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2015 (8) TMI 169 - ITAT DELHI

2015 (8) TMI 169 - ITAT DELHI - TMI - TDS on interest paid on deposits by its members as per provisions of section 194A(3)(i)(b) - Appellant is a Cooperative Bank - assessee in default - Held that:- A plain reading of the provisions of Section 194A(3)(i)(b) above clearly indicates that exemption for interest paid by co-operative society engaged in banking business is exempt from deduction of tax at source up to an amount of ₹ 10,000/-. Therefore, exemption for interest is up to ₹ 10, .....

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circular (NO.9 dated 11.9.2002), to bolster his case, which cannot be countenanced because it is a trite law that CBDT circular cannot over-ride the prescription of statute passed by the parliament. And, there is no quarrel that assessee is a co-operative society engaged in banking business and the exemption for deducting tax at source for payment of interest is only up to ₹ 10,000/-. So the assessee had to deduct TDS for payment of interest above 10,000/-. In the said scenario, the ld CIT .....

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e order of the Commissioner of Income-tax (Appeals), Ghaziabad dated 27.08.2014 for the assessment years 2012-13 & 2013-14. 2. The grounds of appeal for assessment year 2012-13 read as under :- 1. That the Appellant was not liable to make TDS on the interest payments made to its members on the deposits made by them in view of provision of section 194A(3)(v) of the I.T. Act and therefore, the order passed by the Ld. ITO (TDS) u/s 201 (1) and 201 (1A) ought to have been cancelled/annulled by t .....

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A) against the Appellant is arbitrary, unjust and illegal: a) Rs.36,44,493 on account of alleged short deduction u/s 201 b) Rs.12,57,347 on account of interest on alleged short deduction u/s 201 (1A) Total Rs.49,01,840 Various observations made by the authorities below in their respective orders are either incorrect or are untenable. Written submissions and the case laws relied upon by the Appellant had been completely ignored by not taking them into consideration while deciding the issue. 4. Th .....

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1) and 201 (1A) ought to have been cancelled/annulled by the Ld. CIT(A). 2. That the ld. ITO (TDS) had erred in law as well as on the facts of the case by holding that the Appellant (a Cooperative Bank) was liable to make TDS on interest paid on deposits by its members as per provisions of section 194A(3)(i)(b) of the LT. Act which in fact did not apply to the facts of Appellant's case. The Id. CIT(A) is wrong in confirming the order passed by the Ld. ITO (TDS). 3. That the following demand .....

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taking them into consideration while deciding the issue. 4. That without prejudice to Ground No. 1 to 3 above, the demand as created by the AO is very excessive. 5. That the Appellant reserves its right to add, amend/modify the grounds of appeal. 4. Since common issues are involved the both the appeals are decided together. 5. The sole ground before us is whether the assessee should have deducted TDS on the interest disbursed to its members. 6. The appellant/assessee is a Co-operative Bank regis .....

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x Act, 1961 (hereinafter the Act ). The assessee contended that for the last 18 years, the assessee is doing banking business and as per clear provision of section 194A(3)(v) of the Act, it was not required to deduct the tax at source on interest payment to its members and accordingly had not been deducting the tax at source on interest payment to its members. On 24.02.2014, the ITO (TDS) has passed the order under section 201 of the Act holding that assessee was required to deduct the tax at so .....

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ecision of ld. CIT (A), the assessee is before us. 8. The ld. AR, Shri O.P. Sapra took our attention to the relevant provisions of section 194A of the Act with regard to co-operative societies which are reproduced below:- "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 su .....

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dment in section 94A(3)(v) by inserting clause 42 as follows:- Clause 42. In section 194A of the Income-tax Act, in sub-section (3), with effect from 1st day of June, 2015,- (b) in clause (v), for the words "paid by a co-operative society to a member thereof or", the words and brackets "paid by a co-operative society (other than a co-operative bank) to a member thereof or to such income credited or paid by a co-operative society" shall be substituted; So, according to the ld. .....

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without TDS interest on time deposit made with the cooperative bank on or after 1-7-1995. 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 subsection (3) of the said section. The provisions of clause (viia) of the said sub-section are applicable only in case o .....

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on the ITAT Panaji (Goa) Bench decision in ITA No. 85/PNJ/2013 dated 28/08/2013 the case of Bailhongal Urban Cooperative Bank Ltd. V. JCIT which distinguished the cooperative bank and cooperative society and also held that Cooperative Bank was liable to deduct the tax at source on interest payments made on deposits by members. According to the ld. AR, the above decision of Panaji ITAT being not of jurisdictional ITAT was not binding on the authorities below. He submitted that in Assessee's c .....

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uirement of complying with the provisions of TDS prescribed under sub-section (1) of that section. Section 194A(3)(v) provides blanket exemption to the interest paid by any co-operative society to its members. Neither section 2(19) nor section 194A(3) makes any discrimination between the cooperative societies carrying on banking business and other cooperative societies. However, as per section 194A(3), the said exemption is available only to the interest payments made to its members or to any ot .....

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Trib.) (copy at pages 69-72 of paper book), it has been held "In this background, the CIT(A) has concluded that assessee had credited the impugned interest to the credit of the members, and no tax was required to be deducted in view of Section 194A(3)(v) of the Act. The aforesaid finding of the CIT(A) has not been controverted by the Revenue before us on the basis of any cogent material or reasoning. In the absence of any cogent material brought out by the Revenue, we hereby affirm the afor .....

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ore Bench of ITAT has held that, in the light of the above fact and analysis of the provisions, one can conclude that the intention of the Act was to confer some benefit to the members of a Co-operative society, including a cooperative society engaged in banking business that is a cooperative bank. Therefore, the appellant is entitled to exemption specified in section 194A(3)(v). (iv) In a recent case of Bagalkot District Central Co-op. Bank v. Joint Commissioner of Income-tax, Bijapur Range, Bi .....

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ew is binding on the tax authorities. 19. In the case decided by ITAT Panaji Bench in ITA No.85/PN/2013 for AY 09-10 in the case of the Bailhongal Urban Co-op Bank Ltd. (supra) 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. (supra) and therefore chose to follow the decision rendered by Pune ITAT SMC in the case of Bhagani Nivedita Saha .....

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before the Hon'ble Bombay High Court. How could it be said that the entire circular has been quashed by the Hon'ble Bombay High Court? In our view para-2 of the Circular still holds good and the conclusion of the ITA T Pune Bench in the case of the Bailhongal Urban 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 .....

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[2014] 62 SOT 14/41 taxmann.com 110. We may add that in both these decisions the discussion did not turn on the interpretation of Sec.194A(3)(i)(b) of the Act vis-a-vis Sec.194A(3)(v) of the Act. It is 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, .....

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Cooperative Bank Ltd. v. JCIT and dealt with the CBDT Circular No. 9/2002 (supra). It is also clear that CBDT Circular no. 9/2002( supra) contains three Paras. In second Para CBDT has categorically clarified as follows:- " 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 v .....

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hat the above amendment is prospective and not made retrospective. The ld. AR contended that as mentioned in para 1 at page 1 of the Synopsis, since last 18 years, assessee is doing banking business and it had not been making any TDS on the interest paid/payable to its members keeping in view section 194A(3)(v) of the I.T. Act. According to him, never in the past, the Revenue had declared the Appellant Bank in default for short/non deduction of tax u/s 201 of the Act. Therefore, Rules of consist .....

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dated 14.11.2014 for assessment year 2012-13 wherein the order was passed by the author of this order relying on the decision of Vizag Bench of ITAT in the case of Vishakapatnam Co-operative Bank vs. DIT in ITA No.5/2011 & 19/2011 and held that the assessee cooperative bank was not obliged to deduct TDS on the interest paid to its members. Ld.AR concluded that thus viewed from whatever angle, the appeal deserves to be allowed because the issue is fully covered by various judgments and the C .....

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ciety failed to deduct tax at source. So, therefore, the ld. CIT(A) is right in confirming the order of the ITO (TDS) and we need not interfere in the impugned order. 10. We have heard both the parties, perused the records and gone through the case laws cited before us. We find that the assessee is a Co- Operative Society engaged in banking business. Section 194A(3) of the Act prescribes the monetary limits and also list of payment which are exempt from the requirement of complying the provision .....

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edit society . Primary credit society Co- Operative Land Mortgage Bank or a co-operative Land Development bank to members or non-members without any monetary limit. Section 194A (3) (viia) (b) : Exemption of interest paid by persons namely, Co-Operative society engaged in banking business irrespective of membership of amount only to non-time deposits. A plain reading of the provisions of Section 194A(3)(i)(b) above clearly indicates that exemption for interest paid by co-operative society engage .....

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of the assessee society engaged in banking, not to deduct Tax at source is valid, is according to us not correct. And it may be noted that section 194A(3)(v) is a general provision which encompasses with it co-operative society as a whole, which may be termed as genus, whereas, the assessee co-operative society is into banking can be termed as a species of the said genus; And, section 194A(3)(i)(b) is a special provision for co-operative society engaged in banking business. The maxim generalia .....

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g the said maxim to the instant case, we find that argument of the ld AR that section 194A(3)(v) absolves assessee from deducting TDS, cannot be accepted. Further, the order of the Tribunal in the case of Kashipur Urban Cooperative Bank Ltd vs. ITO, Kashipur (ITA No.5329/D/2013 for Assessment Year 2012-13) was cited before us, wherein one of us is the author of this order, and said co-operative bank s contention that it need not deduct tax at source was upheld, to our considered opinion, in the .....

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te or a rule having the force of statute, i.e., in ignorance of a statute or a rule having the force of statute, i.e., delegated legislation. This rule was laid down for the House of Lords by Lord Halsbury in the leading case (London Street Tramways V. L.C.C. (1898) A.C. 375) and for the Court of Appeal it was given as the leading example of a decision per incuriam which would not be binding on the court [Young Vs. Bristol Aeroplance Co. Ltd. (194) K.B. at 729 (C.A.)]. The rule apparently applie .....

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analyses the concept of per incuriam as under: Incuria means literally carelessness , which apparently is considered less uncomplimentary than ignorantia; but in practice per incuriam appears to mean per ignorantiam. It would almost seem that ignorantia juris neminem excusat-except a court of law, ignorance of what? The example given in the actual rules in Young s case [Young Vs. Bristol Aeroplane Co. Ltd. (194) K.B. at 729 (C.A.)] is ignorance of a statute, or of a rule having statutory effect .....

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