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Deputy Commissioner of Income tax (TDS) , Circle -1 (1) , Bangalore Versus Sree Thyagaraja Co-op Bank Ltd,

2015 (11) TMI 1542 - ITAT BANGALORE

TDS u/s 194A - non deduction of tds on payment of interest to its members on time deposits by bank - assessee in default - Held that:- Jurisdictional High Court in the case of CIT v. The Rajajinagar Co-operative Bank Ltd (2011 (7) TMI 666 - KARNATAKA HIGH COURT) though it was in relation to a levy of penalty u/s.271C of the Act, had held at para 10 of its judgment that by virtue of clause (v) of sub-section (3) of Section 194A of the Act, a cooperative bank was exempt from deducting tax at sourc .....

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Kumar Agarawala, JCIT O R D E R PER BENCH : In these appeals filed by Revenue, grievance raised is that CIT (A) held the assesses to be not liable for deducting tax at source for interest paid by it to its members on their time deposits. 02. Facts apropos are that assesses are branches of a cooperative bank and had not deducted tax at source on payment of interest to its members on time deposits. AO was of the opinion that once the interest payment ex .....

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.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) of the Act. 04. Before us, Ld. DR submitted that the decision of coordinate bench in the case of The Bagalkot District Central Co-op Bank (supra) though was in favour of the assessee, Department had moved in further appeal before the Hon ble jurisdictional High Court. Further as per the ld. DR, there were decisions of Pune Bench and Panaji Ben .....

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es on similar issue, had held as under at paras 15 to 21 of its order dt.30.05.2014 : 15. We have given a very careful consideration to the rival submissions. We are of the view that the submissions made by the learned counsel for the Assessee deserves to be accepted. As rightly contended by him Sec.194A(3)(i)(b) of the Act is a provision which mandates deduction of tax at source by a cooperative Society carrying on the business of banking, where the income in the form of interest whi .....

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m 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 if the payment is made to a non-member by a cooperative society, th .....

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(supra) when it says that Co-operative society as mentioned in cl. (v) is a general species, whereas the other five categories of cooperative societies which are specifically referred to in other provisions are specific co-operative societies. The further conclusion in the said decision that the term co-operative society in cl. (v) of s. 194A(3) has to be interpreted as co-operative society other than co-operative bank, is again unsustainable. The law is well settled that by a process of interp .....

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itioners 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 Hi .....

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fferent footing and belong to different class. That not mean that Sec.194A(3)(v) of the Act is applicable only to Cooperative Societies other than co-operative societies carrying on the business of banking as observed in para-37 of its judgment the Pune ITAT in the case of Bhagani Nivedita Sah Bank Ltd. (supra). In fact in para-2 of Circular No.9 dated 11.9.2002, the CBDT has very clearly laid down that Co-operative societies carrying on banking business when it pays interest on deposits by its .....

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> TDS -194A - Under section 194A of the Income-tax Act, 1961, tax is deductible at source from any payment of income by way of interest other than income by way of interest on securities. Clause (v) of sub-section (3) of section 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 d .....

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eposits and deposits other than time deposits with such cooperative without TDS under section 194A by virtue of the exemption granted vide clause (v) of sub-section (3) of the said section. The provisions of clause (viia) of the said sub-section are applicable only in case of a non-member depositor of the cooperative bank, who shall receive interest only on deposits other than time deposits made on or after 1st July, 1995 without TDS under section 194A. 3. A question has also been raised as to w .....

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re of the co-operative bank, must be entitled to participate and vote in the General Body Meetings and/or Special General Body Meetings of the cooperative bank and must be entitled to receive share from the profits of the co-operative bank. [F. No. 275/106/2000-IT(B)] (2002) 177 CTR (St) 1 18. It can be seen from para-2 of the Circular referred to above that the CBDT has very clearly laid down that Co-operative societies carrying on banking business when it pays interest o .....

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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 the case of Jalgaon District Central Cooperative Bank Ltd. s case was dealing with a case of challenge to para-3 of CBDT Circular No.9 dated 11.9.2002 which tried to interpret the word member as given in Sec.194A(3)(v) of the Act. It is .....

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the conclusions drawn in the aforesaid decision also contrary to facts and hence cannot be considered as precedent. 20. The learned counsel for the Assessee has brought to our notice that the ITAT Vishakapatnam Bench in the case of The Visakhapatnam Co-operative Bank ITA No.5 and 19 of 2011 order dated 29.8.2011 has held that co-operative societies carrying on banking business when it pays interest to its members on deposits it need not deduct tax at source in view of the provisions o .....

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