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2018 (7) TMI 292 - AT - Income TaxTDS u/s 194A - interest on deposits paid in excess of ₹ 10,000/- to its members - assessee is a cooperative society registered as a cooperative bank and is also registered under the Karnataka Cooperative Societies Act, 1959 - Held that - Payments made by way of interest by the assessee society to its members would attracts the deduction of tax or not. As from language used in the provisions more particularly 194A(3)(v), then it is clear that the case of assessee shall squarely fall within this provision, being specific provision, irrespective whether ₹ 10,000/- or more is paid by the assessee to its member or not and therefore in the considered opinion of the bench the other provision relied upon by the Ld. DR i.e., 194A(3)(i)(b) shall not be applicable being general in nature. It is settled proposition of law that the specific provision i.e 194A(3)(v) , shall override the general provision, i.e 194A(3)(i) (b) in case of over lapping or conflict , hence the section 194A(3)(v) is applicable to the facts of the present case . Therefore the contention of ld DR is not correct. This case is also covered in favour of assessee by case of Vasavamba Cooperative Bank Ltd (2018 (7) TMI 229 - ITAT BANGALORE) - Decided in favour of assessee.
Issues Involved:
1. Whether interest on deposits paid in excess of ?10,000 to its members by a cooperative bank is liable for tax deduction at source under Section 194A of the Income Tax Act. 2. Applicability of the amendment made in Finance Act, 2015 regarding TDS on interest exceeding ?10,000 on deposits made by members of a cooperative bank from 01.06.2015. Detailed Analysis: 1. TDS Liability on Interest Paid to Members: The primary issue revolves around whether the interest on deposits paid in excess of ?10,000 to its members by a cooperative bank is liable for tax deduction at source (TDS) under Section 194A of the Income Tax Act. The Commissioner of Income Tax (Appeals) [CIT (A)] held that the interest paid by the cooperative bank to its members was subject to TDS as per Section 194A(3)(i)(b) of the Act, which mandates TDS by a cooperative society engaged in banking if the interest exceeds ?10,000. The assessee contended that it was exempt from TDS under Section 194A(3)(v) of the Act, which exempts cooperative societies from deducting TDS on interest paid to their members. 2. Amendment in Finance Act, 2015: The assessee argued that the amendment made in the Finance Act, 2015, which clarified that cooperative banks are required to deduct TDS on interest exceeding ?10,000 on deposits made by members only from 01.06.2015, was not considered by the CIT (A). The CIT (A) maintained that the provisions of Section 194A(3)(i)(b) were applicable for the assessment year 2012-13, and the failure to deduct TDS on interest payments attracted the provisions of Section 40(a)(ia) of the Act. Tribunal's Findings: The Tribunal analyzed the provisions of Sections 194A(3)(i)(b) and 194A(3)(v) in detail. It noted that Section 194A(3)(v) specifically exempts cooperative societies from deducting TDS on interest paid to their members. The Tribunal referenced the decision of the jurisdictional High Court in CIT v. Bijapur District Central Cooperative Bank, which held that the exemption under Section 194A(3)(v) applies to cooperative banks paying interest to their members on deposits before 01.06.2015. The Tribunal also referred to the recent decision in the case of M/s. Vasavamba Cooperative Bank Ltd v. ACIT, where it was held that the amendment effective from 01.06.2015 mandates TDS on interest paid by cooperative banks to their members only from that date onwards. Therefore, for periods before 01.06.2015, cooperative banks were not required to deduct TDS on such interest payments. Conclusion: The Tribunal concluded that the specific provision under Section 194A(3)(v), which exempts cooperative societies from deducting TDS on interest paid to their members, overrides the general provision under Section 194A(3)(i)(b). As such, the cooperative bank was not required to deduct TDS on interest payments to its members exceeding ?10,000 for the assessment year 2012-13. The appeal of the assessee was allowed, and the Assessing Officer was directed to allow the expenditure of ?1,09,16,354/-. Order: The appeal of the assessee is allowed, and the order was pronounced in the open court on 4th July 2018.
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