2015 (7) TMI 978 - AT - Income Tax

Eligibility for exemption u/s. 194A(3)(v) from TDS on interest paid/credited on time deposits to its members - assessee is a cooperative bank - Held that - Considering all the facts in totality in the light of the memorandum explaining the provisions in the Finance Bill 2015 and the clarification by the Board that the Circular has not been withdrawn, makes it ample clear that the impugned provisions relating to the liability of TDS would come with effect from 01/06/2015, we, therefore, set aside the findings of the Ld. CIT(A) and direct the Assessing Officer to delete the impugned additions made in the order u/s. 201(1) & 201(1A) of the Act. See case of Belgaum District Central Cooperative Bank Ltd. 2015 (7) TMI 719 - ITAT PANAJI - Decided in favour of assessee.

Summary

Issues:
Assessee's eligibility for exemption u/s. 194A(3)(v) of the Act from TDS on interest paid/credited on time deposits to its members.

Analysis:
The Appellate Tribunal heard a bunch of appeals by the assessee against separate orders of the Ld. CIT(A) involving common issues. The grievance centered around the Ld. CIT(A) holding that the cooperative bank is not eligible for exemption u/s. 194A(3)(v) of the Act from TDS on interest paid on time deposits to its members. The Tribunal referred to a previous case involving a similar issue and discussed the relevant provisions of the Finance Act, 2015. The Tribunal highlighted the specific provisions mandating tax deduction from interest payments on time deposits by cooperative banks, emphasizing that these provisions override the general exemption provided to cooperative societies under section 194A(3)(v) of the Act.

The Tribunal noted an amendment effective from 01/06/2015, specifying that the exemption under section 194A(3)(v) of the Act shall not apply to the payment of interest on time deposits by cooperative banks to its members. It also considered Circular No. 09/2002 of the CBDT, which clarified that TDS provisions are not enforceable on interest paid by Cooperative Society/Bank to its members but must be deducted from interest paid to non-members. Despite a conflicting view from the Hon'ble High Court of Bombay regarding the validity of the circular, the Tribunal held that the circular remains valid as per the clarification provided by the CBDT.

The Tribunal disagreed with the Assessing Officer and the Ld. CIT(A) who heavily relied on a previous decision and held in favor of the Revenue. The Tribunal emphasized that subsequent information obtained from the CBDT under the Right to Information Act confirmed that the circular remained valid. Considering the totality of facts, the Tribunal set aside the findings of the Ld. CIT(A) and directed the Assessing Officer to delete the additions made under sections 201(1) & 201(1A) of the Act. Following their previous decision in a similar case, the Tribunal allowed all appeals filed by the assessee and dismissed the Stay Applications. Ultimately, all appeals were allowed, and the stay applications were dismissed.

This comprehensive analysis of the judgment highlights the key legal issues, the Tribunal's interpretation of relevant provisions, the impact of amendments, and the Tribunal's decision based on the facts and legal principles involved.