TMI Blog2019 (8) TMI 1332X X X X Extracts X X X X X X X X Extracts X X X X ..... Act made by the AO and accordingly allow the ground No.2 and 2.1 raised by the assessee. Transfer of Reserve Fund - HELD THAT:- Respectfully following the decision of the Hon ble Apex Court in the case of Vellore Electric Corporation Ltd., [1997 (7) TMI 13 - SUPREME COURT] , we hold that the assessee is not entitled to claim deduction in respect of transfer to reserve fund. Transfer to Co-operative Education Fund - HELD THAT:- Decision of the Hon ble Karnataka High Court in the case of Pandavapura Sahakara Sakkare Kharkane Ltd. [1988 (6) TMI 39 - KARNATAKA HIGH COURT] , while deciding on the allowability of contributions to the Co-operative Education Fund, the Hon ble Court considered them akin to consumer rebate reserve and, following the decision of the Hon ble Apex Court in the case of Poona Electric Supply Company Ltd. [1965 (4) TMI 20 - SUPREME COURT] , upheld its allowability. The ratio of the decision in the case of Poona Electricity Supply Company Ltd., [1965 (4) TMI 20 - SUPREME COURT] was upheld by the Hon ble Apex Court in the case of Vellore Electric Corporation Ltd., [1997 (7) TMI 13 - SUPREME COURT] , relied on by the Co-ordinate Bench of this Tribunal. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ouncements. The learned DR for Revenue has also put forth submissions / cited a judicial pronouncement. The rival contentions / submissions put forth have been duly considered. 4. Ground Nos.1 and 7 (supra) being general in nature, do not call for adjudication thereon and are accordingly dismissed as infructuous. 5. Ground Nos. 3, 3.1 and 3.2 and Additional Ground Nos.1 to 3 5.1 In the course of hearings, the learned AR of the assessee submitted that ground Nos.3, 3.1 and 3.2 (supra) and Additional Ground Nos.1 to 3 (supra) are not being pressed by the assessee. In these circumstances, ground Nos. 3, 3.1 and 3.2 and Additional Ground Nos.1 to 3 are rendered infructuous and are accordingly dismissed as not pressed. 6. Ground No.6 Interest under section 234B and 234C of the Act 6.1 In this ground (supra), the assessee denies itself liable to be charged interest u/s 234B and 234C of the Act. The charging of interest is consequential and mandatory and the AO has no discretion in the matter. This proposition has been upheld by the Hon ble Apex Court in the case of Anjum H. Ghaswala (252 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e under section 40(a)(ia) of the Act needs to be deleted. 7.4.1 We have considered the rival submissions and perused the material on record; including the judicial pronouncements cited. From a perusal of the record, it emerges that in the course of assessment proceedings, the AO required the assessee to explain the reasons for non-deduction of tax at source under section 194A of the Act in respect of interest paid by it to its Members on Fixed Deposits maintained by the Members. The assessee submitted that in terms of section 194A(3)(v) of the Act, applicable to Co-operative Societies, it is not required to deduct TDS on interest paid or credited by it to its Members. In support of this proposition, the assessee placed reliance on the decision of the Hon ble Karnataka High Court in the case of CIT Vs. The Rajajinagar Cooperative Bank (ITA No.86 of 2006). The AO, however, did not agree with the assessee s contentions; holding that the provisions of section 194A(3)(i)(b) of the Act are applicable to the assessee as it is a Co-operative Bank and not a Co-operative Society to which the provisions of section 195A(3)(v) of the Act are applicable. According to the AO, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposits to Members only w.e.f. 01.06.2015. In the aforesaid case of the Hon ble Karnataka High Court (supra), the following was the substantial question of law before it: 1 Whether the Tribunal is right in concluding that the provisions of section 194A(3)(V) of the Income Tax Act, 1961 applies to all Co-operative Societies including Co-operative Society engaged in the business of banking? The relevant portion of the judgment where the aforesaid substantial question of law was answered at Para 4 of the Hon ble High Court s order is extracted hereunder:- 7.4.4 Respectfully following the decisions of the Hon ble Karnataka High Court in the case of CIT Vs. The Jamkhandi Urban Co-operative Bank (supra) and the case of Shri Siddeshwara Co-operative Bank Ltd., (2016) 71 taxmann.com 126 (Karnataka); wherein also the Hon ble Court had held that the Amendment to section 194A(3)(V) operates prospectively w.e.f. 01.06.2015; we hold that the assessee, being a Co-operative Bank, is not required to deduct tax at source from the payment of interest on terms deposits to its Members in the year under consideration i.e., Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 31.01.2019. 9.3.1 We have considered the rival contentions and perused the material on record; including the judicial pronouncements cited. We have carefully perused the decisions cited by both parties (supra). The issue before the Hon ble Karnataka High Court was directly on the point of whether the contribution to Co-operative Education Fund by a society governed by the Karnataka Societies Registration Act, was allowable. The issue before the Hon ble Apex Court in the case of Vellore Electric Corporation Ltd., (supra) was on the issue of allowability of amounts transferred to contingency reserve, development reserve and tariff and dividend control reserve out of profits of an electric supply corporation under section 37(1) of the Act. The Apex Court came to the conclusion that the amounts appropriated to these reserves were available in the hands of the Electricity Corporation in one or other form and therefore, an appropriation of amounts towards these reserves ought not to be allowed as a deduction under section 37(1) of the Act. 9.3.2 In the case of Pandavpura Sahakara Sakkare Kharkane Ltd., (supra), the Hon ble High Court of Karnataka, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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