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TMI Blog2015 (4) TMI 1040X X X X Extracts X X X X X X X X Extracts X X X X ..... cision of the Hon'ble Bombay High Court in case of Jalgaon District Cooperative Society (2003 (9) TMI 56 - BOMBAY High Court ) wherein while quashing the CBDT Circular No. 09 of 2002 dt. 11/09/2002 in no uncertain terms held that exemption granted to a cooperative society u/s 194A(3)(v) cannot be taken away by creating a distinction between different categories of members. It is further evident, SLP filed by the department against the aforesaid judgment of the Hon'ble Bombay High Court was also dismissed by the Hon'ble Supreme Court. Thus, as per the decision of the Hon'ble Bombay High Court as aforesaid, which was also followed by ld. CIT(A), no differentiation can be made between the members of a cooperative society while applying the exemption provision of section 194A(3)(v) of the Act. In fact, ld. CIT himself while issuing notice u/s 263 as well as in more than one place in the impugned order has held the assessment order passed to be erroneous and prejudicial to the interests of revenue on the reasoning that no differentiation between members can be made while applying TDS provision u/s 194A(3). Thus, applying the same logic, it is to be held that ld. CIT(A)'s order holding t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee pays interest @ 10% on the deposits received from regular members, it pays 9.5% interest on the deposits received from associate members and 10% interest on the deposits received from nominal members. On going through the bye-laws of the society, AO also found difference in rights and privileges between regular members on one side and associate/nominal members on the other. He, therefore, opined that exemption as contemplated u/s 194A(3)(v) would apply only to a regular member and not associate/nominal members. Though, assessee objected to such proposition of the AO and contended that as the provision contained u/s 194A(3)(v) only speaks of member without any differentiation, AO cannot make a difference between regular member and associate/nominal member while granting exemption u/s 194A(3)(v) of the Act. Assessee in support of such contention, relied upon a decision of the Hon'ble Bombay High Court in case of Jalgaon District Cooperative Society Bank Vs. Union of India (265 ITR 423). AO, however, did not find merit in the contentions of assessee. He observed that 'member' as envisaged u/s 194A(3)(v) only refers to a regular member and not all the members of the so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax u/s 194A(3) of the IT Act. 2) The AO has differentiated between regular member and nominal and associate member. But the IT Act does not differentiate between any categories of member. The differentiation between the member has resulted in the non- compliance to the TDS provision resulting in the loss of revenue. 5. In response to the show cause notice, assessee submitted its reply objecting to the initiation of proceeding u/s 263 of the Act by stating that assessment order cannot be revised as the issue on which section 263 is invoked has already merged with the order passed by ld. CIT(A). Further, it was submitted by assessee that the assessment order passed cannot be considered to be erroneous and prejudicial to the interests of revenue as mere non-deduction of tax at source does not result in any loss of revenue since tax can be recovered from the deductee. Further, assessee submitted that observation of ld. CIT that assessee should be treated as cooperative bank would not make any difference as AO has already raised the demand of ₹ 1,86,50,479. Since the rate of tax does not change inter-se between cooperative bank and cooperative society, there is nothing prejudi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y AO and directed him to redo the assessment by computing correct liability u/s 201(1) and 201(1A). In other words, he directed AO to recompute the liability u/s 201(1) and 201(1A) in so far as interest payments made to regular members. 7. Ld. AR submitted before us, the issue of liability to deduct tax at source on the members of assessee society stood concluded in the order passed by ld. CIT(A) while deciding assessee's appeal against the assessment order. He submitted, ld. CIT(A) having given categorical finding that no differentiation can be made between the different categories of members of a cooperative society in so far as applicability of section 194A(3)(v) is concerned, assessment order got merged with the order of the ld. CIT(A), hence, ld. CIT could not have invoked his power u/s263 of the Act to revise the assessment order. In this context, he relied upon the following decisions: 1. Parminder Singh Vs. ACIT, 151 TTJ 633 (Amritsar) 2. K Sera Sera Productions Vs. CIT, 54 SOT 157 (URO) Mumbai. 3. Sonal Garments Vs. JCIT, 95 ITD 366 (Mumbai) Ld. AR further submitted, even otherwise, also, AO after examining the entire facts and materials on record, vis-à-vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d held that exemption applies only in case of regular members, however, ld. CIT(A) accepted assessee's claim that exemption provision as contemplated u/s 194A(3)(v) would apply not only to regular members but also to other members like associate/nominal members. While doing so, ld. CIT(A) has followed the decision of the Hon'ble Bombay High Court in case of Jalgaon District Cooperative Society (supra). On careful analysis of the said decision, it is very much clear that Hon'ble Bombay High Court while quashing the CBDT Circular No. 09 of 2002 dt. 11/09/2002 in no uncertain terms held that exemption granted to a cooperative society u/s 194A(3)(v) cannot be taken away by creating a distinction between different categories of members. It is further evident, SLP filed by the department against the aforesaid judgment of the Hon'ble Bombay High Court was also dismissed by the Hon'ble Supreme Court. Thus, as per the decision of the Hon'ble Bombay High Court as aforesaid, which was also followed by ld. CIT(A), no differentiation can be made between the members of a cooperative society while applying the exemption provision of section 194A(3)(v) of the Act. In fact, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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