TMI Blog2014 (2) TMI 1346X X X X Extracts X X X X X X X X Extracts X X X X ..... no disallowance under section 40(a)(ia) of the Act can be made. Also in the case of Jalgaon District Central Co-operative Bank Ltd. v. Union of India [2003 (9) TMI 56 - BOMBAY HIGH COURT] held that where the legal validity of Circular No.9 of 2002 dated 11.9.2002 was questioned and the said circular was quashed and set aside. Accordingly, there is no distinction between member and nominal member as far as provisions of section 80P and 194(3)(v) are concerned. In the facts and circumstances of the case, the order of the ld. CIT(A) is reversed and the A.O. is directed to delete the disallowance so made. - Decided in favour of assessee. Also disallowance on account of admission fees cannot be disallowed - SH. H.S. Sidhu And SH. B.P. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , has erred in holding that the TDS provisions are applicable to nominal members and not appreciating the import of law that there is no liability on the assessee u/s 194A(3)(V) of the Act to deduct tax at source in relation to interest paid to nominal members. 6. That as claimed in above grounds of appeal order of CIT(A), Jalandhar, confirming the disallowance of ₹ 14,27,433/- on account of non deduction of tax at source from interest paid to nominal members and treating the admission fees of ₹ 2,520/- as not connected with the objects of the society be set aside and the applicant be allowed the entire amount as deductible u/s 80P(2). 7. That the appellant craves leave to add to, alter amend, modify, substitute, deleted a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Interest to members FDRs accounts Rs.19,07,862/- 6. Interest to members SB accounts Rs.8,43,732/- Total Rs.27,51,594/- It is thus clear that interest paid to member of the society is ₹ 27,51,594/- whereas interest paid to nominal members and non-members is ₹ 32,42,388/-. As per provisions of section 194A(3)(v) of the Act, interest is not required to be deducted at source only on the payment of interest made to members of the society. As regards interest paid to nominal members and non- members tax at source was required to be deducted as per provisions of section 194A of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d non- members. In view of these facts and circumstances of the case and the legal position obtaining on the point at issue it is held that the assessee has failed to deduct tax at source on the payments of interest made top nominal and non-members as mentioned above under the provisions of section 194A and therefore expenditure claimed on this count at ₹ 32,42,388/- is disallowed u/s 40(a)(ia) of the Act. As the assessee has furnished inaccurate particulars of income in this regard, penalty proceedings u/s 271(1)(c) have been initiated separately. Total Income is computed as follows: Total income as declared in the return of income Rs. Nil Add i) Misc. income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present case, the disallowance has been made u/s 40(a)(ia) of the Act, with regard to the interest payments to the nominal members, since the assessee has failed to deduct tax at source of such payments made to the nominal members. The Hon'ble Punjab Haryana High Court in the case of CIT vs Punjab State Co-operative Bank Ltd. reported in [2008] 300 ITR 24 (P H) has held that nominal member who had a become member of the society after its registration on payment of the prescribed fees as per the bye- laws of the society, would also be considered as a member of the society as per the definition given under the Co-operative Societies Act and the head note of the said decision of Hon'ble Punjab Haryana High Court is reproduced a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... members as income from other sources and disallowed the claim of the assessee that this should be treated as income derived from banking business which was eligible for exemption u/s 80P(2)(a)(i) . The CIT(A) and the Tribunal held that interest derived from loans to nominal members was entitled to special deduction u/s 80P. On appeal to the High Court: Held, dismissing the appeal, that a nominal member who had become a member of the society after its registration on payment of the prescribed fees as per the bye-laws of the society, would also be considered as a member of the society as per the definition given under the Co-operative Societies Act. In any case, it made no difference whether the income was derived from the loan advanced t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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