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TMI Blog2015 (11) TMI 1542X X X X Extracts X X X X X X X X Extracts X X X X ..... at source on payment of interest to its members on time deposits. AO was of the opinion that once the interest payment exceeded Rs. 10,000/- per member then Section 194A(1)(vii) and (viia) of the Income-tax Act, 1961 ('the Act' in short) applied. He held that the assesses were in default for non-deduction of tax at source vide Section 201(1) of the Act and also liable for interest u/s.201(1A) of the Act. 03. Aggrieved assessee moved in appeal before the CIT (A). Assessee relied on the decision of coordinate bench in the case of The Bagalkot District Central Co-op Bank v JCIT [ITA No.152/Bang/2013, dt.30.05.2014]. CIT (A) held that assesses could not be treated as one in default u/s.201(1) and also not liable for levy of interest u/s.201(1A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credited or paid by a cooperative society to a member thereof or to any other cooperative society. This provision therefore applies to all cooperative societies including co-operative society engaged in the business of banking. It is not possible to exclude co-operative society engaged in the business of banking from the provisions of Sec.194A(3)(v) of the Act on the ground that the same is covered by the provisions of Sec.194A(3)(i)(b) of the Act. Sec.194A(3)(v) of the Act refers to payment by a co-operative Society to a member and payment by a co-operative society to non-member would continue to be governed by the provisions of Sec.194A(3)(i)(b) of the Act. Similarly u/s.194A(3)(viia)(b) interest on deposits other than time deposits even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra) supports the plea of the Assessee before us. The petitioners in that case were primary credit societies registered under the Kerala Co-operative Societies Act. In view of the specific provisions of Sec.194A(3(viia) of the Act, they claimed that they need not deduct tax at source on interest paid. It was submitted by the petitioner that subs.194A(3)(v) deals with such income credited or paid by a cooperative society to a member whereas sub-s. (3)(viia)(a) provides a total exemption to deposits with the primary credit society. The Hon'ble Kerala High Court accepted their plea and in their judgment have observed that Sec.194A (3)(i) exemption limit of Rs. 10,000 to interest paid on time deposits with cooperative societies engaged in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 194A exempts such income credited or paid by a co-operative society to a member thereof from the requirement of TDS. On the other hand, clause (viia) of sub-section (3) of section 194A exempts from the requirement of TDS such income credited or paid in respect of deposits (other than time deposits made on or after 1st July, 1995) with a co-operative society engaged in carrying on the business of banking. 2. Representations have been received in the Board seeking clarification as to whether a member of a cooperative bank may receive without TDS interest on time deposit made with the co-operative bank on or after 1st July, 1995. The Board has considered the matter and it is clarified that a member of a co-operative bank shall receive interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osits by its members need not deduct tax at source. The above interpretation of the provisions by the CBDT which is in favour of the Assessee, in our view 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. Vs. JCIT 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. Vs. Union of India 265 ITR 423 (Bom) and therefore chose to follow the decision rendered by Pune ITAT SMC in the case of Bhagani Nivedita Sahakari Bank Ltd. (supra). In our view the Hon'ble Bombay High Court in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 cooperative 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, we hold that the Assessee which is a co-operative society carrying on banking business when it pays interest income to a member both on time deposits and on deposits other than time deposits with such co-operative society need not deduct tax at source under section 194A by virtue of the exemption granted vide (v) of sub-section (3) of the said section." 07. We also find that jurisdi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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