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TMI Blog2015 (7) TMI 978X X X X Extracts X X X X X X X X Extracts X X X X ..... rossly erred in law and on facts in holding that the assessee cooperative bank is not eligible for exemption u/s. 194A(3)(v) of the Act from TDS on interest paid/credited on time deposits to its members. 3. At the very outset, it was brought to the notice of the rival parties that an identical issue has been considered and decided by this very Bench in the case of Belgaum District Central Cooperative Bank Ltd. Vs. ITO, TDS Ward, Belgaum in I.T.A.Nos. 312 to 315/PNJ/2014, wherein the Bench has considered the provisions of the Finance Act, 2015. The relevant portion of which reads as under:- "Section 194A(1) read with section 194A(3)(i) of the Act provide for deduction of tax on interest (other than interest on securities)'over a spec-i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... embers of different categories. This has led to dispute as to whether the co-operative banks, for which the specific pro-visions of tax deduction exist in the form of section 194A(1), section(c)4A(3)(i)(b) and 194A(3)(viia)(b) of The Act can take the benefit of general exemption provided to all co-operative societies from deduction of tax on payment of interest to members. The matter has been carried to judicial forums and in some cases a view has been taken that the provisions of section 194A(3)(viia)(b) of the Act makes no distinction between members and non-members of co-operative banks for the purposes of deduction of tax, hence, the co-operative banks are required to deduct tax on payment of interest on time deposit and cannot avoid th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from deduction of tax from payment of interest to members by a co-operative society under section 194A(3)(v) of the Act shall not apply to the payment of interest on time deposits by the cooperative banks to its members." 3.1 It was observed that with this amendment, the impugned provision was not applicable during the years under appeal and it is clear that the provisions are applicable w.e.f. 01/06/2015. The Bench has also considered Circular No. 09/2002 of the CBDT and stated that the Board has clarified that the provisions of TDS are not enforceable in respect of interest paid by the Cooperative Society/Bank to its members, but tax has to be deducted from the interest paid to the non-members. 3.2 The Bench has also considered the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation issued by the CBDT which is in the form of a clarification with regard to the rights and privileges of a duly registered member and nominal member is outside the scope of sec.119 of the Act. The Hon'ble High Court further held that the CBDT cannot issue a circular u/s. 119 of the Act which would override or retract from the provisions of Income-tax Act, 1961. Thus, the observations of the Hon'ble High Court were more towards the clarification regarding member and nominal member. Considering all the facts in totality in the light of the memorandum explaining the provisions in the Finance Bill 2015 (supra) and the clarification by the Board that the Circular has not been withdrawn, makes it ample clear that the impugned provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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