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2016 (7) TMI 338 - ITAT HYDERABAD

2016 (7) TMI 338 - ITAT HYDERABAD - [2016] 50 ITR (Trib) 303 - TDS u/s 194A - non-deduction of tax on interest paid by the assessee - Held that:- The amount cannot be allowed as deduction only in the event when tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction has not been paid. - Section 194A is further qualified by section 197A(1A) which is a non-obstante clause. Setion 197A(1A) provides that liability to deduct tax under section 194A .....

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duct tax at source in view of section 194A r.w.s. 197 A. Once, it is held that tax is not deductible at source under section 194A on receipt of prescribed form, the mischief provided under section 40(a)(ia) is not attracted. - Decided in favour of assessee - ITA No.1581/Hyd/2014, ITA No.1582/Hyd/2014, C.O. No.64/Hyd/2014, C.O. No.65/Hyd/2014 - Dated:- 6-7-2016 - Shri D. Manmohan, Vice President And Shri Pradip Kumar Kedia, Accountant Member For the Assessee : Shri T. Chaitanyakumar For the Depar .....

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issue involved is that the CIT(A) is not justified in deleting the additions made by the Assessing Officer by invoking the provisions of S.40a(ia) of the Act, for non-deduction of tax on interest paid by the assessee in terms of S.194A of the Act. In its cross-objections, the assessee has impugned the legality of the action of the Assessing Officer in reopening the assessments under S.147 of the Act. 3. Facts of the case, common for both the years except for the amounts and dates etc. involved, .....

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under S.148 dated 20th January, 2012. The assessment was reopened to withdraw the house property loss wrongly adjusted and to recompute the business loss of the assessee. The Assessing Officer however completed the re-assessment determining the total income of the assessee at ₹ 5,25,22,858. While framing the re-assessment, the Assessing Officer inter alia made a disallowance of ₹ 6,37,64,249 being interest paid to individual members of the cooperative society and other institutions .....

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by the income-tax officers of the respective deductees. The Assessing Officer also observed that Forms 15G/15H/60 etc. were also not furnished towards non-deduction. The Assessing Officer relied upon CBDT Circular No.9 of 2002 dated 11.9.2009 and held that exemption under S.194A(3)(v) would be available only to such members who have joined in application for the registration of the cooperative society and those who are admitted to membership after registration in accordance with the bye-laws and .....

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verifying the relevant details and after certain sums were also disallowed. No new material/evidence has come to the notice of the Assessing Officer after the completion of the assessment. The entire assessment was reopened on the basis of the very same material, which is against the ratio laid down by the Apex Court in Kelvinator India Ltd(320 ITR 561). Therefore, the action of the Assessing Officer in invoking S.147 is without jurisdiction and thus vitiated in law. 4.1. On merits, the assessee .....

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Officer came to the conclusion that for the default committed by the assessee in obtaining Form 15G/15G/60, a different remedy is available to the Revenue. Accordingly, the learned CIT(A) held that provisions of S.40a(ia) cannot be invoked under the circumstances or non-deduction of TDS. The relevant operative portion of the order of the CIT(A) is reproduced hereunder- 5.3.4 I have perused the submissions made in the remand report. The appellant has filed copies of the despatch registers of its .....

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on filing of such form would not invoke disallowance under section 40(a)(ia) and that where person responsible to deduct TDS received declaration in form 15G/form 15h nonfiling or delayed filing of such form before Commissioner would not result in disallowance under section 40(a)(ia). Further, the Hon'ble ITAT, Jaipur in Shyam Sunder Kailash Chand vs. ITO (2012) (19 taxmann.com)(342(JP)(2011) 3 DJ 126 (JP), has held as under: "Where Form 15G received by the appellant from depositors was .....

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pointed out that village adresss do not contain street names or door numbers and hence they canto be called incomplete addresses. 5.3.6 Based on the decisions of the Hon'ble ITAT, Mumbai and the Hon'ble ITAT, Jaipur in the cases cited above, I am of the opinion that disallowance u/s.40(a)(ia) in the case of a cooperative bank on the grounds that Forms l5G and 15H have not been properly filled in or that have been delivered at the local Income Tax Office as against O/o.CIT(CIB), Hyderaba .....

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pex Court has held that the expression "has reason to believe" is wider than "is satisfied". The reasons must have a live link with the formation of belief. The information based on which reopening is done would also include true and correct state of law derived from relevant judicial decisions either of the IT. Authorities or Courts of Law - Whether the ground on which the original assessment is based is held to be erroneous by Supreme Court in some other sense, that will al .....

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Builders (P) Ltd. vs DCIT (ITAT, Kol) 98 ITD 78, it has been held that "Change of opinion comes to rescue of assessee only when Assessing Officer has taken one of permissible views at the time of original proceedings - A wrong application of law cannot be held as permissible view and that can always be Changed for appreciating law'. Further, in the case of crr Vs. Rinku Chakraborthy (Kar) 56 ITR 227, it has been had that " When an income liable to tax has escaped assessment in the .....

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ng us.147. Further, having issued notice u/s. 148, the assessing officer is within his rights and is in fact, duty bound to take into account any issue regarding escapement of income, which comes to light during the re-assessment proceedings. In the cases of CIT Vs., Sun Engineering Works P. Limited (SC) 198 ITR 297, V.Jaganmohan Rao & Ors. V/s. CIT (SC) 75 ITR 373, ITO Vs. Mewalal Dwarka Prasad(SC) 176 ITR 529, the Hon ble Supreme Court has held that ITO can bring to tax any income which es .....

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nue submitted that the assessee has not filed Form 15G/15H/60, etc. towards non-deduction before the appropriate authority, i.e. Commissioner of Income-tax. He relied upon the provisions of S.194A and submitted that the assessee was under legal obligation to deduct TDS on interest payments to various depositors as mandated by law. He finally relied upon the order of the Assessing Officer and submitted that the Assessing Officer was fully justified in resorting to the provisions of S.40a(ia) for .....

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plying the provisions of S.40a(ia) in the case of the assessee. He further submitted that the reliance placed on the CBDT Circular No.9 of 2002 dated 11.9.2002 by the Assessing Officer for denying exemption under S.194A(3)(v) of the Act is misplaced. He pointed out that the aforesaid CBDT circular has been read down by the Hon'ble Bombay High Court in the case of Jalgaon District Central Cooperative Bank Ltd. and Anr. V/s. Union of India & Ors. (265 ITR 423)(Bom) with regard to applicati .....

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ions filed by the assessee and submitted that the action of the Assessing Officer in invoking the provisions of S.147 is not sustainable, since such action is based on mere review of the exiting facts and records and merely owing to change of opinion thereon. For this proposition, he relied upon the decision of the Apex Court in the case of Kelvinator of India Ltd.(supra). 9. In rejoinder, the learned Departmental Representative, on the legality of reopening of the assessment by the Assessing Of .....

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banking activities. 10.1. The provisions of S.194A of the Act. 1961 deals with interest other than interest on securities. Sub-section (1) of S.194A mandates deduction of income-tax at source in respect of payments by way of interest whereas sub-section 3 of S.194A provides an exception to the applicability of the provisions of sub-section (1). S.194A(3)(v) grants exemption from TDS to such person who is credited or paid interest by the cooperative society to a member thereof or to any other coo .....

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to such members, who have joined in application for registration of the cooperative society and those who are admitted to the members for the registration in accordance with bye laws and rules. We find that the Hon'ble Bombay High Court in the case of Jalgaon District Central Cooperative Bank (supra) has quashed and set aside the Board Circular No.9 of 2002 relied upon by the Assessing Officer. The relevant portion of the head-note on page 424 of the Reports(265 ITR) as follows- The Central .....

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n application for the registration of the cooperative society and those who are admitted to the membership after registration in accordance with the bye laws and rules; that the members eligible for exemption under section 194A(3)(v)must have subscribed to and fully paid for at least one share of the cooperative bank, must be entitled to participate and vote in general body meetings or special general body meetings of the co-operative bank and must be entitled to receive share from the profits o .....

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the Bombay High Court, we hold the reliance of the Assessing Officer on the above circular of the board as misplaced. The CIT(A) has granted relief to the assessee on the ground that the prescribed forms given by the depositors have been duly furnished by the assessee before the Assessing Officer albeit wrongly instead of CIT concerned. We do not find any infirmity in the conclusion of the CIT(A) on this regard. Thus, no interference with the order of CIT(A) is called for. 11. We have also exami .....

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the following mounts shall not be deducted in computing the income chargeable under the head "profits and gains of business or profession ",- (a) In the case of any assessee - (i) ....... (ii) (ia) any interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), .....

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to deduct tax in terms of the provisions of section 194A. We note that Section 194A is further qualified by section 197A(1A) which is a non-obstante clause. Setion197A(1A) provides that liability to deduct tax under section 194A ceases when a declaration in writing in duplicate in prescribed form and verified in the prescribed manner received by a person responsible for paying income to the payee. The remedy towards default for non-furnishing of the declaration to the Commissioner of Income Tax .....

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ve occurred in terms of the phraseology provided under section 40(a)(ia) of the Act in the facts of the case. Accordingly, we hold that the CIT(A) rightly cancelled the disallowance made by the assessing officer under section 40(a)(ia) of the Act due to mere non-filing of impugned Form No.15G/15H etc. with the appropriate authority. We have also perused decision of the ITAT in the case of Karwat Steel Traders V/s. ITO (ITA no.68322/Mum/2011 order dated 10.7.2013) relied upon by the CIT(A) in thi .....

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