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2016 (7) TMI 205 - ITAT CHANDIGARH

2016 (7) TMI 205 - ITAT CHANDIGARH - TMI - Taxability of trust - liability to deduct TDS u/s 194A - receipt of interest income - whether the assessee's income was exempt under sections 10(25) and 10(23AAA)? - Held that:- The Punjab State Cooperative Bank Pension Fund and Board of Trustee Provident Fund are approved trusts created by assessee for the purpose of pension fund and Provident Fund respectively. Assessee has also enclosed copies of returns filed for assessment year 2012-13 in the case .....

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iable to quashed in the facts and circumstances of the case. - Assessee had furnished a certificate 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, Provi .....

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id 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 interest payment by a cooperative society to another cooperative society existed before the amendment, and continue to apply to the cooperative bank even after the amendment. It was made furthe .....

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under section 194A of the Act and consequently, interest under section 201(1) of the Act cannot also be levied. - Decided in favour of assessee - ITA No. 97 /Chd/2016, ITA No. 279 /Chd/2016 - Dated:- 1-7-2016 - Shri George George K. Judicial Member And Ms. Annapurna Gupta, Accountant Member For the Assessee : Shri M. R. Sharma For the Department : Shri S.K. Mittal, DR ORDER Per George George K., J. M. These cross appeals are directed against the order of the Commissioner of Income Tax (Appeals)- .....

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the Income Tax Officer (TDS-II), Chandigarh as upheld by the Commissioner of Income Tax (Appeals)-2, Chandigarh upholding the levy of interest u/s 201(1A) at ₹ 9,11,428/- in respect of trusts which are regular assessee and have filed return declaring Nil income being exempt under the provision of section 10(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. 3. That the order of the Income Tax Officer (TDS- .....

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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 .....

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at source and also making it liable for consequent interest. 5. Aggrieved by the orders passed under sections 201(1) and 201(1A) of the Act, the assessee preferred appeal before the First Appellate Authority. Before the CIT (Appeals), it was contended that the Punjab State Cooperative Bank Pension Fund and Board of Trustee Provident Fund are approved under section 10(23AAA) and under section 67 of the Act and its income was exempt under section 10 of the Act. It was contended that the interest .....

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deductor. The CIT (Appeals), however, rejected the contention raised by the assessee and confirmed the order passed by the ITO (TDS-II) under sections 201(1) and 201 (1A) of the Act. The relevant findings of the CIT (Appeals) read as follows : "5.3(d) M/s Punjab State Coop Bank Pension Fund and M/s Board of Trustee Provident Fund are the trust and the appellant relied on the apex court decision in the case of Hindustan Coco cola Beverages Pvt Ltd. Vs. Commissioner of Income Tax, 293 ITR st .....

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ing officer evidencing that the deductee has included this payment as its income in the books of accounts and no evidence/ledger also produced before the undersigned during appellate proceeding. The trusts i.e. M/s Punjab State Coop Bank Pension 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 .....

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med." 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 issued by the payee trust showing that the amount of in .....

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val submissions and perused the material available on record. The Punjab State Cooperative Bank Pension Fund and Board of Trustee Provident Fund are approved trusts created by assessee for the purpose of pension fund and Provident Fund respectively. A copy of the approval of the same is enclosed at pages 1 and 7 of the Paper Book filed by the assessee. Further, the assessee has also enclosed copies of returns filed for assessment year 2012-13 in the case of Punjab State Cooperative Bank Pension .....

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tances of the case. 9. Further, assessee had furnished a certificate issued by the Chairman of Board of Trustees, Punjab State Cooperative Bank Ltd., Pension Fund, stating that they are in receipt of an amount of ₹ 2,23,34,880/- 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 .....

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isdictional 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 o .....

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al): 11. The grounds raised in Revenue's appeal read as follows : "The Ld. CIT(A) erred in law and facts by considering the appellant is cooperative society and not liable to deduct TDS in accordance to section 194A(3)(v) of the I.T. Act, 1961. 1. The Ld. CIT(A) erred in law and facts by ignoring the fact that though appellant is Co- operative Society but engaged in the business of banking and therefore not exempt u/s 194A (3) (v) and thus the Ld. CIT(A)- 2,Chandigarh nab erred in delet .....

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-. Since the assessee had not deducted the tax at source on these interest payments, the ITO (TDS) treated the assessee, as 'an assessee in default' and passed the order under section 201(1) of the Act. The ITO(TDS) also levied interest under section 201(1A) of the Act. 13. Being aggrieved, the assessee preferred appeal before the CIT (Appeals). The CIT (Appeals) for his elaborate reasoning mentioned in paras 5.3 to 5.3(c) decided the issue in favour of the assessee. 14. The Revenue bein .....

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e rival submissions and perused the material available on record. The CIT (Appeals) had considered the amended provision of section 194A(3)(v) of the Act (w.e.f. 1.6.2015). The CIT (Appeals) has also considered various orders of the Tribunal on this aspect and has given a very elaborate findings, which read as follows: '5.3 The submission of the appellant have been considered. The amended provisions of section 194A(3)(v) are effective from 01.06.2015 . The relevant portion of the chapter on .....

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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. [S .....

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s specified threshold of ₹ 10,000/-. However, as the provisions of section 194A(3)(v) of the Act provide a general exemption from making tax deduction from payment of interest by all co-operative societies to its members, the co-operative banks tried to avail this exemption by making 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), sect .....

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o 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 the Act for co- operative 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 dif .....

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ormed for the 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 .....

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opment 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 deduct tax on interest payment to depositors even after the proposed amendment Further, the existing exemption provided under section 194A(3)(v) of the Act from deduction of tax from interest paid by a cooperative society to another co-operative society shall continue to apply to the co .....

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cision in the case of Bhagani Nivedita Sahakari Bank Ltd has been considered. It is discussed in the case of Raddi Sahakara Bank (supra) that Hon'ble ITAT Bangalore Bench in the case of Bagalkot District Central Cooperative Bank has dealt with identical issue wherein the Hon'ble Tribunal did not agree with the view expressed by the Hon'ble Pune ITAT (SMC Bench) in the case of Bhagani Nivedita Sahakari Bank Ltd. It was held by the Hon'ble ITAT, Bangalore Bench in the case of Bagal .....

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ase of M/s Raddi Sahakara Bank as "In our view, the above decision rendered by the co- ordinate bench is squarely applicable to the facts of the present case. Respectfully following the decision of the co-ordinate bench referred to above, we set aside the orders of the lower authorities and hold that to the extent interest is paid to members of the society there is no obligation to deduct tax at source." 5.3(b) There were conflicting decisions of various Tribunals on applicability of t .....

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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 bank .....

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made clear in the chapter on "Rationalisation of provisions relating to deduction of tax on interest (other than interest on securities) in the Finance Bill, 2015 that the "the existing exemption provided under section 194A(3)(v) of the Act from deduction of tax from interest paid by a cooperative society to another co-operative society shall continue to apply to the co-operative bank and, therefore a co-operative bank shall not be required to deduct tax from the payment of interest o .....

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