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2019 (12) TMI 915 - AT - Income TaxTDS u/s 194A - Disallow of interest u/s 40(a)(ia) - non deduction of TDS - HELD THAT - The amendment to section 194A was expressly provided from the prospective date of 1st June 2015 but not retrospectively. In the instant case the A.Y. involved is 2014-15, hence, the amendment to section 194A has no application in assessee s case. Since the facts are identical and the Ld.CIT(A) followed the order of this Tribunal, we decide the issue in favour of the assessee and uphold the order of the Ld.CIT(A). The revenue s appeal on this ground is dismissed. Amortization of government securities - HELD THAT - The assessee is required to maintain 25% of its demand and time liabilities in the form of liquid assets as per the provisions of section 24 of the Banking Regulation Act, 1949. In compliance with these provisions, the assessee purchased some government securities. As per the RBI guidelines, where the cost of acquisition of these securities is more than their face value, such excess amount has to be amortised over the remaining period of maturity. The assessee claimed towards amortization for the impugned assessment year. The AO treated the same as contingent liability and disallowed the same. Against which the assessee went on appeal before the CIT(A) and the CIT(A) allowed the appeal of the assessee following the order of this Tribunal in the assessee s own case for the A.Y. 2012-13 and 2013-14 - Issue is remitted back to the file of the AO with a direction to decide the appeal afresh as per the directions given by the Ld.CIT(A) and also keeping in view of latest direction of the RBI
Issues Involved:
1. Delay in filing appeals and cross objections. 2. Disallowance of interest on fixed deposits under Section 40(a)(ia) of the Income Tax Act. 3. Disallowance of amortization of premium on government securities. Detailed Analysis: 1. Delay in Filing Appeals and Cross Objections: The revenue filed an appeal with a delay of 73 days and submitted a condonation petition. The tribunal considered the submissions and condoned the delay. Conversely, the assessee filed cross objections with a delay of 37 days but did not file a condonation petition. Consequently, the cross objections of the assessee were dismissed in limine. 2. Disallowance of Interest on Fixed Deposits under Section 40(a)(ia): The assessee, a cooperative bank, paid interest on deposits to its members without deducting tax at source. The Assessing Officer (AO) disallowed the interest amounting to ?3,94,12,695 under Section 40(a)(ia) of the Income Tax Act, asserting that the assessee, despite being registered under the Cooperative Societies Act, was a cooperative bank and thus liable to deduct tax on interest paid to members. The AO supported this view with a decision from the ITAT in a similar case. The Commissioner of Income Tax (Appeals) [CIT(A)] reversed the AO's decision, relying on a previous Tribunal order in the assessee’s own case for earlier assessment years. The Tribunal reiterated that the amendment to Section 194A, which mandated tax deduction on interest payments by cooperative banks, was prospective from 1st June 2015 and not retrospective. Therefore, for the assessment year 2014-15, the amendment did not apply. The Tribunal upheld the CIT(A)’s decision, dismissing the revenue’s appeal on this ground. 3. Disallowance of Amortization of Premium on Government Securities: The AO disallowed ?23,213 claimed by the assessee towards amortization of government securities, treating it as a contingent liability. The assessee argued that the amortization was in compliance with RBI guidelines, which mandate amortizing the excess cost of acquisition over the face value of government securities over their remaining maturity period. The CIT(A) allowed the assessee’s claim, following the Tribunal’s order in the assessee’s own case for previous assessment years. The Tribunal noted that similar issues had been remitted back to the AO for fresh examination in earlier years and directed the AO to reconsider the matter in line with the CIT(A)’s directions and RBI guidelines. The Tribunal upheld the CIT(A)’s decision, dismissing the revenue’s appeal on this ground. 4. Consistency for AY 2015-16: For the assessment year 2015-16, the issues involved were identical to those of the previous year, i.e., disallowance under Section 40(a)(ia) for interest paid on members' deposits and amortization expenses. Following the rule of consistency, the Tribunal dismissed the revenue’s appeal for AY 2015-16 as well. Conclusion: In conclusion, the Tribunal dismissed the revenue’s appeals and the assessee’s cross objections for both assessment years 2014-15 and 2015-16. The Tribunal upheld the CIT(A)’s decisions on disallowance of interest and amortization of government securities, emphasizing the prospective nature of the amendment to Section 194A and adherence to RBI guidelines.
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