TMI Blog2023 (12) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... consider the issue afresh upon consideration of the relevant evidences already been placed by the assessee or any other evidences appellant chooses to file at the time of hearing of the matter. Deduction u/s 40(a)(ia) - interest paid by a cooperative society to its members in terms of the provision of sec. 194A(3)(v) - We find that so far as the amendment made by the Finance Act 2015 is concerned, the Chennai Bench in [ 2022 (7) TMI 1048 - ITAT CHENNAI] has been pleased to observe that the amendment is prospective in nature and applicable only from 01/06/2015. We find substance in the submission made by assessee that though amendment has been made by the Finance Act 2015, the same is not applicable to the instant case, particularly taking into consideration the observation made by the Mumbai Benches. We also find that the assessee has been able to make out a substantial case against addition made by the authorities below on the issue itself and thus, respectfully relying upon the order passed by the Co-ordinate Bench Asst. Year 2013-14 [ 2017 (9) TMI 2016 - ITAT BANGALORE] particularly in assessee s own case on the identical issue as already discussed above, we remit the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted before us that the issue involved in this particular case as to whether the assessee has deducted tax at source on payment made to members as already been duly considered by the co-ordinate bench of this Tribunal in assessee s own case for the assessment year 2010-11 and 2011- 12 in SP. No.51 and 52/Bang/2015 and in ITA Nos.308 209/Bang/2015. A copy of the said order is also annexed in the paper book filed before us. It was pointed out that the issue has been decided in favour of the assessee relying upon the order passed by different benches of ITAT, wherein the assessee was also cooperative bank and the identical issue, which has been settled in favour of the assessee was duly taken into consideration. He also further relied on the order passed by the coordinate bench in assessee s own case in ITA No.1245/Bang/2016 for assessment year 2013-14 wherein on the same set of facts, the coordinate bench has been pleased to dismiss the appeal preferred by the revenue upholding the order of the First Appellate Authority in deleting the disallowance made u/s 40A(ia) of the Act for non deduction of tax on interest paid to the members. A copy has also been annexed to the paper book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Under section 194A of the Income-tax Act, 1961, tax is deductible at source from any payment of income by way of interest other than income by way of interest on securities. Clause (v) of sub-section (3) of section 194A exempts such income credited or paid by a co-operative society to a member thereof from the requirement of TDS. On the other hand, clause (viia) of sub-section (3) of section 194A exempts from the requirement of TDS such income credited or paid in respect of deposits (other than time-deposits made on or after 1 st July, 1995) with a cooperative society engaged in carrying on the business of banking. 2. Representations have been received in the Board seeking clarification as to whether a member of a cooperative bank may receive without TDS interest on time deposit made with the co-operative bank on or after 1st July, 1995. The Board has considered the matter and it is clarified that a member of a co-operative bank shall receive interest on both time deposits and deposits other than time deposits with such co-operative bank without TDS under section 194A by virtue of the exemption granted vide clause (v) of sub-section (3) of the said section. The provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction with the issue before the Hon'ble Bombay high Court. How could it be said that the entire circular has been quashed by the Hon'ble Bombay High Court? In our view para-2 of the Circular still holds good and the conclusion of the ITAT Pune Bench in the case of The Bailhongal Uraban Coop Bank Ltd.(supra) are not factually correct. Consequently, the conclusions drawn in the aforesaid decision also contrary to facts and hence cannot be considered as precedent. 20. The learned counsel for the Assessee has brought to our notice that the ITAT Vishakapatnam Bench in the case of The Visakhapatnam Co-operative Bank ITA No. 5 and 19 of 2011 order dated 29.8.2011 has held that co-operative societies carrying on banking business when it pays interest to its members on deposits it need not deduct tax at source in view of the provisions of Sec. 194A(3)(v) of the Act. Similar view has also been expressed by the Pune Bench of the ITAT in the case of Ozer Merchant Co-operative Bank ITA No.1588/PN/2012 order dated 30.10.2013. We may add that in both these decisions the discussion did not turn on the interpretation of Sec. 194A(3)(i)(b) of the Act vis-a-vis Sec. 194A(3)(v) of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a provision which mandates deduction of tax at source by a cooperative Society carrying on the business of banking, where the income in the form of interest which is paid by such society is in excess of ten thousand rupees. Sec. 194A(3)(v) of the Act provides that tax need not be deducted at source where the income in the form of interest is credited or paid by a cooperative society to a member thereof or to any other cooperative society. This provision therefore applies to all cooperative societies including co-operative society engaged in the business of banking. It is not possible to exclude co-operative society engaged in the business of banking from the provisions of Sec. 194A(3)(v) of the Act on the ground that the same is covered by the provisions of Sec. 194A(3)(i)(b) of the Act. Sec. 194A(3)(v) of the Act refers to payment by a co-operative Society to a member and payment by a co-operative society to non-member would continue to be governed by the provisions of Sec. 194A(3)(i)(b) of the Act. Similarly u/s. 194A(3)(viia)(b) interest on deposits other than time deposits even if the payment is made to a non-member by a co-operative society, the cooperative society need not d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n business of banking and primary credit societies stand on different footing and belong to different class. That does not mean that Sec.194A(3)(v) of the Act is applicable only to Cooperative Societies other than co-operative societies carrying on the business of banking as observed in para-37 of its judgment the Pune ITAT in the case of Bhagani Nivedita Sah Bank Ltd. (supra). In fact in para-2 of Circular No.9 dated 11.9.2002, the CBDT has very clearly laid down that Co- operative societies carrying on banking business when it pays interest on deposits by its members need not deduct tax at source in view of the provisions of Sec.194A(3)(v) of the Act. 17. We also find that the CBDT in Circular No.9 dated 11.9.2002 clarified certain aspects which are relevant to the present case. The same reads thus: Circular No.9 of 2002 Sub : Tax deduction at source under section 194A of the Income-tax Act, 1961 Applicability of the provisions in respect of income paid or credited to a member of co-operative bank Reg. 11/09/2002 TDS 194A Under section 194A of the Income-tax Act, 1961, tax is deductible at source from any payment of income by way of interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bers need not deduct tax at source. The above interpretation of the provisions by the CBDT which is in favour of the Assessee, in our view is binding on the tax authorities. 19. In the case decided by ITAT Panaji Bench in ITA No. 85/PN/2013 for AY 2009-10 in the case of The Bailhongal Uraban Co-op Bank Ltd. Vs. JCIT order dated 28.8.2013, the tribunal proceeded on the footing that the aforesaid circular has been quashed by the Hon ble Bombay High Court in the case of The Jalgaon District Central Co-operative Bank Ltd. Vs. Union of India 265 ITR 423 (Bom) and therefore chose to follow the decision rendered by Pune ITAT SMC in the case of Bhagani Nivedita Sahakari Bank Ltd. (supra). In our view the Hon ble Bombay High Court in the case of Jalgaon District Central Cooperative Bank Ltd. s case was dealing with a case of challenge to para-3 of CBDT Circular No.9 dated 11.9.2002 which tried to interpret the word member as given in Sec. 194A(3)(v) of the Act. It is only that part of the Circular that had been quashed by the Hon ble Bombay High Court and the other paragraphs of the Circular had no connection with the issue before the Hon ble Bombay high Court. How could it be said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ooperative society to its members in terms of the provision of sec. 194A(3)(v) of the Act, he has relied upon the order passed by the Chennai Tribunal in ITA No.1111/Chen/2016 for Assessment Year 2012-13 in the case of Dharmapuri District Central Cooperative Bank Ltd. The copy of the said order has also been furnished before us, wherein the amendment has been held to be prospective in nature. 8. Upon considering the argument, we find that so far as the amendment made by the Finance Act 2015 is concerned, the Chennai Bench has been pleased to observe that the amendment is prospective in nature and applicable only from 01/06/2015. The relevant observation to this effect is as follows:- It was thus held by Hon'ble Court that none of the State or Central enactments such as the Tamil Nadu Co-operative Societies Act, 1983, the Multi-State Co-operative Societies Act, 2002, the Reserve Bank of India Act, 1934, the Banking Regulation Act, 1949 and the National Bank for Agriculture and Rural Development Act, 1981 make any distinction between a co-operative society engaged in carrying on banking business and a co-operative bank. However, the amendment as brought in by Finance Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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