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Asst. Commissioner of Income-tax, Circle – 14 (1) , Hyderabad Versus M/s APSRTC Employees Thrift & Credit Society Ltd.

2015 (9) TMI 437 - ITAT HYDERABAD

Compliance to TDS provisions - whether interest payment to associate/nominal members are not covered under the said provision of exemption u/s 194A(3)(v) - difference in rights and privileges between regular members on one side and associate/nominal members on the other found by AO and observed that ‘member’ as envisaged u/s 194A(3)(v) only refers to a regular member and not all the members of the society - Held that:- On perusal of the provisions contained u/s 194A(3)(v), it is very much clear .....

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egistered member and nominal member. The aforesaid decision of the Hon’ble Bombay High Court has been affirmed by the Hon’ble Supreme Court while dismissing SLP preferred by the department. In view of the the principle laid down in the judicial precedents, as noted above, to the effect that no distinction can be made between different categories of members while applying the provisions of section 194A(3)(v) of the Act, in our view decision of ld. CIT(A) cannot be interfered with.

It .....

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he issue in dispute is clearly the subject matter of appeal before ld. CIT(A) and a decision has already been rendered by ld. CIT(A) much prior to the exercise of power u/s 263 of the Act, in our view, assessment order has merged with the order of ld. CIT(A), hence, could not have been revised by invoking the provisions of section 263. Therefore, the exercise of power u/s 263 is invalid - Decided in favour of assessee. - ITA Nos. 1689 /Hyd/2013 - Dated:- 12-8-2015 - SHRI P.M. JAGTAP AND SHRI SAK .....

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In course of survey, it was found that the society was paying interest on deposits kept with it to different categories of members such as regular members, associate members and nominal members. However, while making such interest payments, assessee society has not deducted tax at source. When assessee was called upon to explain the reason for not deducting tax on interest payments, it was submitted by assessee on the principle of mutuality, TDS provisions on interest payments to members would .....

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aws of the society, AO also found difference in rights and privileges between regular members on one side and associate/nominal members on the other. He, therefore, opined that exemption as contemplated u/s 194A(3)(v) would apply only to a regular member and not associate/nominal members. Though, assessee objected to such proposition of the AO and contended that as the provision contained u/s 194A(3)(v) only speaks of member without any differentiation, AO cannot make a difference between regula .....

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ned, AO held that though it may be a fact that the said Circular has been quashed by the Hon ble Bombay High Court, but, since the Board has not withdrawn or repealed the said Circular, it is binding on both assessee and revenue. Holding as aforesaid, AO proceeded to compute demand u/s 201(1) and 201(1A), as under: Member FY 2010-11 Interest paid Tax u/s 201(1) Interest u/s 201(1A) Associate Member 14,89,26,397 1,48,92,640 35,74,233 Nominal Member 14,80,706 1,48,070 35,536 Total 15,04,07,103 1,5 .....

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i High Court had clearly stated that the rights and privileges of members have got nothing to do with the exemption granted to members u/s 194A(3)(v) of the Act. Thereafter, the Hon ble Court has quashed the Circular No. 9 of 2002 dated 11/09/2002. Since the SLP filed by the Department has not been admitted and the Hon ble Supreme Court has disposed the SLP (12601-12602 of 2004) on 07/07/2004, the order of the Mumbai High Court in the case of Jalgaon District Cooperative Bank Ltd. Vs. Union of I .....

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empt. He, therefore, submitted, assessee was liable to deduct tax as far as interest payment to associate/nominal members are concerned. 6. Ld. AR, on the other hand, strongly supporting the view expressed by ld. CIT(A) submitted a reading of section 194A(3)(v) would make it clear that no differentiation has been made as far as categories of members are concerned. Therefore, AO was not justified in holding that exemption provided u/s 194A(3)(v) does not apply to associate/nominal members. Ld. AR .....

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ent. Ld. AR further submitted, when ld. CIT in exercise of power u/s 263, revised the assessment order passed by AO by holding that TDS provisions will apply even to the regular members, the Tribunal while deciding appeal preferred by assessee in ITA No. 1070/Hyd/2014 dated 29/04/2015 has quashed the order passed by ld. CIT u/s 263 of the Act. Thus, it was submitted by ld. AR, the issue relating to requirement of assessee in deducting tax on interest payment to different categories of members st .....

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viz., regular members, associate members and nominal members. As could be seen, AO while allowing assessee s claim of exemption u/s 194A(3)(v) in respect of interest payment to regular members, he held that interest payment to associate/nominal members are not covered under the said provision. However, on perusal of the provisions contained u/s 194A(3)(v), it is very much clear that there is no distinction made under the said provision between different categories of members. The language used u .....

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ismissing SLP preferred by the department. In view of the the principle laid down in the judicial precedents, as noted above, to the effect that no distinction can be made between different categories of members while applying the provisions of section 194A(3)(v) of the Act, in our view decision of ld. CIT(A) cannot be interfered with. It may be worthwhile to note here that the impugned assessment order was also subject matter of revision proceeding u/s 263 of the Act. Ld. CIT while revising the .....

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cooperative society u/s 194A(3)(v) cannot be taken away by creating a distinction between different categories of members. It is further evident, SLP filed by the department against the aforesaid judgment of the Hon ble Bombay High Court was also dismissed by the Hon ble Supreme Court. Thus, as per the decision of the Hon ble Bombay High Court as aforesaid, which was also followed by ld. CIT(A), no differentiation can be made between the members of a cooperative society while applying the exemp .....

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