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2016 (2) TMI 736 - ITAT CHENNAI

2016 (2) TMI 736 - ITAT CHENNAI - TMI - TDS liability on cooperative society - Whether a co-operative society, carrying on banking business with the approval of the Reserve Bank of India, is liable to deduct tax U/s.194A on the interest paid to its members? - Held that:- For the relevant assessment years 2008-09 to 2011-12 the assessee would not be liable to deduct tax U/s. 194 of the Act as the none of the State or Central enactments such as the Tamil Nadu Co-operative societies Act, 1983, the .....

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-2016 - SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER For The Appellant : Mr.R.Vijayaraghavan,Advocate For The Respondent : Mr.P.Radhakrishnan,JCIT, D.R ORDER PER A.MOHAN ALANKAMONY , ACCOUNTANT MEMBER: These four appeals are filed by the Assessee, aggrieved by the common order of the Learned Commissioner of Income Tax(A)- 13, Chennai dated 21.09.2015 in ITA No.213,214, 215 & 216/CIT(A)-13/14-15 passed under Sec.143(3) read with section 147 & Sec. 250 .....

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T(A) ought to have appreciated that the Appellant activities are with its members and hence the income of the society dividend from the Members are exempted from income tax liability on account of mutuality. 3.1 The brief facts of the case are that the assessee is a Credit Cooperative Society, deriving income from carrying on the business of providing credit facilities to its members and income from House property, selling of plots and dividend income. Since the assessee had not filed its return .....

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ssessing Officer with the following observations:- Thus perusal of the provisions of this statute and object of the cooperative society it is now a question whether Katpadi Cooperative Township Limited is a cooperative bank or not for the purpose of application of section 80P. If the objects of the Katpadi Cooperative Township Limited are seen along with the banking regulation act and the provision of the statute than the Katpadi Cooperative Township Limited falls in the category of (ccvi) prima .....

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)(c)(ii) and (2)(d) is not eligible to the assessee. Accordingly I dismiss the appeal for assessment year 2008-09 and similar issue are involved for AY 2009- 10, AY 2010-11 & ASSESSMENT YEAR 2011-12, therefore on the same ground held above, the assessee is a cooperative bank carrying on the business of banking under the Cooperative Society Act. Therefore deduction u/s. 80P(2)(a) (i), (2)(c)(ii) and (2)(d) are not eligible for the AY 2009- 10,AY 2010-11 & AY2 011-12. Accordingly assessee .....

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ard both the parties and carefully perused the decision cited by the Ld.A.R and the materials available on record. As pointed out by the Ld. A.R., the issue is covered by the decision of the Hon ble jurisdictional High Court cited supra. While deciding the appeal, the Hon ble Jurisdictional High Court had framed the following two substantial question of law (i) Whether a co-operative society, carrying on banking business with the approval of the Reserve Bank of India, is liable to deduct tax U/s .....

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perative society engaged in carrying on banking business and a co-operative bank and if so, under which category the appellant would fall. The answer is too obvious in view of the foregoing discussion. Except the provisions of sub-clause (b) of clause (i), subclause (a) of clause (iii) and sub-clauses (a) and (b) of clause (viia) of subsection (3) of section 194A, we do not find anywhere a dichotomy created between a co-operative bank and a co-operative society engaged in carrying on banking bus .....

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st question framed by the Hon ble Madras High Court, it was held as follows:- 60. That leaves us with one last issue, namely, as to whether the conflict of opinion between the Tribunals and High Courts was confined only to quasijudicial and judicial bodies or as to whether there was confusion even in the minds of the legislature. The answer to this question can be found in the manner in which an amendment has been brought forth with effect from 1.6.2015 and the memorandum explaining the clauses. .....

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ety or the public company, as the case may be, where such banking company or the co-operative society or the public company has adopted core banking solutions. (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; (c) after clause (v), the following Explanation shall be inse .....

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ount of such income or, as the case may be, the aggregate of the amounts of such income paid during the financial year does not exceed fifty thousand rupees; (e) in Explanation 1 below clause (xi), for the word excluding , the word including shall be substituted. 62. The relevant portion of the memorandum explaining the clauses in the Finance Bill reads as follows: Section 194A(1) read with section 194A(3)(i) of the Act provide for deduction of tax on interest (other than interest on securities) .....

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ection 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 per the provision .....

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their depositors as members of different categories. This has led to dispute as to whether the co-operative banks, for which the specific provisions of tax deduction exist in the form of section 194A(1), section 194A(3)(i)(b) and section 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 and in some cases a view has been taken that the .....

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t for cooperative 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 cooperative banks a taxation regime which is similar to that for the other commercial banks. Therefore, there is no rat .....

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eral 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 1 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 members. 63. It can b .....

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h the provisions stood and the manner in which they were understood, the same could be taken only to have prospective effect. It must be pointed out that the Parliament did not choose to answer a question. Rather it chose to amend the provisions. It is now well settled that an amendment can only be prospective unless it is made retrospective by express language or necessary implication. Apart from the fact that the express language of Section 194A after amendment does not indicate any retrospect .....

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