TMI Blog2015 (1) TMI 1405X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 194A (1)(viia) is clearly applicable and therefore the assessee has to deduct T.D.S. on income credited or paid in respect of deposits except which falls under that provisions. We therefore, dismiss the appeal of the assessee. - I.T.A No. 344/PNJ/2014 - - - Dated:- 5-1-2015 - Shri P. K. Bansal, AM Shri D.T Garasia, JM For the Appellant: Shri Ashok G Mudhur, CA, ld.AR For the Respondent : Shri Vinay Singh Rawat, ld.DR ORDER Per Shri D.T Garasia, JM: This appeal has been filed by the assessee against the separate order of the ld. CIT(A), Belgaum dated 01/08/2014 for the assessment years 2011-12. 2. The assessee has raised the following grounds of appeal for the assessment year under consideration:- 1. The learned CIT(A), Belgaum and Assessing Officer erred in facts and law in treating appellant in default under Section. 201(1) even when the I.T.A.T. Panjim in ITA No.233/PANJ/2004 has held in assessee own case for the Asst Year 2002-03 that tax is not deductable on interest paid to Members and Cooperative Societies in view of exemption u/s 194A(3) (v) of the Income Tax Act 1961. 2. The learned CIT(A), Belgaum and Assessing Officer erre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eding ₹ 10,000/- Therefore, the provisions of section 201(1) 201(1A) of the I.T Act 1961 are applicable in the case of the assessee. Since the assessee has failed to deduct the TDS, the assessee/deductor is default u/s 201(1), interest u/s 201(1A) was required to be levied. Thus, the Income Tax Officer calculated the amount payable for A.Y 2011-12 at ₹ 13,29,185/-, ₹ 9,04,211/- u/s 201(1) and ₹ 4,24,974/- u/s 201(1A). 5. Matter carried to ld. CIT(A) and CIT(A) has confirmed the action of the AO. 6. The assessee is in appeal against the decision of the ld.CIT(A). 7. We have heard the rival contentions of both the parties. During the course of hearing before us the ld.AR of the assessee submitted that the assessee is a co-operative society engaged in banking business and interest paid to its members is not liable for tax deduction. He further submitted that for the past many years the assessee bank has been filing return of income regularly and exemption from TDS u/ s 194A(3)(v) has been allowed to assessee year after year upto assessment year 2009-10.The AO has relied upon the decision of the I.T.A.T. Pune in the case Bhagani Nivedita Shahari Bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the assessment years 2010-11 to 2013-14 vide order dated 01/10/2014, wherein we find that the assessee is required to deduct a tax at source in respect of time deposits in excess of ₹ 10,000/- interest payment to members of the assessee bank. We have already held that the co-operative bank and co-operative society both are different and independent. The co-operative bank was registered under the Banking Regulations Act 1949. The co-operative society was registered under the Karnataka Co-operative Societies Act 1959. Therefore, we are of the view that TDS is required to be made on time deposit on interest payment after 01-07-1995. We have already dealt with this issue in detail in para 2.6 of the said tribunal order, which reads as under:- 2.6. We have heard the rival contention of both the parties, it is undisputed fact that assessee has paid interest on term deposit to ₹ 18,39,0031/- to depositor without deducting the tax at source. The assessee contended that the provisions of TDS are not attracted in view of clause (v) of sub-section (3) of section 194A as the interest payments to the extent of ₹ 1,83,90,031/- have been made to the members of the bank wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RBI) 1. As per the bye laws of the cooperative society. 2. Society cannot open savings bank account, current account, issue letter of credit, discounting bills of exchange, issue cheque, demand drafts, pay orders, gift cheques, lockers, bank guarantees etc. 3. Society cannot act clearing agent, for cheques, DDs, pay orders and other forms. 4. Society are bound by rules and regulations as specified by in the co-operative societies act. Filing of returns . Co-operative banks. have to submit annual return to RBI every year Society has to submit the annual return to Registrar of Societies. Inspection RBI has the power to inspect accounts and over all functioning of the Bank Registrar has the power to inspect accounts and over all functioning of the bank. Part V of the Part V Part V of the Banking Regulation Act is applicable to co-operative bank Part V of the Banking Regulation Act is not applicable to co-operative banks. Use of words The word bank‟ banker‟, bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nking. We find that the assessee bank is covered by the provisions of sub-clause (b) of clause (i) of Sec.194A(3) as well as the provisions of clause (viia) of Section 194A(3) which are specific in nature and 194A(3)(v) which are general in nature. We find that the Hon‟ble Kerala High Court in the case of ITO Ors. vs. Thodupuzha Urban Co-operative Bank and others have filed the writ before the Hon‟ble Kerala High Court, wherein the Hon‟ble High Court has held as under: The Income Tax Department has come up with this appeal against the judgment in O.P. No. 17082/1997.(Thodupuzha Urban Co-operative Bank Ltd., In [1999]238 ITR630(Ker). That petition was filed by five co-operative Societies, when they were faced with a notice from the appellant to deduct the income-tax out of the interest paid by them on time deposits, in respect of every payment exceeding ₹ 10,000, at the relevant point of time. The learned single judge as per the impugned judgment, quashed the notices holding that going by the provisions contained in section 194A(3)(viia)(a) of the Income Tax Act, for short the Act ,the writ petitioners were not liable to deduct income-tax at source in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, irrespective of Whether it is a time deposit or any other type of deposit, the 4th petitioner, first respondent will not be liable to deduct income-tax, as such society is under sub-section (3) taken out of the purview of section 194A(1) of the Act. Therefore, the writ appeal fails, dismissed. W.A. No. 2270 of 1998: A reading of the impugned judgment discloses that the writ petitioner, the first respondent, was concede to be an agricultural co-operative society. Consequently, it comes within the purview of clause (viia)(a) of sub-section (3) of section 194A of the Income-tax Act, 1961. Naturally, the first respondent-society will not be liable in terms of sub-section (1) of section 194A. The writ appeal fails, dismissed. From this above we are of the view that the Hon‟ble High Court has interpreted sub- section (v) and(viia)(a) of Section 194A(3). Now coming to Circular No. 9/2002, issued by the CBDT, which is relied upon the assessee. The said circular sought to interpret the definition of member clarified that the member does not include the nominal member. It was held by the Bombay High Court in the case of Jalgaon District Central Co-operative Bank Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the bank and commission w.e.f., June 1992. Accordingly, Finance Act 1992 substituted a new Clause (vii) w.e.f., 1st June, 1992, sub-section 3 of Section 194A for clause (vii) and someone as earlier introduced by Finance No.2 Act w.e.f., 1st October, 1991. This amendment was made to restore the position as was before 1st October, 1991 in relation to deduct tax at source in the case of income credited or paid in respect of deposit with a bank company to which banking regulation Act 1949 applies or with a co-operative society engaged in carrying on the business of banking, including co-operative land mortgage bank or co-operative land development bank This was brought into w.e.f., 1.4.1992. Finance Act 1995 w.e.f., 1st July 1995 again withdrawn the exemption for interest on time deposit payable by bank. The amendment Section 194A now provides for deduction of tax at source at the rate in force from payment for interest exceeding ₹ 10,000/-in a financial year on time deposits made on or after 1st July,1995 with a banking company or with a Co-operative society engaged in carrying on business of banking. The aforesaid limit of ₹ 10,000/- shall be computed with refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 194A(3)(viia) will become redundant. The section cannot be read in this manner. For the sake of clarity, we have analyse the Section 194A(3)(v) and (viia) which read as under: (3) The provisions of sub- section (1) shall not apply- (i) 5 where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year by the person referred to in sub- section (1) to the account of, or to, the payee, does not exceed 6 ten thousand rupees................. (v) to such income credited or paid by a co- operative society 5 to a member thereof or] to any other co- operative society; (viia) to such income credited or paid in respect of,- (a) deposit with a primary agricultural credit society or a primary credit society or a co-operative land mortgage bank or a co-operative land development bank; (b) deposits (other than time deposits made on or after the 1st day of July, 1995) with a co-operative society, other than a co-operative society or bank referred to in sub-clause (a), engaged in carrying on the business of banking The TDS on time deposits is dealt in clauses (vii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Government and notified by it in this behalf; and (d) five thousand rupees in any other case]:] From the above it is clear that, in case of a payer which is a cooperative society engaged in the business of banking, the monetary limit prescribed is ₹ 10000/-. Once the interest payment exceeds that amount the TDS is to be made. Neither in clause (viia) nor in clause (i) there is anything to restrict their applicability only to non-members and therefore they apply to all depositors. Going by the above understanding, the co-op bank is required u/s 194A(1) to make TDS from the interest paid to all depositors. However co-op bank holds the view that clause (viia) applies only to non-members and not to the members. However, on perusal of clause (viia), nothing in it to restrict its application only to non-members. The stand taken by co-op bank is that the interest paid to members is exempted in clause(v). The appellant is placing reliance on Circular no 9 of 2002 in its support. In this scenario, the moot question for consideration is: Whether, in respect of interest paid on time deposits by a co-op bank, the clause(v) which deals with cooperative societies will apply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive banks were required to deduct tax from interest paid to depositors who are not its members, rendering clause (vii) redundant. e. The by Finance Act 1991, for the first time introduced TDS on time deposits by substituting above mentioned clause (vii) with two separate clauses (vii) (viia). While clause (vii) applied to banking companies, clause (viia) applied to specially created category of cooperative societies. This reaffirms the decision of legislature to apply a specific clause to the specific genre cooperative societies, which were earlier carved out of the genus as envisaged in general clause(v). The effect of above amendment was explained by the CBDT in Circular no 617 dated 22-11-1991 where in it is clarified that: The effect of the aforesaid change is that income-tax shall now be deductible at source from the interest income on the deposits with. (i) a banking company, or cii) a co-operative society engaged in carrying on the business of banking, other than a co-operative land mortgage bank, a co-operative land development bank, primary agricultural credit society or a primary credit society (emphasized) The above circular clearly states that, it was only ..... X X X X Extracts X X X X X X X X Extracts X X X X
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