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TMI Blog2018 (9) TMI 1690X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessee co-op, bank was liable to deduct TDS u/s 194A on the interest paid on term deposits to its members and thereby confirming the disallowance u/s 40(a)(ia) without appreciating that the said disallowance was justified. 2] The learned CIT(A) failed to appreciate that as per the provisions of section 194A(3)(v) applicable for A.Y.2012 -13, co-operative banks were not liable to deduct TDS u/s 194A in respect of interest paid to its members and hence, there was no reason to make any disallowance u/s 40(a)(ia) in the case of the assessee for this year. 3] The learned CIT(A) erred in not appreciating that the said issue is covered in favour of the assessee by the decision of Hon'ble Bombay H.C. in the case of 'The Jalg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd. We find that similar issue i.e. the obligation of assessee Co-operative bank to deduct tax out of interest payment to the members or other Co-operative societies on time deposits arose before the Hon'ble Bombay High Court in Saraswat Co-operative Bank Ltd. Vs. ITO and Anr (supra), which principle has been applied by the Pune Bench of Tribunal in Abhyudaya Co-op. Bank Ltd. Vs. ITO (supra) and it has been held as under:- "9. We have heard the rival contentions and perused the record. The only issue which is raised in the present appeal is the liability of assessee Co-operative bank to deduct tax at source out of interest payments made by the assessee to its members or other Co-operative societies and on time deposits. The assessee had c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ociety being interest income is outside the purview of section 194A(1) of the Act. 12. The assessee in this regard has pointed out that this position of law is also clarified by the amendment made by the Finance Ac, 2015 w.e.f. 01.06.2015. In this regard, he has invited our attention to the Memorandum explaining the aforesaid provisions vide paras 42.4 and 42.5. The Memorandum further explains in respect of applicability of specific provisions mandating deduction of tax from the payment of interest on time deposits by the Co-operative banks to its members by claiming that general exemption was also applicable for payment of interest to member depositors by the amendment. The provisions of section 194A(3)(v) of the Act have been amended s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndment from 01.06.2015 and under the old provisions of section 194A(3)(v) of the Act, the assessee Co-operative bank was not obliged to deduct tax on the income of members and Co-operative societies. Applying the ratio laid down by the Hon'ble Bombay High Court in Saraswat Co-operative Bank Ltd. Vs. (1) ITO & (2) Union of India (supra), we hold that the assessee had not defaulted in not deducting tax at source out of such payments made to its members / Co-operative societies. Thus, there was no liability to deduct tax at source and the assessee cannot be said to have violated the provisions of section 194A(1) of the Act. The ground of appeal No.1 raised by the assessee is allowed. The issue in ground of appeal No.2 is on without prejudice b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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