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2016 (8) TMI 956 - KARNATAKA HIGH COURT

2016 (8) TMI 956 - KARNATAKA HIGH COURT - TMI - TDS liability on Co-operative Bank to deduct tax on the interest paid to its members - Held that:- Circular No.9 dated: 11.09.2002, the CBDT has very clearly laid down that co-operative societies carrying on banking business when it pays interest on deposits by its members need not deduct tax at source in view of the provisions of Sec.194A(3)(v) of the Act. Tribunal was correct in holding that Co-operative Bank are not liable to deduct tax on the i .....

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by the Hon.Mumbai High Court in the case of Jalgaon District Central Co-operative Bank Ltd.? (ii) Whether the Tribunal was correct in holding that Co-operative Bank are not liable to deduct tax on the interest paid to its members on the ground that they are exempt u/s 194A(3)(v) of the IT Act, 1961? (iii) Whether the Tribunal is right in law in overlooking the established principle of generalia specialibus non derogant vis-à- vis the specific provisions of Sec.194A(3)(viia)(b) and genera .....

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llant-Revenue. 3. After hearing the learned counsel appearing for the appellant-Revenue, we find that, the issues which arise for consideration in the present appeal are already covered by the decision of this Court dated 21.6.2016 in ITA No.604/2015 and other matters in case of The Commissioner of Income Tax and others Vs. The National Co-operative Bank Limited. In the above referred decision, this Court observed thus: In all matters, the appellant-Revenue has preferred the appeals by raising f .....

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e established principle of generalia specialibus non derogant vis-à-vis the specific provisions of Sec.194A(3)(viia)(b) and general provisions of 194A(3)(v) of the Act? 4. Whether the Tribunal was correct in not appreciating the fact that the provision of Section 194A(3)(v) is a general provision granting benefit to all co-operative societies, whereas, the provisions of Section 194A(3)(i)(b) deals with co-operative society carrying on the business of banking, hence specific provisions in .....

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(2014) 48 taxmann.com 117(Bangalore-Trib) held that Co-Operative Societies carrying on banking business while paying interest to members on time deposit and deposits other than time deposits need not deduct tax at source U/s 194-A of the Act by virtue of exemption granted U/s 194-A(3)(v) of the Act. The learned DR relied on the stand taken by the revenue in the grounds of appeal filed before the Tribunal. 13. We have considered the rival submissions. This tribunal in the case of Bagalkot Distri .....

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tended by him Sec.194A(3)(i)(b) of the Act is a provision which mandates deduction of tax at source by a co-operative Society carrying on the business of banking, where the income in the form of interest which is paid by such society is in excess of ten thousand rupees. Sec.194A(3)(v) of the Act provides that tax need not be deducted at source where the income in the form of interest is credited or paid by a co-operative society to a member thereof or to any other co-operative society. This prov .....

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overned 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 co-operative society, the co-operative society need not deduct tax at source. Thus this section carves out another exception to Sec.194A(3)(i)(b) of the Act. We do not think that any of the above provisions can be called a general provision an other provision called specific provisions. Each provision over-lap and .....

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e 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 interpretation one cannot add on words that are not found in the text of the statute. Such a course is permitted only when there is causes omisus . We do not think that the provisions of Sec.194A(3)(v) suffers from any causes omisus as has been interpreted by the ITAT Pune Bench SMC. 16. We are also of .....

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ith such income credited or paid by a co- operative 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 there plea and in their judgment have observed that Sec.194A(3)(i) exemption limit of ₹ 10,000/- to interest paid on time deposits with co-operative societies engaged in carrying on in business of banking is allowed but that does not mean that all co-operative societies who have credi .....

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Bank Ltd(supra). In fact in para 2 of Circular No.9 dated: 11.09.2002, the CBDT has very clearly laid down that co-operative societies carrying on banking business when it pays interest on deposits by its members need not deduct tax at source in view of the provisions of Sec.194A(3)(v) of the Act. 17. We also find that the CBDT in Circular No.9 dated 11.09.2002 clarified certain aspects which are relevant to the present case. The same reads thus: Circular No.9 of 2002 Sub: Tax deduction at sourc .....

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nt 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 co-operative bank may receive without TDS interest on time deposit made with the co-operative bank .....

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ceive 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 whether normal members, associate members and sympathizer members are also covered by the exemptions Under Section 194A(3)(v). It is hereby clarified that the exemption is available only to such members who have joined in application for the registration of the co-operative society and those who are admitted to membership after registra .....

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refered to above that the CBDT has very clearly laid down that co-operative societies carrying on banking business when it pays interest on deposits by its members need not deduct tax at source. The above interpretation of the provision 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 Uraban Co-op Bank Ltd Vs. JCIT order dated 28.08.2013, the .....

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of CBDT Circular No.9 dated: 11.09.2002 which tried to interpret the word member as given in Sec.194A(3)(v) of the Act. It is only that part of the Circular that had been quashed by the Hon ble High Court and the other paragraphs of the Circular had no connection with the issue before the Hon ble Bombay High Court. How could it be said that the entire Circular has been quashed by the Hon ble Bombay High Court? In our view para 2 of the Circular still holds good and the conclusion of the ITAT Pu .....

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s interest to its members on deposits it need not deduct tax at source in view of the provisions of Sec.194A(3)(v) of the Act. Similar view has also been expressed by the Pune Bench of the ITAT in the case of Ozer Merchant Co- operative Bank ITA No.1588/PN/2012 order dated 30.10.2013. We may add that in both these decisions the discussion did not turn on the interpretation of Sec.194A(3)(i)(b) of the Act vis-à-vis Sec.194A(3)(v) of the Act. It is thus clear that the preponderance of judic .....

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ource Under Section 194A by virtue of the exemption granted vide Clause (V) of Sub Section (3) of the said section 22. In our view the above decision rendered by the co-ordinate bench is squarely applicable to the facts of the present case. In fact the CIT (A) in canceling the order of the AO has placed reliance on the aforesaid decision. Respectfully following the decision of the co-ordinate bench referred to above, we uphold the order of the CIT (A). 3. The aforesaid shows that the Tribunal wa .....

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th. We may record that this Court in the above referred decision observed thus: In this appeal by the Revenue, the issue involved is for consideration whether the Co- operative Bank was required to deduct tax while paying interest to its members on time deposits under Section 194-A of the Income Tax Act. 2. The Ministry of Finance, Government of India vide Circular No.19/2015 in F.No.142/14/2015- TPL, has held that the Co-operative Banks are not required to deduct tax at source on time deposits .....

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As this amendment is effective from the prospective date of 1st June, 2015, the co-operative bank shall be required to deduct tax from the payment of interest on time deposits of its members, on or after the 1st June, 2015. Hence, a cooperative bank was not required to deduct tax from the payment of interest on time deposits of its members paid or credited before 1st June, 2015. 3. In view of the aforesaid circular, this appeal does not survive for consideration and is accordingly dismissed. No .....

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