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The Commissioner of Income-Tax TDS, Versus The National Co-Operative Bank Ltd Banashankari 2nd Stage Branch, Bangalore

2016 (6) TMI 1118 - KARNATAKA HIGH COURT

TDS u/s 194A - tds applicability on Co-operative Banks - Held that:- In view of the referred decision of this Court in case of Bagalkot District Central Co-operative Bank [2015 (1) TMI 1005 - ITAT BANGALORE] wherein 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 when the question is alrea .....

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iew and this Court may independently consider the matter and may hold that in view of specific provision, general exemption would not be available to co-operative bank. Hence the TDS from the interest exceeding the amount of ₹ 10,000/- was required to be deducted by the respondent-assessee in the present case which is a co-operative bank. - As such, we are not impressed by the submission that there is any specific provision and therefore general exemption would not apply for the simple .....

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C/W ITA Nos.606/2015, 607/2015, 608/2015, 609/2015, 610/2015, 612/2015, 613/2015, 614/2015, 615/2015. - Dated:- 21-6-2016 - MR. JAYANT PATEL AND MR. B. SREENIVASE GOWDA JJ. APPELLANTS (BY SRI.K.V.ARAVIND, ADVOCATE) JUDGMENT JAYANT PATEL J., In all matters, the appellants-Revenue has preferred the appeals by raising following substantial questions of law: 1. Whether the Tribunal is right in law in relying on Circular No.9/2002 when the same has been quashed by the Hon. Mumbai High Court in the c .....

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ether 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 any case overrides the general provisions? 2. We have heard Mr.Aravind K.V., learned counsel appearing for the appellants. As such, if we see the observations of the Tribunal in thi .....

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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 District Central Co-operative Bank (supra) dealt with identical issue and identical stand taken by the revenue and the Assessee in the case of co-operative society engaged in banking busin .....

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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 provision therefore applies to all co-operative societies including co-operative society engaged in the business of banking. It is not possible to exclude co-operative society engaged in .....

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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 if read in the manner as indicated above, there is perfect harmony to the various provisions. We do not agree with the view expressed by the Pune ITAT SMC in the case of Bhagani Ni .....

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y 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 the view that the decision of the Hon ble Kerala High Court in the case of Moolamattom Electricity Board Employees Co-op Bank Ltd(supra) supports the plea of the Assessee before us. .....

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Kerala High Court accepted their 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 credited or paid exceeding ₹ 10,000/- are liable to deduct tax at source. The Court held that co-operative society engaged in carrying on business of banking and primary credit soci .....

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rest 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 source Under Section 194A of the Income Tax Act 1961- Applicability of the provisions in respect of income paid or credited to a member of co- operative bank - Reg. 11.09.2002 TDS 194A U .....

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me- 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 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 on both time deposits and deposit .....

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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 registration in accordance with the bye-laws and rules. A member eligible for exemption Under Section 194A(3)(v) must have subscribed to and fully paid for at least one share of the co- .....

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duct 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 Tribunal proceeded on the footing that the aforesaid Circular as been quashed by the Hon ble Bombay High Court in the case of The Jalgaon District Central Co- Operative Bank L .....

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hed by the Hon ble Bombay 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 Pune Bench in the case of the Bailhongal Uraban Co-op Bank Ltd(supra) are not factually correct. Consequently, the conclusions drawn in the aforesaid decision also contrar .....

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e 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 judicial opinion on this issue is that co-operative societies carrying on banking business when it pays interest to its members on deposits need not deduct tax at source in v .....

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rdinate bench is squarely applicable to the facts of the present case. In facts the CIT (A) in cancelling 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 was bound by its earlier decision in case of Bagalkot District Central Co-operative vs. JCIT (2014) 48 Taxmann.com 117. When we further enquired from the learned counsel .....

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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 of its members paid or credited on or before 1.7.2015. The relevant portion of the circular reads as under: 42.5. In view of this, the provisions of the section 194A(3 .....

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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 costs. 4. As such, in view of the referred decision of this Court in case of Bagalkot District Central Co-operative Bank referred supra, when the question is already c .....

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