TMI Blog2019 (3) TMI 565X X X X Extracts X X X X X X X X Extracts X X X X ..... e basis of our aforesaid observations, the disallowance of the interest expenditure made by the A.O u/s 40(a)(ia) for the alleged failure on the part of the assessee to deduct tax at source on the said amount under Sec. 194A is vacated - Disallowance u/s 40(a)(ia) - decided in favour of assessee. - ITA No. 2741/Mum/2017 - - - Dated:- 28-2-2019 - Shri G.S.Pannu, Vice President and Shri Ravish Sood, Judicial Member For The Appellant : Shri Piyush Chhajed, A.R For The Respondent : Shri Suhas Kulkarni, D.R ORDER PER RAVISH SOOD, JM The present appeal filed by the assessee is directed against the order passed by the CIT(A)-Aurangabad, dated 20.02.2017, which in turn arises from the order passed by the A.O under Sec. 143(3) of the Income Tax Act, 1961 (for short IT Act ), dated 30.03.2015 for A.Y. 2012-13. The assessee assailing the order of the CIT(A) has raised before us the following grounds of appeal : The grounds mentioned hereunder are without prejudice to one another: 1. The learned Commissioner of Income Tax (Appeal ) erred in conf irming the disal lowance of ₹ 1,15,21,357/- u/s.40(a) (ia) in regard to nondeduction of TDS on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to subscribe to the same. It was observed by the CIT(A) that a co-operative society engaged in carrying on the business of banking was from 01.07.1995 onwards no more exempt from deduction of tax at source under Sec.194A on the interest payments exceeding an amount of ₹ 10,000/- on time deposits. In fact, it was observed by the CIT(A) that in the case of the payer which is a co-operative society engaged in the business of banking, once the interest payment exceeded the prescribed monetary limit of ₹ 10,000/-, it was rendered liable to deduct tax at source on the same. Insofar, the contention of the assessee that it was not obligatory on the part of a co-operative bank to deduct tax at source on the interest paid to its members was concerned, it was observed by the appellate authority that clause (viia) of Sec.194A(3) did not provide that the obligation to deduct tax at source on the interest payments was only in respect of the non- members. In sum and substance, it was observed by the CIT(A) that a co-operative society engaged in carrying on the business of banking was required to deduct tax at source on interest exceeding an amount of ₹ 10,000/- on the time depo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ld. A.R also relied on the judgment of the Hon ble High Court of Madras in the case of Coimbatore District Central Co-operative Bank Ltd. Vs. ITO, TDS Ward-1(5), Coimbatore (2016) 382 ITR 266 (Mad), wherein too it was observed by the Hon ble High Court that the amendment made to sub-section (3) of Sec. 194A w.e.f 01.06.2015 was applicable prospectively. Further, the ld. A.R took support of the judgment of the Hon ble High Court of Bombay in the case of Jalgaon District Central Co-operative Bank Ltd. Vs. Union of India (2004) 265 ITR 423 (Bom), wherein the Hon ble High Court while deliberating on the scope and gamut of a CBDT Circular No. 9/2002; dated 11.09.2002 had observed that the provisions relating to TDS were inapplicable to the income credited or paid by a cooperative society to a member thereof or to any other cooperative society. Insofar, the order of the Hon ble High Court of Bombay in the case of The Marathwada Urban Bank Co-op Association Limited Vs. Union of India Ors. (CWP No. 4935 of 2003; dated 31.04.2014) was concerned, it was submitted by the ld. A.R that though the Hon ble High Court by carrying out a conjoint reading of clause (viia) and clause (v) of Sec. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force. Sub-section (3) of Sec. 194A carves out the exceptions wherein deduction of tax at source as envisaged in sub-section (1) of Sec. 194A of the Act had been dispensed with by the legislature. 8. We find that as per sub-section (v) to Sec.194A [as was available on the statute prior to its amendment vide the Finance Acts, 2015 w.e.f. 01.06.2015], income credited or paid by a co-operative society to a member thereof or to any other co-operative society was not liable for deduction of tax at source. Our aforesaid view stands fortified by the CBDT Circular No. 19/2015, dated 27.11.2015, wherein at Para 42.5 of the said circular pertaining to rationalisation of provisions relating to deduction of tax on interest (other than interest on securities), it is stated as under: 42.5 In view of this, the provisions of the Sec.194A(3)(v) of the Income Tax Act have been amended so as to expressly provide that the exemption provided from deduction of tax fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed that Sec.194A(3)(v) suggests that the provisions relating to TDS are inapplicable to the income credited or paid by the co-operative society to a member thereof or to any other co-operative society. In our considered view, it is only pursuant to the amendment made to clause (v) to Sec. 194A (3), vide the Finance Act, 2015 w.e.f 01.06.2015 that interest income credited or paid by a co-operative bank to a member thereof had been made liable for deduction of tax at source. Be that as it may, in our considered view during the period relevant to the year under consideration before us viz. A.Y. 2012-13, no statutory obligation was cast upon a co-operative bank to deduct tax at source on the interest income paid or credited on the time deposits of its members before 1st June 2015. Insofar, the judgment of the Hon ble High Court of Bombay in the case of The Marathwada Urban Bank Coop Association Ltd. Vs. Union of India Ors. as had been relied upon by the CIT(A) is concerned, we are of the considered view that the same is distinguishable on facts. The Hon ble High Court in its aforesaid judgement by carrying out a conjoint reading of clause (viia) and clause (v) of Sec.194A (3), ..... X X X X Extracts X X X X X X X X Extracts X X X X
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