2022 (12) TMI 211 - AT - Income Tax

TDS u/s 194A - Addition u/s 40(a)(ia) interest payment - disallowance non-deduction of TDS regarding payments made to members /non-members - distinction between members and nominal-members - HELD THAT - We find no merit in the Revenue s instant arguments as we are in assessment year 2010-11 whereas a cooperative bank has been excluded from the purview of section 194(A)(3)(v) vide Finance Act 2015 w.e.f. 01.06.2015 only. This tribunal s Special Bench decision is The Virudhunagar Central District Co-Operative Bank Ltd. 2018 (10) TMI 1170 - ITAT CHENNAI has followed hon ble Madras high court s judgment M/s. Coimbatore District Central Co-Operative Bank Ltd. 2016 (1) TMI 370 - MADRAS HIGH COURT while adjudicating the very issue against the department. This is coupled with the fact that hon ble jurisdictional high court in Central Co-operative Bank Ltd., V/s Union Of India 2003 (9) TMI 56 - BOMBAY HIGH COURT has quashed the CBDT s circular dated 11.09.2002 as ultra vires violating section 119 of the Act. Their lordship s further decisions in The Bailhongal Urban Cooperative Bank Ltd., V/s. CIT 2015 (12) TMI 1659 - KARNATAKA HIGH COURT and in Saraswat co-operative Bank 2017 (3) TMI 741 - BOMBAY HIGH COURT take note of forgoing legislation developments to hold that a co-operative bank/ assessee has no liability to deduct TDS on interest payments made to members. We thus delete the impugned section 194A r.w.s. 40 (a)(ia) disallowance of Rs. 2,00,095/- in very terms therefore. The assessee s sole substantive grievance is accepted therefore.

Summary

Issues:
Challenge to correctness of interest payment disallowance due to non-deduction of TDS under section 40(a)(ia) for A.Y. 2010-11.

Analysis:
The appeal was against the CIT(A)-7, Pune's order regarding the disallowance of interest payment under section 40(a)(ia) for non-deduction of TDS. The assessee's ground challenged the lower authorities' action on this matter. The Hon'ble Supreme Court's decision in Mavilavi Service Co-operative Bank Ltd. V/s. CIT (2021) had already clarified the law related to TDS deduction on payments to members/non-members. The factual position supported the conclusion that TDS was not deducted on interest payments. The tribunal referred to various judgments to establish that a cooperative bank like the assessee was excluded from the purview of TDS deduction on interest payments for the relevant assessment year. Notably, the tribunal cited legislative developments and judicial decisions to support the assessee's position and deleted the disallowance of Rs. 2,00,095 under section 40(a)(ia).

Additional Points:
The delay of 23 days in filing the appeal was condoned in the interest of justice. The tribunal partly allowed the assessee's appeal based on the above analysis. The order was pronounced in the Open Court on September 29, 2022.