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TMI Blog2023 (10) TMI 908X X X X Extracts X X X X X X X X Extracts X X X X ..... d facts of the case in confirming the action of the ld. AO in charging of interest u/s. 201(1A). 5. That the impugned order under appeal is arbitrary and contrary to law & facts of the case, hence deserves to be cancelled. 6. That the appellant craves leave to add/alter or forgo any of the grounds of appeal before or at the time of hearing of appeal. 3. The sole and common issue raised by way of multiple grounds of appeals pertains to treating the assessee in default for TDS to the tune of Rs. 41,89,719/- in contravention to the principle of Res-judicata. Accordingly, the appeal has been adjudicated in the following paras. 4. Facts as per records are that the appellant has paid interest exceeding Rs. 5,000/- to non-members/nominal member without deducting TDS. The Ld. CIT(A) confirmed the action of the AO by observing that it is very clear in this regard under Section 194A(3)(v) of the Income Tax Act, 1961, that exemption of TDS provision is allowed only to a member of a co-operative society. He further noted that the CBDT has clearly defined 'member' for the purpose of this section vide Circular No. 9 of 2022 dated 11.09.2022. The Assessing Officer has clearly dealt with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ............................................................................................................................deduct income tax thereon at the rates in force. Provided that an individual or a Hindu Undivid ........................................................... (2) (Omitted by the finance Act,1992 w.e.f. 1-6-1992) (3) The provisions of sub-section (1) shall not apply- (i) ..................................................................... (a) (b)(c)(d) (iv). (v) to such income credited or paid by a co-operative society (other than a co- operative bank) to a member thereof or to such income credited or paid by a cooperative society to any other co-operative society." Thus as per the said provision the provisions of section 194A are not applicable in the case of payment of interest paid by the co-operative Society to its members. It is respectfully submitted that as per "The Punjab Co Operative Societies Act, 1961" definition of Member as defined in section 2(g) is as under: Member: Member means a person joining in the application for the registration of a co operative society and a person admitted to membership after such registration in accordanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e nominal member that he has to subscribe for the share capital. On the other hand, the Government cannot become a nominal member. It can become a member of the society when it subscribes to the share capital of the society. Thus, it is not necessary for a nominal member to subscribe to the share capital. The whole thresh of the Revenue is that the loan advanced to the nominal members, who are not holding the share capital, cannot be termed to be the loan advanced to the members and any income derived from such loanees would not be deductible for exemption under Section 80P(2)(a)(i) of the Act because the said income is not derived by the cooperative bank from the credit facilities provided to its members. In our view, a nominal member who has become a member of the society after its registration on payment of the prescribed fees as per the bye laws of the society, will also be considered as a member of the society as per the definition given under the Societies Act. Therefore, in the facts and circumstances of the case, it makes no difference whether the income is derived from the loan advanced to the nominal members or members or otherwise to a third party because every income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a and Ore. 05/09/2003184 CTR 343. (ANNEXURE D) That We are concerned with as to whether the exemption granted to the co- operative society under Section 194A(3)(v) can be taken away be creating a distinction between duly registered member and a nominal member, which is unknown to the exemption clause contained in Section 194A(3)(v) of the IT Act, 1961. 23. The impugned Notification issued by CBDT, which is in the form of clarification with regard to rights and privileges of a duly registered member and nominal member is outside the scope of Section 119 of the IT Act, 1961. No doubt, Section 119 of the IT Act, 1961 generates some power in CBDT, But the power so generated by virtue of Section 119 is required to be utilized in a prescribed manner. CBDT is empowered to issue only administrative instructions to the subordinate authorities for the purpose of proper administration and enforcement of the provisions of the IT Act. 1961. Under the garb of Section 119 of the IT Act, 1961, CBDT has crossed its authority. What is not contemplated in exemption clause under Section 194A(3)(v) of the IT Act, 1961, cannot be imported to deprive the exemption granted to co-operative society by i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce Co-operative Bank Ltd: Vs. Commissioner of Income Tax, Calicut, [2021] 123 taxmann.com 161 (SC) has also held that the expression "member" is not defined in the Act. Since a cooperative society has to be established under the provisions of the law made by the State Legislature in that regard, the expression "member" in section 80-P(2)(a)(i) must therefore, be construed in the context of the provisions of the law enacted by the state Legislature under which the cooperative society claiming exemption has been formed" [ANNEXURE E] In this regards, it is further humbly submitted that the worthy CIT(A) NFAC, Delhi in the case of the assessee itself for the proceeding Asstt. Year i.e for 2014-15, has held that nominal members are members and interest paid to them is not liable for TDS u/s. 194 of the Income Tax. Act, 1961 [Copy of Order attached herewith] [ANNEXURE also similar view taken in appeal no NFAC/2014-15/10109750 & Appeal No. NFAC/2013-14/10010485 [Copies attached herewith] [ANNEXURE G&H respectively] Thus in view of the above said submission, keeping in view the above stated facts as well as legal position, it is requested before the hon'ble Bench that the appeal of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting the ideas unknown to the IT Act. 1961. The impugned circular, therefore, does not stand to the legal test. Accordingly, the impugned Circular No. 9 of 2002 dt. 11th Sept., 2002 [F. No. 275/106/2000/IT(B)--Annexure A] was quashed and set aside. Thus, in our view, the reliance of the Worthy CIT(A) NFAC, Delhi on this circular is against law. 10. Further, the Hon'ble Supreme Court in the case of "Mavilayi Service Co-operative Bank Ltd: Vs. Commissioner of Income Tax, Calicut, [2021] 123 taxmann.com 161 (SC) has also observed that the expression "member" is not defined in the Act. Since a cooperative society has been established under the provisions of the law made by the State Legislature in that regard, the expression "member" in section 80-P(2)(a)(i) must therefore, be construed in the context of the provisions of the law enacted by the state Legislature under which the cooperative society claiming exemption has been formed. 11. It is further noted that the CIT(A) NFAC, Delhi in the assessee's own case for the proceeding in respect of the Assessment Year 2014-15, has accepted nominal members as members and held that interest paid to them is not liable for TDS u/s. 194 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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