2017 (9) TMI 1695 - AT - Income Tax

TDS u/s 194A on the amount of interest paid on term deposits - Whether the provisions of section 194A(3)(v) apply to cooperative society involved in the business of banking? - Held that - We find that this issue is squarely covered by the decision in the case of Almora Urban Cooperative Bank Ltd. vs. ITO(TDS) Kashipur 2015 (8) TMI 13 - ITAT DELHI wherein it was held that the provisions of section give blanket exemption to the interest paid by any cooperative society to its members and that neither section 2(19) nor section 194A(3)(v) claims any discrimination between the cooperative societies carrying on banking business and other cooperative societies. CIT(A) has rightly followed the aforesaid decision and deleted the demand in dispute which does not need any interference on our part hence we uphold the same and reject the ground no. 1 raised by the Revenue. Short deduction of TDS and interest thereon - Form No. 15G/15H were not submitted to the CIT(TDS) Chandigarh on or before 7th day of the week - Held that - Assessee had received Form 15G/15H from all the persons to whom the interest was paid and the assessee had also sent these Forms to the Income Tax Department. Not sending these Forms Specifically to CIT TDS is a mere technical breach. CIT(A) has rightly held that assessee was not required to deduct TDS on interest so paid hence the demand raised by the AO was accordingly deleted which does not need any interference on our part therefore we uphold the order of the Ld. CIT(A) on the issue in dispute and reject the ground no. 2 raised by the Revenue.

Summary

Issues:
- Whether a cooperative society engaged in banking business is exempt from deducting TDS under Section 194(3)(v) of the Income Tax Act, 1961.
- Whether the demand raised on account of short deduction of TDS and interest thereon is justified.
- Whether the submission of Form No. 15G/15H to the CIT(TDS) within the stipulated time frame is necessary to avoid TDS deduction.

Analysis:

Issue 1: Exemption of Cooperative Society from TDS
The Department contended that the appellant, a cooperative society engaged in banking, was not exempt from deducting TDS under Section 194(3)(v) of the IT Act. However, the Ld. CIT(A) ruled in favor of the appellant, citing a precedent from the ITAT Delhi that provided a blanket exemption to interest paid by any cooperative society to its members without discrimination based on the nature of the cooperative society. The Tribunal upheld the decision, stating that the provisions did not differentiate between cooperative societies engaged in banking and others, leading to the rejection of the Department's argument.

Issue 2: Demand on Short Deduction of TDS
Regarding the demand raised for short deduction of TDS and interest, the AO had raised the demand due to the failure of the assessee to provide documentary evidence of submitting Form 15G/15H to the concerned CIT. The Ld. CIT(A) noted that the forms were indeed obtained by the assessee and sent to the Income Tax Department, even though they were not specifically sent to the CIT. The Tribunal found this to be a technical breach, as the forms were sent to the relevant department, and the assessee was not required to deduct TDS on the interest paid. Consequently, the demand raised by the AO was deemed unjustified and was deleted by the Ld. CIT(A), a decision upheld by the Tribunal.

Conclusion:
The Tribunal dismissed both appeals filed by the Revenue, upholding the Ld. CIT(A)'s orders in favor of the appellant on both issues. The judgment was pronounced on 27/09/2017, settling the disputes related to the exemption of a cooperative society engaged in banking from TDS and the validity of the demand raised on short deduction of TDS and interest.