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2025 (3) TMI 84 - AT - Income TaxTDS u/s 194A - interest paid by the assessee co-operative bank to its members other co-operative societies - HELD THAT - By virtue of section 194A(3)(v) of the Act (whether pre amended and/or post amendment assessee bank is not liable to deduct TDS on any payment made to a cooperative society and contentions canvassed by the assessee bank is meritorious in nature. The Assessee bank has rightly not deducted TDS on payment made to SMR Coop Bank Emp Society Nahan The SBI Emp Non-Agri/CR/SEV Coop Society . The addition made on this count is liable to be deleted. Section 194A(3)(v) of the Act was express and clear with regard to cooperative society. We hold that it is not mandatory requirement in law that such societies (depositors) should be Members of Cooperative Bank. Section 194A(3)(v) expressly say that Income is credited or paid by a cooperative society to any other cooperative society then such income payment or credit need not be made subject matter of TDS. The other cooperative societies to whom payment is made or amount credited need not be a member of cooperative society so making payment. We gainfully refer to the order of Punjab State Co-operative Bank Ltd. Chandigarh 2016 (7) TMI 205 - ITAT CHANDIGARH . The Ludhiana Central Co-operative Bank ltd. Ludhiana 2016 (11) TMI 1766 - ITAT CHANDIGARH wherein it has been that when assessee being a Cooperative Society paid interest without deducting tax at source to other cooperative societies then such assessee would enjoy immunity from deduction of tax at source by virtue of section 194A(3)(v) of the Act. The said decisions would squarely apply in the present case. We thus hold that by virtue of the provisions of Section 194(A)(3)(v) the assessee is not required to deduct from payment of interest on time deposit of other being a cooperative society and that any demand raised to the contrary view (Supra) needs to be deleted. Assessee was required to deduct TDS on interest paid to Jagan Nath Temple Nahan we hold that said temple is being run by state Government that interest payable to Temple is not liable to TDS/or subject to TDS by virtue of notification so 3489 dt. 22/10/1970 under section 194A(3)(iii)(f) which includes any undertaking or body including a society registered under the Societies registration Act 1860 (21 of 1860) financed wholly by the Government. We hold that Assessee s action in not deducting TDS is justifiable. Assessee appeal allowed.
ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
ISSUE-WISE DETAILED ANALYSIS 1. Liability of TDS on Interest Payments to Co-operative Societies Relevant Legal Framework and Precedents: The relevant provisions are found in Section 194A of the Income Tax Act, particularly subsections (3)(i)(b), (3)(viia), and (3)(v). The Finance Act, 2015, amended these provisions, affecting the applicability of TDS exemptions. Court's Interpretation and Reasoning: The Tribunal examined whether the interest paid by the co-operative bank to other co-operative societies is subject to TDS. The Tribunal noted that Section 194A(3)(v) provides an exemption for interest payments from a co-operative society to another co-operative society, which remains intact even after the amendment. Key Evidence and Findings: The Tribunal relied on previous decisions from the ITAT Chandigarh Bench, which held that co-operative societies are not required to deduct TDS from interest payments to other co-operative societies. Application of Law to Facts: The Tribunal found that the assessee co-operative bank's payments to other co-operative societies fall under the exemption provided by Section 194A(3)(v). Treatment of Competing Arguments: The Tribunal rejected the Revenue's argument that the exemption does not apply post-amendment, citing consistent interpretations in previous cases. Conclusions: The Tribunal concluded that the assessee co-operative bank is not liable to deduct TDS on interest payments to other co-operative societies. 2. Exemption of TDS on Interest Paid to Government-Run Temple Relevant Legal Framework and Precedents: Section 194A(3)(iii)(f) exempts TDS on interest payments to any undertaking or body wholly financed by the government. Court's Interpretation and Reasoning: The Tribunal considered whether the temple, being run by the state government, qualifies for the exemption. Key Evidence and Findings: The Tribunal noted the notification SO 3489 dated 22/10/1970, which supports the exemption for government-financed bodies. Application of Law to Facts: The Tribunal found that the interest paid to Jagan Nath Temple Nahan falls under the exemption due to its government management. Treatment of Competing Arguments: The Tribunal dismissed the Revenue's assertion that the exemption was not applicable, emphasizing the temple's government-run status. Conclusions: The Tribunal concluded that the interest payments to the temple are exempt from TDS under the relevant notification. SIGNIFICANT HOLDINGS Preserve Verbatim Quotes of Crucial Legal Reasoning: "The exemption provided under section 194A(3)(v) of the Act with regard to deduction of tax at source from interest payment by a cooperative society to another cooperative society existed before the amendment, and continue to apply to the cooperative bank even after the amendment." Core Principles Established: The Tribunal reaffirmed that the exemption under Section 194A(3)(v) applies to interest payments between co-operative societies, irrespective of the Finance Act, 2015 amendments. It also established that interest payments to government-run entities are exempt under Section 194A(3)(iii)(f). Final Determinations on Each Issue: The Tribunal allowed the appeal, deleting the additions made in the impugned order concerning TDS on interest payments to co-operative societies and the government-run temple.
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