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2015 (7) TMI 719

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explaining the provisions in the Finance Bill 2015 and the clarification by the Board that the Circular has not been withdrawn, makes it ample clear that the impugned provisions relating to the liability of TDS would come with effect from 01/06/2015, we, therefore, se .....

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in time. The delay is condoned for all the years. 4. The sum and substance of the grievance of the assessee for all the years under consideration is that the Ld. CIT(A) failed to appreciate the true import of sec. 194(v) and sec. 194A(viia) sub-clause (b) and erred in denying the exemption from sec. 194A in respect of payments of interest to Members. 5. The assessee is a cooperative bank engaged in the business of banking. A survey was conducted at the bank premises on 28/10/2013 to verify the .....

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. 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 submissions of the Ld. CIT(A) at para 6.3 has o .....

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not help the case of the appellant. The appellant's reliance on the said circular is found to be ill founded. Similarly, the appellant's reliance on the decisions of the High Court in the cases of Jalgaon District Co-op Bank 265 ITR 423, supra as well as in the case of the Gujarat Urban Co-operative Bank Federation do not help the case of the appellant as in both the cases the decision is same as discussed above. Ld. CIT(A) further drawing support from the decision of the Tribunal Panaji .....

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rative 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 194A(3)(viia)(b) of the Act] Therefore, as .....

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that the provisions of section 194A(3)(viia)(b) of the Act makes no distinction between members and non-members of co-operative banks for the purposes of deduction of tax, hence, the co-operative banks are required to deduct tax on payment of interest on time deposit and cannot avoid the same by taking the plea of the general exemption provided under section 194A(3)(v) of the Act. This is because the specific provision of tax deduction provided under section 194A(3)(i)(b) and 194A(3)(viia)(b) of .....

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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 deposits by the cooperative banks to its me .....

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refully perused the orders of the authorities below. We have also gone through the decisions relied upon by the rival parties and the Circulars of the CBDT brought to our notice. 11. Firstly, the Assessing Officer and the Ld. CIT(A) have heavily relied upon the decision of the Tribunal Panaji Bench in the case of Bailhongal Urban Co. Bank Ltd. (supra), wherein the Tribunal has held that circular No. 9 of 2002 dated 11/09/2002 issued by the CBDT has been quashed and set aside by the Hon ble High .....

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and privileges of a duly registered member and nominal member is outside the scope of sec.119 of the Act. The Hon ble High Court further held that the CBDT cannot issue a circular u/s. 119 of the Act which would override or retract from the provisions of Income-tax Act, 1961. Thus, the observations of the Hon ble High Court were more towards the clarification regarding member and nominal member. Considering all the facts in totality in the light of the memorandum explaining the provisions in th .....

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