given by the Assessing Officer, the disallowance made under section 40(a)(ia) amounting to ₹ 2,11,39,621/- is confirmed. 6. In the result, the appeal is dismissed." 5. Learned AR submitted that the Assessing Officer should have to verify whether the interest income is shown by the member depositor in his return of inc .....

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tax should be payable by deduction or collection at source or by advance payment or by payment u/s. 192(1A) of the Act. Sec. 191 of the Act prescribes that in the event there is a failure on the part of the deductor to deduct tax at source on payments made to the assessee, then the primary liability to pay tax on such income rests on the assessee and the assessee shall pay the tax directly. When the assessee failed to pay tax on such income which was earlier subjected to TDS, the deductor can b .....

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axes due on such income in his return of income. Thus the law requires that there has to be a fact finding exercise by the authorities by way of ascertaining as to whether in the event of deductor having failed to deduct tax at source on certain payments, the payee have also failed to declare such income in their return of income and paid the taxes. It is only when the payee has failed to remit the taxes and the department is unable to recover from them that the liability can be casted on the de .....

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ared by him in such return of income and the person furnishes a certificate to this effect from an accountant in such form as may be prescribed. Therefore, the assessee cannot be held liable unless the deductor has not paid tax on this income in his return. Learned AR submitted that the deduction of tax at source is the responsibility of the Assessing Officer if the assessee has not deducted the TDS and the deductee has not shown in his return of income, then and only then the assessee can be he .....

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AR relied upon the decision of Hon'ble Allahabad High Court in the case of Jagaran Prakashan v. DCIT (TDS) reported in 345 ITR 288 and the decision of Hon'ble Uttarakhand High Court in the case of DIT, International Taxation v. Maersk Co. Ltd. reported in 334 ITR 79 (FB). Learned AR further submitted that impugned order passed u/s. 201(1) of the Act holding the assessee as an assessee in default in respect of the interest income paid to member depositors are not in accordance with law an .....

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to any depositor during the year exceeds ₹ 10,000/-, the provisions of sec. 194A(1) of the Act shall apply to the cooperative society engaged in the banking business shall have to deduct tax on such payment. From the facts of the case, it is seen that the ITO has categorically brought out the material on record to prove that the assessee bank is covered by the provisions of sub-clause (b) of clause (viia) of sec. 194A(3) of the Act. We have taken the consistent view taken by the ITAT, Pan .....

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77; 1,83,90,031/- have been made to the members of the bank which is a Co-operative society. While the revenue claims the T.D.S has to be deducted as per section 194A(viia). The provisions of Section 194A(3)(v)(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 refe .....

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e 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; We find that the Co-operative is also interpreted by the Hon'ble jurisdictional Karnataka High Court, wherein in the case of CIT vs. Yeshwanthpur Credit Co-operative Society Limited in ITA No. 237/2012, wherein the Hon'ble High Court has interpreted the Co-operative Bank by observing as .....

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ange, issue cheques, demand drafts (DD), Pay orders, Gift cheques, lockers, bank guarantees etc. 3. Co-operative Banks can act as clearing agent for cheques, DDs, pay -orders and other forms. 4. Banks are bound to follow the rules, regulations and directions issued by Reserve Bank of India (RBI) 1. As per the bye laws of the cooperative society. 2. Society cannot open savings bank account, current account, issue letter of credit, discounting bills of exchange, issue cheque, demand drafts, pay or .....

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pect accounts and over all functioning of the bank. Part V of the Part V Part V of the Banking Regulation Act is applicable to co-operative bank Part V of the Banking Regulation Act is not applicable to co-operative banks. Use of words The word bank' banker', banking' can be used by a co-operative bank. The word bank' banker', banking cannot be used by a co-operative society Moreover, we find that in the said judgment the Hon'ble High Court has held as under: "If a C .....

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ve agricultural and rural development bank. They did not want to extend the said benefit to a co-operative bank which is exclusively carrying on banking business i.e., the purport of the amendment. If the assessee is not a Co-operative bank carrying on exclusively banking business and if it does not possess a license from the Reserve Bank of India to carry on business, then it is not a Co-operative bank. It is a Co-operative society which also carries on the business of lending money to its memb .....

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f Bhagani Nivedita Sahakari Bank Ltd. vs. ACIT (2003) 87 ITD 567 where in it is held that Co-operative Society mentioned in Section 194A(3)(v) should be interpreted as Co-operative Society other than Co-operative Bank. We find that the ITAT Pune Bench has interpreted the word Co-operative and Co-operative Society and further the Hon'ble Kerala High Court in the case of Moolamattom Electricity Board Employees Co-operative Bank Ltd. 630 has made a clear distinction between primary credit socie .....

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ers have filed the writ before the Hon'ble Kerala High Court, wherein the Hon'ble High Court has held as under: "The Income Tax Department has come up with this appeal against the judgment in O.P. No. 17082/1997. (Thodupuzha Urban Co-operative Bank Ltd., In [1999] 238 ITR 630(Ker). That petition was filed by five co-operative Societies, when they were faced with a notice from the appellant to deduct the income-tax out of the interest paid by them on time deposits, in respect of ever .....

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his appeal is filed only against the 4th petitioner in O.P. No. 17082/1997 (see[199]238 ITR 630), namely, the Thodupuzha Urban Co-operative Bank Ltd. No. 394, Thodupuzha, Idukki District, represented by the secretary. 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, sub-section (1) of section 194A cast the liability on all those institutions other th .....

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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: "(3) The provisions of sub-section (1) shall not apply (viia) to such income credited or paid in respect of (a) deposits with a primary agricultural credit society or a primary credit society or a co-operative land mortgage bank or a co-operative land development bank; (b) deposits (other than time deposits made on or after .....

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e a case before us that the 4th petitioner, the first respondent herein, does not come within any of the types of co-operative societies made mention of in sub-clause (a) of clause (viia) of sub-section (3) of section 194A of the Act. Therefore, irrespective of Whether it is a time deposit or any other type of deposit, the 4th petitioner, first respondent will not be liable to deduct income-tax, as such society is under sub-section (3) taken out of the purview of section 194A(1) of the Act. Ther .....

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of the view that the Hon'ble High Court has interpreted section 194(v) and 194(va) of Section 194A(3). Now coming to Circular No. 9/2002, issued by the CBDT, which is relied upon the assessee. The said circular sought to interpret the definition of "member" clarified that the member does not include the nominal member. It was held by the Bombay High Court in the case of Jalgaon District Central Co-operative Bank Ltd. & Anors. vs. Union of India 265 ITR 423, that the Board has n .....

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.09.2002 issued by CBDT does not help to the case of the assessee. The assessee relied upon the said circular is ill founded. The question before the Hon'ble Bombay High Court was not whether a Co-operative Bank not entitle to deduction of tax on interest paid on the deposits with it. To understand the legislative amendment in this regard query wherein in the budgets speech of Finance Minister and his object for suggesting TDS to such deposit in following words to enable the Government to id .....

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excess of the limit but not having taxable income will have the facility of collecting payment with no tax deduction by filing a declaration in the prescribed manner. Such provision relates to TDS introduced by Finance Act. 1991. Invited consideration criticism from taxpayers, bankers above inconvenience and difficulty in implementation of this provisions. The finance minister in his budget speech in 1992 expressed that "The system of tax deduction at source is a useful tool and one of the .....

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on 194A for clause (vii) and someone as earlier introduced by Finance No.2 Act w.e.f., 1st October, 1991. This amendment was made to restore the position as was before 1st October, 1991 in relation to deduct tax at source in the case of income credited or paid in respect of deposit with a bank company to which banking regulation Act 1940 applies or with a co-operative society engaged in carrying on the business of banking, "including co-operative land mortgage bank or co-operative land deve .....

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mit of ₹ 10,000/- shall be computed with reference to the income credited or paid by branch of banking company or Co-operative Society as the case may be. The interest on time deposit made with a primary agricultural society or a credit society or a co-operative land mortgage bank or a Co-operative land development bank will not be subject to requirement of deduction of tax at source. Reference in this connection may be made to circular no. 715 dated 8th August, 1995 and explanatory circul .....

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a Co-operative Society carrying on a business of banking is liable to make TDS u/s. 194A. Learned AR has relied upon the decision of Income Tax Tribunal, Beanglore Bench in the case of Bagalkot District Central Co-op. Bank vs. Joint Commissioner of Income Tax, in ITA NO.1572/Bang/2013, wherein the Tribunal has interpreted the Section 194A(3)(v) which grants an exemption from TDS to such income credited or paid by the Co-operative Society. They have interpreted the word "member" mentio .....

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t Section194A(3)(v) and 194A(3)(va) of the Act. The decision of Hon'ble Kerala High Court in the case of ITO & Ors. vs. Thodupuzha Urban Co-operative Bank, wherein they have clearly defined and interpreted the Section it appears that the bank did not consider the provision of section 194A(viia). Therefore, when there is a specific provision, general provision cannot be applied in the case of the assessee otherwise the provision of section 194A (viia) will become redundant. The section ca .....

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.... (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 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 r .....

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ed to in section 51 of that Act); (viia): to such income credited or paid in respect of, (a) deposits with a primary agricultural credit society or a primary credit society or a co-operative land 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" *emphasized .....

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1995. Further, 194A(3)(i) lays down monetary limits up to which is there is no requirement of TDS. The said monetary limits are different for different category of payers. The said clause is reproduced below for the sake of clarity: 194A(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 .....

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ral Government and notified by it in this behalf; and (d) five thousand rupees in any other case]:] From the above it is clear that, in case of a payer which is a cooperative society engaged in the business of banking, the monetary limit prescribed is ₹ 10000/-. Once the interest payment exceeds that amount the TDS is to be made. Neither in clause (viia) nor in clause (i) there is anything to restrict their applicability only to non-members and therefore they apply to all depositors. Going .....

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this scenario, the moot question for consideration is: Whether, in respect of interest paid on time deposits by a co-op bank, the clause(v) which deals with cooperative societies will apply or the clause (viia) which mentions specifically a co-operative society engaged in the business of banking' finds application? 2. Legislative history of TDS on interest: a. The Finance act 1968, inserted clause (v) in 194A(3) to exempt interest paid by on co-op society to another co-op society from TDS pu .....

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in Circular no. 42 dated 20-06-1970, whose relevant portion is extracted below: I am directed to invite a reference to the Board's Circular No. 22/68- IT(B) [F.No. 12/23/68-IT(B)], dated 28-3/13-5-1968, and to say that the Finance Act of 1970, has made an important change in section 194A by inserting a new clause (vii) in sub-section (3) of that section. As per this clause, the provisions of section 194A are not applicable to income by way of interest credited or paid in respect of deposits .....

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circular it is very clear that, by virtue clause(vii), a co-op bank is exempted from making TDS. c. The Finance Act 1971, which inserted the words (to a member thereof or) in clause (v) and the said amendment was directed only at the general co-operative society and not at the specific gene i.e cooperative society engaged in carrying on the business of banking. d. The stand of appellant is that, even after insertion of specific clause(vii), the general clause(v) will continue to apply to the co .....

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e decision of legislature to apply a specific clause to the specific genre cooperative societies, which were earlier carved out of the genus as envisaged in general clause(v). The effect of above amendment was explained by the CBDT in Circular no. 617 dated 22-11-1991 where in it is clarified that: The effect of the aforesaid change is that income-tax shall now be deductible at source from the interest income on the deposits with. (i) a banking company, or (ii) a co-operative society engaged in .....

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i) & (viia) with a combined clause (vii) and status quo ante was restored. f. The Finance Act 1995 inserted clauses (vii) & (viia) which lay down that, the exemption as envisaged in 194A(3) is not available in respect of time deposits made on or after 01-07-1995 with a banking company and a cooperative society engaged in the business of banking. This position of law has been explained in the explanatory notes to Finance Act 1995, contained in CBDT Circular No. 717 dated 14-8-1995 as unde .....

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ng. (emphasized) The above explanatory note leaves no doubt, whatsoever, about the applicability of clause (viia) to a cooperative society engaged in the business of banking. 3. Principle of "Generalia specialibus non derogant" The Hon'ble jurisdiction High court in M.L.Vasudeva Murthy & Sons vs. Jt. Commissioner of Ag IT 65 Taxman 185 (Kar) has observed that "a special provision normally excludes the operation of a general provision". The Hon'ble Supreme Court in .....

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paid in respect of deposits except which falls under that provisions. We therefore, dismiss the appeal of the assessee." 8. By respectfully following the above decision, we hold that the assessee in these assessment years has paid interest above ₹ 10,000/-, to each of the depositors, therefore it is liable to deduct tax at source and the assessee is deemed to be default. 9. Learned AR has relied upon the decision of Hon'ble Allahabad High Court in the case of Jagaran Prakashan Vs. .....

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o. 448 to 454/Agra/2011 and he submitted that as per the above judgment, it is the duty of the Assessing Officer to find out whether the assessee has deducted the tax at source or not. If tax is not deducted at source and if payee has not already shown that amount in his return of income, then and only then the Assessing Officer can be held the assessee is liable. The learned AR submitted that tax deductor cannot be treated as assessee in default till it is found that the assessee has also faile .....

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assessee to file a certificate to this effect from Chartered Accountant in such form as may be prescribed. Therefore, we are of the view that the assessee has to prove that payee has shown interest in his return of income and paid the due taxes on this income. Therefore, we do not agree with the submissions of the assessee in this regard. 10. Recently, Hon'ble High Court of Bombay, Bench at Aurangabad on the occasion to interpret in sec. 194A of the Act in the case of The Marathawada Urban .....

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ub-section (3) of section 194A, exception is carved out. The further proviso to section 194A (3) clarifies the situation as to how the income and the limits of the income as detailed in section 194 (3) is to be construed. 5. Section 194A (3) deals with exemptions. It lays down that upto an amount of ₹ 10,000/- where the payee is a co-operative society engaged in carrying on the business of banking, the provisions of section 194A , requiring the said co-operative society doing a banking bus .....

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ciety. Sub-clause (viia) (a) and (b) lays down the specific categories of the banks which are exempted from deducting TDS. The income accrued on the deposits other than the time deposits made after 1st day of July, 1995 is not exempted from deducting the TDS by urban co-operative Bank. Subclause (viia) (a) does not include urban co-operative Bank and sub clause (b) of clause (viia) limits the exemption to deposits other than the time deposits. 6. It is a settled proposition of law that various s .....

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the tax at source, meaning thereby that an interest credited below ₹ 10,000/- by urban cooperative Bank will not be liable for the tax deducted at source. Even the learned Asstt. Solicitor General conceded to the position that for amount below ₹ 10,000/-, TDS is not required to be deducted by the urban cooperative Bank. 7. The Circular impugned does not clarify the aforesaid aspect. The Circular will have to be read in a manner that if the amount more than ₹ 10,000/- is credite .....

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