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2015 (7) TMI 245 - ITAT BANGALORE

2015 (7) TMI 245 - ITAT BANGALORE - TMI - Non deduction of TDS - interest paid to members - assessee is a co-operative society - Held that:- Following the decision of the co-ordinate bench of this Tribunal in the case of The Bagalkot District Central Co-operative Bank (2015 (1) TMI 1005 - ITAT BANGALORE), we hold that the assessee, which is a co-operative society carrying on the business of banking, need not deduct tax at source under Section 194A of the Act when it pays interest to a member bot .....

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ecision of the learned CIT (Appeals) in directing the Assessing Officer to verify whether any portion of the interest in question relates to payments to non-members and to restrict the disallowance only to the extent of payment of interest to non-members without deduction of tax at source. -Decided against revenue. - I.T.A. Nos.86 & 87/Bang/2015 - Dated:- 29-6-2015 - Shri N.V. Vasudevan and Shri Jason P. Boaz, JJ. For the Petitioner : Dr.P.K. Srihari, Addl. CIT (D.R.) For the Respondent : Ms. Vi .....

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133A of the Income Tax Act, 1961 (in short 'the Act') was conducted at the assessee's business premises on 26.11.2013 in order to verify its compliance to the Tax Deduction at Source ( TDS ) provisions. In the course of the survey, it was noticed that in the period relevant to Assessment Years 2011-12 and 2012-13, the assessee had not deducted tax at source in respect of interest paid to members relying on the specific exception provided for under the provisions of section 194A(3)(v) .....

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sing Officer passed orders under Section 201(1) and 201(1A) of the Act dt.31.3.2014 determining the following demands :- Asst. Year Demand u/s.201(1) Demand u/s. 201(1A) 2011-12 31,32,522 11,27,708 2012-13 31,24,020 7,49,765 2.2 Aggrieved by the orders of the ITO (TDS), Mysore dt.31.3.2014 for both Assessment Years 2011-12 and 2012-13, the assessee preferred appeals before the CIT (Appeals), Mysore. The learned CIT (Appeals), allowed the assessee's appeals following the decision of a co-ordi .....

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144A by virtue of exemption granted vide clause (v) of sub-section (3) of the said section. However, the interest paid to non-members are not covered under this has held by Hon'ble ITAT in the order, A.O. is directed to restrict the addition only to this if there is any interest paid to non-members. It is ordered accordingly. 6. For statistical purpose the appeals are treated as allowed. 3. Revenue is now aggrieved by the orders of the CIT (Appeals), Mysore dt.16.10.2014 for both Assessment .....

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ainst the law. 3. The learned CIT (Appeals) ought to have considered the orders of the Hon'ble ITAT, Pune (857 ITD 569) and Hon'ble ITAT, Panaji Bench order in the case of Bailhongal Urban Co-operative Bank dt.28.8.2013, which have been decided in favour of the Department. 4. The learned CIT (Appeals) erred in relying on the decision of the Hon'ble ITAT, Bangalore which held that the provisions of section 194A(3)(v) are applicable to the deposits made with the assessee, the assessee .....

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s in general, it is a normal principle of interpretation of law that in the presence of a specific provision the general provision will not apply. For these and other grounds that may be raised during the course of appeal and actual hearing, the appellant prays that the order of learned CIT (Appeals) may be set aside and cancelled. For A.Y. 2012-13 1. The learned CIT (Appeals) has erred in granting relief contrary to the findings in the earlier part of the order. 2. The learned CIT (Appeals) has .....

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ed in relying on the decision of the Hon'ble ITAT, Bangalore which held that the provisions of section 194A(3)(v) are applicable to the deposits made with the assessee, the assessee being a co-operative bank. 5. The learned CIT (Appeals) erred in relying on the decision of the Hon'ble ITAT, Bangalore which had failed to appreciate the fact that the clause 194A(3)(viia) is a specific provision which has overriding effect on the general provisions of clause 194A(3)(v). 6. The learned CIT ( .....

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side and cancelled. 4.1 Though Revenue has raised several grounds (supra), the issue in question relates to the applicability of the provisions of Section 194A(3)(5) of the Act in the case on hand. We have heard both the learned Departmental Representative in support of the above grounds of appeal raised by Revenue and the learned Authorised Representative in support of the impugned orders of the learned CIT (Appeals). We find that the issues in question before us were considered by a co-ordinat .....

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tive portion of this order of the co-ordinate bench from paras 12 to 23 thereof are extracted hereunder :- 12. We have heard the rival submissions. The learned counsel for the Assessee after referring to the relevant provisions of Sec.194A(3)(i)(b), 194A(3)(v) and 194A(3)(viia) of the Act (these provisions have already been extracted in the earlier part of this order and are not being repeated), submitted that an analysis of the provisions would disclose that: a) U/s. 194A(3)(i)(b) a Co-operativ .....

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ive land mortgage bank or a co-operative land development bank need not deduct tax at source on any interest paid by it in respect of deposits received by it. d) U/s 194A(3)(viia)(b) of the Act a co-operative society other than a co-operative society or a bank referred to in Clause (a) need not deduct tax at source on interest paid on any deposit other than time deposits. 2.3 The following chart explains the position: Type of Interest / Payee Rs.10,000 or Less 1 94A(3)(i)(b) Any Amount/Any type .....

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cieties Act vide the certificate issued by the Registrar of Co-operative Societies. 13. With regard to the reliance placed by the learned Assessing Officer on the decision of the Hon ble ITAT Pune Bench in Bhagani Nivedita Sahakari Bank Ltd Vs ACIT (87) ITD 569, it was submitted by him that in that case the Hon ble Tribunal held that the provision of S. 194A(3)(v) of the Act is not applicable to a Co-operative Bank. The Hon ble Tribunal held that u/s. l94A(3)(v) were to apply to a Co-operative B .....

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s the nature of interest whether it is on time deposit or a non-time deposit When the classification is on a totally different criterion, there cannot be any conflict between the two sections. They operate in two different fields. It is respectfully submitted that the Hon ble ITAT Bench erred in holding that there is a conflict between 194A(3(v) and 194A(3)(viia)(b). It was further submitted by him that the Hon ble ITAT Pune Bench did not have the benefit of Circular No. 9/2002 dated 11.9.2002 ( .....

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cooperative bank, who shall receive interest only on deposits other than time deposits made on or after July 1, 1995 without TDS under section 194A . It was also submitted by him that the learned Assessing Officer has stated that the Circular was struck down in Jalgaon District Central Cop-operative Bank Ltd Vs Union of India (265)ITR 423. According to him the observations of the AO in this regard were not correct as the Hon ble High Court struck down only that portion of circular which dealt w .....

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Bank Ltd. Vs. JCIT order dated 28.8.2013 wherein the Tribunal followed the order of SMC Bench in the case of Bhagani Nivedita Sah Bank Ltd. Vs. ACIT 87 ITD 569 (Pune). Without prejudice to his submission that TDS provisions were applicable even in the case of payment of interest to member depositors by a co-operative society, it was submitted by him that the order of the AO/CIT(A) is not clear as to whether the interest disallowed pertains to interest paid to members or non-members and this aspe .....

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erate in different field. We may clarify here that the said argument of the learned counsel for the Assessee is a clear answer to the above argument of the learned DR. The learned DR also filed written submission before us, in which the stand of the revenue, as reflected in the orders of the lower authorities, has been reiterated. 15. We have given a very careful consideration to the rival submissions. We are of the view that the submissions made by the learned counsel for the Assessee deserves .....

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o-operative society. This provision therefore applies to all cooperative societies including co-operative society engaged in the business of banking. It is not possible to exclude co-operative society engaged in the business of banking from the provisions of Sec.194A(3)(v) of the Act on the ground that the same is covered by the provisions of Sec.194A(3)(i)(b) of the Act. Sec.194A(3)(v) of the Act refers to payment by a co-operative Socieity to a member and payment by a co-operative society to n .....

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sions. Each provision over-lap and if read in the manner as indicated above, there is perfect harmony to the various provisions. We do not agree with the view expressed by the Pune ITAT SMC in the case of Bhagani Nivedita Sahakari Bank Ltd. (supra) when it says that 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. The further co .....

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TAT Pune Bench SMC. 16. We are also of the view that the decision of the Hon ble Kerela High Court in the case of Moolamattom Electricity Board Employees Co-op 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 of the specific provisions of Sec.194A(3(viia) of the Act, they claimed that they need not deduct tax at source on interest paid. It was submitted by the .....

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o-operative societies who have credited or paid exceeding ₹ 10,000 are liable to deduct tax at source. The Court held that co-operative society engaged in carrying on business of banking and primary credit societies stand on different footing and belong to different class. That does not mean that Sec.194A(3)(v) of the Act is applicable only to Co-operative Societies other than co-operative societies carrying on the business of banking as observed in para-37 of its judgment the Pune ITAT in .....

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2002 Sub : Tax deduction at source under section 194A of the Income-tax Act, 1961 -Applicability of the provisions in respect of income paid or credited to a member of co-operative bank-Reg. 11/09/2002 TDS 194A Under section 194A of the Income-tax Act, 1961, tax is deductible at source from any payment of income by way of interest other than income by way of interest on securities. Clause (v) of sub-section (3) of section 194A exempts such income credited or paid by a co-operative society to a .....

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it made with the co-operative bank on or after 1st July, 1995. The Board has considered the matter and it is clarified that a member of a co-operative 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 o .....

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mitted to membership after registration in accordance with the bye-laws and rules. A member eligible for exemption under section 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 the General Body Meetings and/or Special General Body Meetings of the co-operative bank and must be entitled to receive share from the profits of the co-operative bank. [F. No. 275/106/2000-IT(B)] (2002) 177 CTR (St) 1 18. It ca .....

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Ltd. Vs. JCIT order dated 28.8.2013, the tribunal proceeded on the footing that the aforesaid circular has been quashed by the Hon ble Bombay High Court in the case of The Jalgaon District Central Co-operative Bank Ltd. Vs. Union of India 265 ITR 423 (Bom) and therefore chose to follow the decision rendered by Pune ITAT SMC in the case of Bhagani Nivedita Sahakari Bank Ltd. (supra). In our view the Hon ble Bombay High Court in the case of Jalgaon District Central Co-operative Bank Ltd. s case wa .....

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till holds good and the conclusion of the ITAT Pune Bench in the case of The Bailhongal Uraban Co-op Bank Ltd.(supra) are not factually correct. Consequently, the conclusions drawn in the aforesaid decision also contrary to facts and hence cannot be considered as precedent. 20. The learned counsel for the Assessee has brought to our notice that the ITAT Vishakapatnam Bench in the case of The Visakhapatnam Co-operative Bank ITA No.5 and 19 of 2011 order dated 29.8.2011 has held that co-operative .....

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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 cooperative 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-op .....

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