TMI Blog2016 (7) TMI 205X X X X Extracts X X X X X X X X Extracts X X X X ..... te issued by the Chairman of Board of Trustees, Punjab State Cooperative Bank Ltd., Pension Fund, stating that they are in receipt of an amount as interest on term deposit with the assessee bank and the same was duly accounted in its books of account and the return of income has been filed for the relevant assessment year. Similar certificate is also issued by Punjab State Cooperative Bank, Provident Fund Trust. Therefore, it is evident from the certificates that these two entities who are in receipt of interest income from the assessee had duly accounted the same in their books of account and filed their return of income for the concerned assessment year. Hon'ble Apex Court in the case of Hindustan Coca-cola Beverages (P) Ltd. (2007 (8) TMI 12 - SUPREME COURT OF INDIA) had held that the recovery of tax cannot be made from the deductor when the deductee had filed the return and paid the tax on the same. - Decided in favour of assessee TDS u/s 194A - interest paid to Housefed Punjab and KRIBHCO - Held that:- On reading the memorandum of Finance Bill, 2015, it is clear that the exemption provided under section 194A(3)v) of the Act with regard to deduction of tax at source from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rusts which are regular assessee and have filed return declaring Nil income being exempt under the provision of section10(25) and section 10(23AAA) of the Income Tax Act is bad in law and needs to be deleted in view of the Judicial Decisions in this behalf. 4. That the appellant craves leave to add, delete, alter any of the grounds of appeal before the same is heard finally. It is therefore humbly prayed that the levy of tax under section 201(1) and interest u/s 201(1A) amounting to ₹ 36,45,715/- and ₹ 9,11,428/- respectively may kindly be deleted. 4. The brief facts in relation to assessee's appeal are as follows : The assessee is a cooperative society registered under the Punjab Cooperative Societies Act, 1961. It is engaged in the business of banking. For the relevant assessment year, the assessee had paid interest on term deposits to Punjab State Cooperative Bank Pension Fund amounting to ₹ 2,23,34,880/- and to Board of Trustee, Provident Fund, amounting to ₹ 1,41,22,274/-. The assessee had not deducted tax at source when it had made payment of interest to Punjab State Cooperative Bank Pension Fund and Board of Trustee, Provident Fund. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Fund and M/s Board of Trustee Provident Fund in case they have included the payment as their income and is exempt from taxation being trust, the appellant was required to obtain certificate of non deduction/lower deduction from the Assessing Officer u/s 197 of the Act, but no such certificate was obtained. Therefore appellant as held by the Assessing Officer is liable u/s 201(1) as person-in-default for not deducting the tax at source u/s 194A(1) of the IT Act, 1961 and is also liable to pay interest u/s 201(1A) of the IT. Act, 1961. Therefore demand created by the Assessing Officer on the appellant with regard to the default in respect of payments made to M/s Punjab State Coop Bank Pension Fund and M/s Board of Trustee Provident Fund is confirmed. 6. The assessee being aggrieved, is in appeal before us. The learned counsel for the assessee submitted that the CIT (Appeals) has erred in holding that the assessee had not produced books of account of the deductee before the Assessing Officer evidencing that the deductee has included the interest received as its income in the books of account. It was submitted by the learned counsel for the assessee that the copy of certificate i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra) had held that the recovery of tax cannot be made from the deductor when the deductee had filed the return and paid the tax on the same. The Hon'ble Jurisdictional High Court in the case of CIT (TDS) Vs. Assistant Manager (Accounts) Food Corporation of India, reported in 326 ITR 106 had held on identical facts, that the TDS was not required to be deducted by the deductor, since the deductee has disclosed the income in its books of account and filed the return of income, evidencing the receipt of such income. In view of the fact that the recipient of interest has disclosed the same in its books of account and filed the return of income, we are of the view the judgment of the Hon'ble Apex Court in the case of Hindustan Coca-cola Beverages (P) Ltd. (supra) is applicable to the facts of the instant case. Therefore, we hold that the assessee is not liable to deduct tax at source, in respect of interest paid on term deposits received from Punjab State Cooperative Bank Pension Fund and Board of Trustee, Provident Fund. It is ordered accordingly. 10. Therefore, the appeal of the assessee is allowed. ITA No.279/Chd/2016 (Revenue's Appeal): 11. The grounds raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of section 194A(3)(v) are effective from 01.06.2015 . The relevant portion of the chapter on rationalization of provision relating to deduction of tax on interest (other than interest on securities) in the Finance Bill, 2015 is as under: Section 194A(1) read with section 194A(3)(i) of the Act provide for deduction of tax on interest (other than interest on securities) over a specified threshold, i.e. ₹ 10,000 for interest payment by banks, co-operative society engaged in banking business (cooperative bank) and post office and ₹ 5,000 for payment of interest by other persons. Further, sub-section (3) of section 194A inter alia also provides for exemption from deduction of tax in respect of following interest payments by co-operative society: (i) Interest payment by a co-operative society 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] (Hi) Interest payment on deposits other than time deposit by a co-operative so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit of small number of members. However, as mentioned earlier, a doubt has been created regarding the applicability of the specific provisions mandating deduction of tax from the payment of interest on time deposits by the co-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 deposits by the cooperative banks to its members. However, the existing exemption provided under section 194A(3)(viia)(a) of the Act to primary agricultural credit society or a primary credit society or a co-operative land mortgage bank or a co-operative land development bank from deduction of tax in respect of interest paid on deposit shall continue to apply. Therefore, these co-operative credit societies/banks referred to in said clause (viia)(a) would not be required to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... members by claiming that general exemption provided is also applicable for payment of interest to member depositors, provisions of the section 194A of the Act is amended 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 co-operative banks to its members. While proposing amendment in section 194A(3)(v) of the Act, legislature was aware of the fact that the matter has been carried to judicial forums and in some cases a view has been taken 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) and194A(3)(viia)(b) of the Act for co-operative ban ..... X X X X Extracts X X X X X X X X Extracts X X X X
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