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2015 (7) TMI 719 - ITAT PANAJI

2015 (7) TMI 719 - ITAT PANAJI - TMI - Denial of exemption from sec. 194A in respect of payments of interest to Members - assessee is a cooperative bank engaged in the business of banking - Held that:- Considering all the facts in totality in the light of the memorandum explaining the provisions in the Finance Bill 2015 and the clarification by the Board that the Circular has not been withdrawn, makes it ample clear that the impugned provisions relating to the liability of TDS would come with ef .....

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te orders of Ld. CIT (A), Belgaum, each dated 04/06/2014 pertaining to A.Ys. 2010-11 to 2013-14. All these appeals have a common grievance and, therefore, they were heard together and disposed of by this common order for the sake of convenience and brevity. 2. All these appeal are late by 25 days. The assessee has filed an affidavit stating cause for the delay. 3. We have carefully perused the contents of the affidavit. In our considered opinion, the assessee was prevented by reasonable and suff .....

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k premises on 28/10/2013 to verify the compliance with TDS provisions. A show-cause notice was issued to the assessee calling for details of interest paid on deposits and tax deducted at source therein. The details were filed. After perusing the details, the Assessing Officer found that the defaults have been made by the assessee for not deducting tax at source on payment of interest on term deposit in excess of ₹ 10,000/- as per the provisions of sec. 194A(3)(i)(b) read with sec. 194A(3)( .....

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ee u/s. 201(1) & 201(1A) of the Act. 6. Aggrieved by this, assessee carried the matter before the Ld.CIT(A) and reiterated its claim that the Assessing Officer has relied upon wrong decisions referring to its own orders for the A.Y. 2002-03. It was pointed out to the Ld. CIT(A) that the then Ld. CIT(A) has allowed the assessee s appeal based on the decision of Jalgaon District Central Co-op Bank Ltd. & another Vs. Union of India (265 ITR 423). After considering the facts and the submissi .....

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pret the provisions of law by way of circular. The issue at hand of the Bombay High Court was the definition of the word 'member' 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. Therefore, the circular No.9 of 2002 da .....

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rom the decision of the Tribunal Panaji Bench in the case of Bailhongal Urban Co. Bank (supra), confirmed the order of the Assessing Officer made u/s. 201(1) & 201(1)(A) of the Act. 7. Aggrieved by this, the assessee is before us. 8. At the very outset, counsel for the assessee drew our attention to the memorandum explaining the provisions in the Finance Bill 2015. The relevant portion of which reads as under:- Section 194A(1) read with section 194A(3)(i) of the Act provide for deduction of .....

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to a member thereof or any other co-operative society. (Section 194A(3)(v) of the Act] (ii) Interest payments on deposits by a primary agricultural credit society or primary credit society or co-operative land mortgage bank or co-operative land development bank. [Section 194A(3)(viia)(a) of the Act] (iii) Interest payment on deposits other than time deposit by a co-operative society engaged in the business of banking other than those mentioned in section 194A(3)(viia)(a) of the Act. [Section 194 .....

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erative banks tried to avail this exemption by. making their depositors as members of different categories. This has led to dispute as to whether the co-operative banks, for which the specific pro-visions of tax deduction exist in the form of section 194A(1), section(c)4A(3)(i)(b) and 194A(3)(viia)(b) of The Act can take the benefit of general exemption provided to all co-operative societies from deduction of tax on payment of interest to members. The matter has been carried to judicial forums a .....

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n 194A(3)(i)(b) and 194A(3)(viia)(b) of the Act for co-operative banks override the general exemption provided to all co-operative societies for non-deduction of tax from interest payment to members under section 194A(3)(v) of the Act. As there is no difference in the functioning of the co-operative banks and other commercial banks, the Finance Act, 2006 and Finance Act, 2007, amended the provisions of the Act to provide for co-operative banks a taxation regime which is similar to that for the o .....

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operative banks to its members by 'claiming that general exemption provided is also applicable for payment of interest to member depositors. In view of this, it is proposed to amend the provisions of the section 194A of the Act to expressly provide from the prospective date of 1st June, 2015 that the exemption provided from deduction of tax from payment of interest to members by a co-operative society under section 194A(3)(v) of the Act shall not apply to the payment of interest on time depo .....

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s Members, but tax deducted at source is to be deducted from the interest paid to the non-members. 9. Per contra, learned DR strongly supported the order of the Assessing Officer. It is the say of the DR that the amendment is only of clarificatory in nature. Learned DR further pointed out that the Circular 9 of 2002 has been withdrawn by the CBDT as it has been struck down by the Bombay High Court in the case of Jalgaon District Central Co. Bank (supra). 10. Having given a thoughtful considerati .....

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shed and set aside by the Hon ble High Court of Bombay in the case of Jalgaon District Co. Bank (supra). Therefore, assessee s reliance on the said case and the circular is found to be ill-founded. The Tribunal decided the appeal in favour of the Revenue and against the assessee. With due respect to the said decision of the Tribunal, we have to say the observations made by the Tribunal are ill-founded because subsequent to the decision of the Hon ble Bombay High Court in the case of Jalgaon Dist .....

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