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TMI Blog2003 (9) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... of parties, taken up for final hearing forthwith. The Maharashtra Co-operative Societies Act was enacted with a view to provide for orderly development of the co-operative movement in the State of Maharashtra in accordance with the relevant directive principles of State policy enunciated in the Constitution of India. The application of the principles of co-operation has made it possible for a society composed of comparatively poor and weak men to give its members some of the advantages ordinarily obtainable only to the rich and strong. The co-operation is not a merely business but a combination of business and a spirit of service. Petitioner No.1 is a Central Bank within the meaning of section 2(6) of the Maharashtra Co-operative Societies Act, the object of which includes creation of funds to be advanced in the form of loans to other societies such as agricultural, co-operative and multipurpose co-operative societies. Section 194A of the Income-tax Act, 1961, deals with interest other than interest on securities. Sub-section (1) of section 194A mandates deduction of income-tax at source in respect of the income by way of interest whereas subsection (3) of section 194A engra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Taxes. The Central Board of Direct Taxes has issued the circular by virtue of section 119 of the Income-tax Act, 1961. The petitioner has found fault with the authority of the Central Board of Direct Taxes. The power which has been assumed by the Central Board of Direct Taxes, does not in fact spring from section 119 of the Income-tax Act, 1961. No doubt, section 119 of the Act empowers the Central Board of Direct Taxes to issue instructions to the subordinate authorities for proper administration of the Act. Being aggrieved by the impugned circular, the petitioner has filed this writ petition under article 226, read with article 227 of the Constitution of India and thereby challenged the validly of the impugned circular (exhibit A) and the competency of the Central Board of Direct Taxes. Similar challenge to the said circular is also given by the petitioner in Writ Petition No. 2261 of 2003. The petitioner therein is an income-tax consultant of Jalgaon. In response to the notice, one S.Y. Jawale, Income-tax Officer, Ward 2(3), Jalgaon, has filed affidavit in reply on behalf of the respondents. It is stated in the affidavit that the definition of "member" does not include nom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to withdraw the exemption granted under the law without there being any authority of law. He further submitted that the power of the Central Board of Direct Taxes under the provisions of section 119 of the Income-tax Act, 1961, only allows to issue such orders, instructions and directions to subordinate income-tax authorities for proper administration of the provisions of the Income-tax Act and such authorities are expected to observe and follow such orders, instructions and directions of the Central Board of Direct Taxes. Therefore, the impugned circular is liable to be quashed and set aside. In order to buttress his submissions, learned senior counsel, Shri Shah, has relied upon the following cases: (1) Banque Nationale De Paris v. CIT [1999] 237 ITR 518 (Bom); (2) K.K. Adhikari v. T.G. Kulkarni [1980] CTJ 241; (3) CIT v. Varangaon Co-operative Fruit and Agricultural Produce Sale Society Ltd. (Income-tax Application No. 20 of 1987 decided on 26th July 1990); and (4) U.P. Co-operative Cane Union Federation Ltd. v. CIT [1999] 237 ITR 574 (SC). Learned additional standing counsel, Shri Sonwane, for the Union of India has argued that the Central Board of Direct Taxes, by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered member and nominal, associate and sympathizer member. In the case of K.K. Adhikari, a Division Bench of this court has held that the definition of a member under section 2(19) of the Maharashtra Co-operative Societies Act, 1960, includes a nominal member or a sympathizer member. It is further held that notwithstanding the fact that a nominal member does not enjoy all the rights and privileges which are available to an ordinary member, his status is that of a member as defined in section 2(19) of the Act. The Division Bench of this court in the case of CIT v. Varangaon Co-operative Fruit and Agricultural Produce Sale Society Ltd., has also taken a similar view that the definition of "member" under section 2(19)(a) of the Maharashtra Co-operative Societies Act, 1960, includes a nominal member. It is further held by the Division Bench that there is nothing in section 80P(2)(iii) of the Income-tax Act to the contrary. The reliance on sub-section (2) of section 24 of the Maharashtra Co-operative Societies Act, 1960, by Shri Sonwane, learned additional standing counsel for the Union of India, is misconceived. The question for consideration is not with regard to what are the ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erstepped its authority and has issued the impugned circular directly in conflict with the provisions contained in section 194A(3)(v) of the Income-tax Act, 1961. Section 119 of the Income-tax Act, 1961, does not at all support the action of the Central Board of Direct Taxes. The Division Bench of this court, in the case of Banque Nationale De Paris [1999] 237 ITR 518, has ruled that the Central Board of Direct Taxes cannot issue a circular under section 119 of the Act, which would override or detract from the provisions of the Income-tax Act, 1961. The Central Board of Direct Taxes can legitimately issue administrative instructions or orders by exercising powers under section 119 of the Income-tax Act, 1961. However, by virtue of section 119 of the Act, the Central Board of Direct Taxes is not at all permitted to override or withdraw the exemption clause under section 194A(3)(v) of the Income-tax Act, 1961. Assumption of such powers in the Central Board of Direct Taxes by virtue of section 119 of the Income-tax Act, 1961, would really amount to bestowing powers on the delegated authority even to amend the provisions of the Income-tax Act, 1961, enacted by Parliament. Having ex ..... X X X X Extracts X X X X X X X X Extracts X X X X
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