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2021 (1) TMI 748 - AT - Income TaxTDS u/s 194A - Assessee society had paid interest on deposits - Non deduction of TDS - whether any interest was paid to members less than ₹ 10,000/- so that the provisions of section 194A of the Act will not apply to such payments? - HELD THAT - We are of the view that the analogy so drawn by the CIT(A) is erroneous. The provisions of Sec.194A which are in relation to deduction of tax at source cannot be equated with the provisions of Sec. 80P(2)(a)(i) of the Act, which deals with deduction while computing total income. The admitted position is that the sum has been paid to Associate Members and CIT(A) has equated it and named them as non-members. In our view this approach is erroneous. For the AY 2015-16, there is no obligation to deduct tax at source by a Co-operative Society u/s.194A of the Act as laid down by the Hon ble Karnataka High Court in the case of CIT Vs Karnataka State Apex Cooperative Bank Ltd. 2016 (6) TMI 1409 - KARNATAKA HIGH COURT - We therefore delete the addition sustained by the CIT(A). - Decided in favour of assessee.
Issues:
Deduction of tax at source on interest payments made by a Co-operative Society under section 194A of the Income Tax Act, 1961. Detailed Analysis: Issue 1: Deduction of tax at source on interest payments The Appellate Tribunal ITAT Bangalore dealt with an appeal by the assessee against the order of the CIT(Appeals) regarding the deduction of tax at source on interest payments made by a Co-operative Society in the assessment year 2015-16. The Assessing Officer (AO) had raised concerns about the society's failure to provide evidence of tax deduction on interest payments under section 194A of the Act. The AO specifically highlighted the non-submission of details regarding interest payments of ?10,000 and above, which attracted the provisions of section 194A. The AO disallowed the interest paid to non-members under section 40(a)(ia) due to the lack of tax deduction. The CIT(A) upheld this disallowance for payments made to non-members exceeding ?10,000, emphasizing the society's failure to deduct tax at source and lack of supporting documentation like Form 15G/15H or income declarations in ITRs. Issue 2: CIT(A) directions and AO's actions The CIT(A) directed the AO to examine and verify the claims made by the assessee regarding interest payments below ?10,000 to members/non-members and various types of deposits. The AO subsequently allowed relief for interest payments below ?10,000 and to members/non-members, including various deposit types. However, the CIT(A) upheld the disallowance under section 40(a)(ia) for interest payments to non-members exceeding ?10,000. The assessee contested this disallowance, arguing that for the assessment year 2015-16, there was no obligation to deduct tax at source on interest payments to members, citing a decision of the Karnataka High Court. The Tribunal noted that the sum paid to associate members was erroneously equated to non-members by the CIT(A) and referenced a Supreme Court decision regarding deductions under a different section of the Act. The Tribunal concluded that there was no obligation to deduct tax at source for a Co-operative Society under section 194A for the relevant assessment year, based on the Karnataka High Court decision, and therefore deleted the addition sustained by the CIT(A). Conclusion: The Tribunal allowed the appeal by the assessee, ruling in favor of the Co-operative Society regarding the deduction of tax at source on interest payments under section 194A for the assessment year 2015-16. The decision was based on the lack of obligation for tax deduction as per the Karnataka High Court ruling, leading to the deletion of the addition sustained by the CIT(A).
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