9911796707
TMI Blog2015 (1) TMI 1405X X X X Extracts X X X X X X X X Extracts X X X X ..... aid to Members of Cooperative Societies is exempt u/s 194A(3)(v) as held by High Courts and I.T.A.T. Benches: (i) The Jalgaon DCC Bank Ltd Vs. Union of India (2004) (ii) Gujarat Urban Cooperative Bank Federation Vs. Union of India (2012) 209 Taxman 340(Guj) (iii) Asst Commissioner of Income Tax Circle I, Nasik Vs. Ozer Merchant Cooperative Bank Ltd ITA 1588/PNJ/2012 dated 30.10.2013 (iv) Asst. Commissioner of Income Tax Circle 1(1) Vs. Visakhapatnam Coop Bank Ltd ITA 5/Vizag/2011 dt. 29.08.2011 (v) The Bagalkot District Central Coop Bank Ltd Vs. Joint Commissioner of Income tax, Bijapur Range Bijapur ITA 1572/Bang/2013 dt. 30.05.2014. 3. The learned CIT(A), Belgaum and Assessing Officer erred in treating that appellant was liable to deduct tax u/s. 194A(3)(i)(b) contradicting the view taken by earlier Assessing Officer who has passed assessment u/s 143(3) for the Asst Year 2009-10 and some earlier years holding the view that interest paid to members is exempt u/s 194A(3)(v) of the Act. 4. The learned Assessing Officer erred in facts and law in treating the assessee in default without giving opportunity nor verifying that the recipient of income have no caused any loss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posits other than time deposits with cooperative bank without TDS u/s 194A by virtue of exemption granted vide clause (v) of sub-section (3) of the said section. It was clarified that a member is one who has joined in application for the registration of the cooperative society and those who are admitted to membership after registration in accordance with the bye-laws and rules. A member eligible for exemption u/s 194A(3) must have subscribed to and fully paid for at least one share o the cooperative bank, must be entitled to participate and vote in the general body meetings and to share from the profits of the cooperative bank. The Circular also clarified that the provisions of section 194A(3)(viia) are applicable only in case of non-member depositor of the cooperative bank, who shall receive interest only on deposits other than time deposits made on or after 1.7.1995 without TDS under section 194A. This Circular 9/2002 was challenged in the Bombay High Court in the case of Jalgaon DCC Bank Vs. Union f India (2004) 265 ITR 423(Bom), wherein the Hon'ble Bombay High Court has quashed the said CBDT Circular. The ld. AR of the assessee has also relied upon the decisions on the foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich 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; We find that the Co-operative is also interpreted by the Hon‟ble jurisdictional Karnataka High Court, wherein in the case of CIT vs. Yeshwanthpur Credit Co-operative Society Limited in ITA No. 237/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as defined under the Banking Regulation Act includes the primary agricultural credit society or a primary co-operative agricultural rural development bank. The Legislature did not want to deny the said benefit to a primary agricultural credit society or a primary cooperative agricultural and rural development bank. They did not want to extend the said benefit to a co-operative bank which is exclusively carrying on banking business i.e., the purport of the amendment. If the assessee is not a Co-operative bank carrying on exclusively banking business and if it does not possess a license from the Reserve Bank of India to carry on business, then it is not a Co-operative bank. It is a Co-operative society which also carries on the business of lending money to its members which is covered under Section 80P(2)(a)(i) i.e., carrying on the business of banking for providing credit facilitates to its members. The object of the aforesaid amendment is not to exclude the benefit extended under Section 80P(i) to the society." Looking to the facts and circumstances of the case the Hon‟ble High Court has interpreted the difference between Co-operative Bank and Co-operative Society. The Co- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of several situations mentioned under that clause. Admittedly, sub-section (1) of section 194A cast the liability on all those institutions other than individuals and Hindu Undivided Family to deduct income-tax at source, when such institutions pay interest on deposits exceeding the prescribed limit. Sub-section (3)(viia) reads as follows : Sub-section 3 of section 194A of the Act makes it clear that "the provisions of sub-section (1) shall not apply" in respect of several situations mentioned under that clause. Admittedly, sub-section (1) of section 194A cast the liability on all those institutions other than individuals and Hindu Undivided Family to deduct income-tax at source, when such institutions pay interest on deposits exceeding the prescribed limit. Sub-section (3)(viia) reads as follows : "(3) The provisions of sub-section (1) shall not apply (viia) to such income credited or paid in respect of (a) deposits 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 soci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Therefore, circular No.9/2002 dated 11.09.2002 issued by CBDT does not help to the case of the assessee. The assessee relied upon the said circular is ill founded. The question before the Hon‟ble Bombay High Court was not whether a Co-operative Bank not entitle to deduction of tax on interest paid on the deposits with it. To understand the legislative amendment in this regard query wherein in the budgets speech of Finance Minister and his object for suggesting TDS to such deposit in following words to enable the Government to identify income earners, most of whom would not otherwise declare their income or would not declare their full income, I propose to extend the scheme of tax deduction at source to cover new areas of payments in the nature of commissions, interest paid by banks on time deposits and withdrawals from the National Savings Scheme. To minimise the inconvenience for small depositors, tax will be deducted at source only in respect of payments in excess of Rs. 2500 per year. Those receiving payments in excess of the limit but not having taxable income will have the facility of collecting payment with no tax deduction by filing a declaration in the prescribed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to sub-section (3) of Section 194 has omitted the provision therein providing the specific limit of Rs. 10,000/- in respect of time deposit made with banking company with reservation that overall limit of Rs. 5,000/- provided in main portion of sub-section 3 would apply to such deposit w.e.f. 19th June, 2001. From this above intention of legislature we are of the view that it is clear that assessee company a Co-operative Society carrying on a business of banking is liable to make TDS u/s. 194A. Learned AR has relied upon the decision of Income Tax Tribunal, Beanglore Bench in the case of Bagalkot District Central Co-op. Bank vs. Joint Commissioner of Income Tax, in ITA NO.1572/Bang/2013, wherein the Tribunal has interpreted the Section 194A(3)(v) which grants an exemption from TDS to such income credited or paid by the Co-operative Society. They have interpreted the word "member" mentioned in Section 194A(3)(v) of the Act. The Tribunal has also relied upon the decision of Hon‟ble Bombay High Court and the circular issued by CBDT and they relied upon circular issued by CBDT following the judgement of Jalgaon District Central Co-operative Bank Ltd. & Anors. Vs. Union of Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty 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" [emphasized] From a plain reading of above clauses, it is clear that while clause (vii) deals with interest payment by a banking company the clause (viia) deals with interest payment by a certain category cooperative societies including a cooperative society engaged in carrying on the business of banking. It is also clear that, as regards a co-operative society engaged in carrying on the business of banking, there is no exemption for the interest payments in respect of time deposits made on or after 01-07-1995. Further,194A(3)(i) lays down monetary limits up to which is there is no requirement of TDS. The said monetary limits are different for different category of payers. The said clause is reproduced below for the sake of clarity: 194A(3) The provisions of sub-section (1) shall not apply- (i) where the amount of such income or, as the case may be, the aggregate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in clause (v). By this amendment, a specific specie called a „cooperative society engaged in carrying on the business of banking‟ was carved out of the genus „cooperative society‟ mentioned in clause (v). The scope of the above amendment is explained in Circular no 42 dated 20-06-1970, whose relevant portion is extracted below: I am directed to invite a reference to the Board‟s Circular No. 22/68- IT(B) [F.No. 12/23/68-IT(B)], dated 28-3/13-5-1968, and to say that the Finance Act of 1970, has made an important change in section 194A by inserting a new clause (vii) in sub-section (3) of that section. As per this clause, the provisions of section 194A are not applicable to income by way of interest credited or paid in respect of deposits with a banking company to which the Banking Regulation Act, 1949 applies (including any bank or banking institution referred to in section 51 of that Act), or with a co-operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank or a co-operative land development bank). All such banking institutions are, therefore, no longer required to deduct tax from interest paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ety engaged in the business of banking. This position of law has been explained in the explanatory notes to Finance Act 1995, contained in CBDT Circular No. 717 dated 14-8-1995 as under. Para 46.2: The (Finance )Act amends Section 194A of the Income-tax Act relating to deduction of income-tax at source from interest other than interest on securities in the case of residents. The amendment provides for deduction of income-tax at source at the rate in force from payment of interest exceeding ten thousand rupees in a financial year on time deposits made on or after 1st of July, 1995 with a banking company or with a co-operative society engaged in carrying on the business of banking. (emphasized) The above explanatory note leaves no doubt, whatsoever, about the applicability of clause (viia) to a cooperative society engaged in the business of banking. 3.Principle of "Generalia specialibus non derogant" The Hon‟ble jurisdiction High court in M.L.Vasudeva Murthy & Sons vs. Jt. Commissioner of Ag IT 65 Taxman 185(Kar) has observed that "a specialprovision normally excludes the operation of a general provision ". The Hon‟ble Supreme Court in the, case of South India ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
