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TMI Blog2012 (7) TMI 732X X X X Extracts X X X X X X X X Extracts X X X X ..... b-section (3) of section 194A with respect to some of its members is withdrawn, the banks would have to follow the entire procedure of deducting tax at source at the time of paying or crediting such interest in favour of such a member. The member in turn is also be subject to tax deduction regime and all the procedure and procedural requirements would have to be followed by the Banks and the member would suffer the tax deduction at source. It, therefore, cannot be stated that the petitioners which are cooperative banks are not prejudicially affected by the impugned circular. Circular holding that powers under section 119 of the Act would not empower the Board to issue clarification which would take away the exemption which has been grant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v) thereof provides that the provisions of sub-section (1) shall not apply to such income credited for paid by a cooperative society to a member thereof or to any other cooperative society . 3. It is the case of the petitioners that such exemption or exclusion provided in clause (v) of sub-section (3) of section 194A in case of a member of cooperative society would include all members and is not confined to only certain class of members of a cooperative society. CBDT, however, issued the impugned circular dated 11th September 2002, and clarified as under: 3. A question has also been raised as to whether nominal members, associate members and sympathizer members are also covered by the exemption under section 194A(3)(v). It is hereby ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Court was carried in appeal by the Revenue. The Apex Court, however, dismissed the appeal by an order dated 7.7.2004. Counsel, therefore, submitted that in the present case also, the circular be declared ultra vires. 5. On the other hand, learned counsel for the Revenue opposed the petitions contending that the Board has power under section 119 of the Act to issue clarification. Such a clarificatory circular draws a distinction between different kinds of members of cooperative society. A nominal member has no right to vote or participate in any of the meeting of a cooperative society. Clarifying that such nominal member would not fall within clause (v) of sub-section (3) of section 194A of the Act and therefore, was within the power of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Section 119 of the Income Tax Act, 1961, CBDT has crossed its authority. What is not contemplated in exemption clause under Section 194-A(3)(v) of the Income Tax Act, 1961 cannot be imported to deprive the exemption granted to co-operative society by issuing the impugned circular. By impugned circular, the co-operative society cannot be deprived of its right of exemption given under Income Tax Act, 1961. The CBDT has over-stepped its authority and has issued the impugned circular directly in conflict with the provisions contained in Section 194-A(3)(v) of the Income Tax Act, 1961. Section 119 of the Income Tax Act, 1961 does not at all support the action of CBDT. The Division Bench of this Court, in the case of Banque Nationale De Par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t petitions are allowed. The impugned circular No. 9 of 2002 dated 11-9-2002 (F.No. 275/106/2000/IT (B) Annexure-A) is quashed and set aside. Similarly, the letter issued by the Income Tax Officer, Jalgaon, Ward No. 2(3) (No. JAL/ITO/2(3)/TDS/194/2000-03 dated 9-10-2002 Annexure B) is also quashed and set aside. Rule made absolute in the above terms. We wee no reason to take a different view particularly when the decision of the Bombay High Court was challenged before the Apex Court, the SLP came to be dismissed and thus the decision of the Bombay High Court attained finality. We may notice that the provisions which the Bombay High Court referred to and relied upon from the Maharashtra Cooperative Societies Act are very similar in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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