9911796707
TMI Blog2015 (1) TMI 1405X X X X Extracts X X X X X X X X Extracts X X X X ..... lause (v) which is general in nature will not apply to the co-op bank. The provisions of Section 194A (1)(viia) is clearly applicable and therefore the assessee has to deduct T.D.S. on income credited or paid in respect of deposits except which falls under that provisions. We therefore, dismiss the appeal of the assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... ding ₹ 10,000/- Therefore, the provisions of section 201(1) & 201(1A) of the I.T Act 1961 are applicable in the case of the assessee. Since the assessee has failed to deduct the TDS, the assessee/deductor is default u/s 201(1), interest u/s 201(1A) was required to be levied. Thus, the Income Tax Officer calculated the amount payable for A.Y 2011-12 at ₹ 13,29,185/-, ₹ 9,04,211/- u/s 201(1) and ₹ 4,24,974/- u/s 201(1A). 5. Matter carried to ld. CIT(A) and CIT(A) has confirmed the action of the AO. 6. The assessee is in appeal against the decision of the ld.CIT(A). 7. We have heard the rival contentions of both the parties. During the course of hearing before us the ld.AR of the assessee submitted that the assessee is a co-operative society engaged in banking business and interest paid to its members is not liable for tax deduction. He further submitted that for the past many years the assessee bank has been filing return of income regularly and exemption from TDS u/ s 194A(3)(v) has been allowed to assessee year after year upto assessment year 2009-10.The AO has relied upon the decision of the I.T.A.T. Pune in the case Bhagani Nivedita Shahari Bank Ltd. By ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt years 2010-11 to 2013-14 vide order dated 01/10/2014, wherein we find that the assessee is required to deduct a tax at source in respect of time deposits in excess of ₹ 10,000/- interest payment to members of the assessee bank. We have already held that the co-operative bank and co-operative society both are different and independent. The co-operative bank was registered under the Banking Regulations Act 1949. The co-operative society was registered under the Karnataka Co-operative Societies Act 1959. Therefore, we are of the view that TDS is required to be made on time deposit on interest payment after 01-07-1995. We have already dealt with this issue in detail in para 2.6 of the said tribunal order, which reads as under:- "2.6. We have heard the rival contention of both the parties, it is undisputed fact that assessee has paid interest on term deposit to ₹ 18,39,0031/- to depositor without deducting the tax at source. The assessee contended that the provisions of TDS are not attracted in view of clause (v) of sub-section (3) of section 194A as the interest payments to the extent of ₹ 1,83,90,031/- have been made to the members of the bank which is a Co-oper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lls of exchange, issue cheque, demand drafts, pay orders, gift cheques, lockers, bank guarantees etc. 3. Society cannot act clearing agent, for cheques, DDs, pay orders and other forms. 4. Society are bound by rules and regulations as specified by in the co-operative societies act. Filing of returns . Co-operative banks. have to submit annual return to RBI every year Society has to submit the annual return to Registrar of Societies. Inspection RBI has the power to inspect accounts and over all functioning of the Bank Registrar has the power to inspect accounts and over all functioning of the bank. Part V of the Part V Part V of the Banking Regulation Act is applicable to co-operative bank Part V of the Banking Regulation Act is not applicable to co-operative banks. Use of words The word „bank‟ „banker‟, „banking‟ can be used by a co-operative bank. The word „bank‟ „banker‟, „banking cannot be used by a co-operative society Moreover, we find that in the said judgment the Hon‟ble High Court has held as under: "If a Co-operative Bank is exclusively carrying banking business, then the income derived ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive Bank and others have filed the writ before the Hon‟ble Kerala High Court, wherein the Hon‟ble High Court has held as under: "The Income Tax Department has come up with this appeal against the judgment in O.P. No. 17082/1997.(Thodupuzha Urban Co-operative Bank Ltd., In [1999]238 ITR630(Ker). That petition was filed by five co-operative Societies, when they were faced with a notice from the appellant to deduct the income-tax out of the interest paid by them on time deposits, in respect of every payment exceeding ₹ 10,000, at the relevant point of time. The learned single judge as per the impugned judgment, quashed the notices holding that going by the provisions contained in section 194A(3)(viia)(a) of the Income Tax Act, for short "the Act" ,the writ petitioners were not liable to deduct income-tax at source in respect of the interest so paid, as sub-section (3) exempts them from the coverage of sub-section (1) of section 194A of the Act. Aggrieved by the judgment, this appeal is filed only against the 4th petitioner in O.P. No. 17082/1997 (see[199]238 ITR 630), namely, the Thodupuzha Urban Co-operative Bank Ltd. No. 394, Thodupuzha, Idukki District, repre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of the impugned judgment discloses that the writ petitioner, the first respondent, was concede to be an agricultural co-operative society. Consequently, it comes within the purview of clause (viia)(a) of sub-section (3) of section 194A of the Income-tax Act, 1961. Naturally, the first respondent-society will not be liable in terms of sub-section (1) of section 194A. The writ appeal fails, dismissed. From this above we are of the view that the Hon‟ble High Court has interpreted sub- section (v) and(viia)(a) of Section 194A(3). Now coming to Circular No. 9/2002, issued by the CBDT, which is relied upon the assessee. The said circular sought to interpret the definition of "member" clarified that the member does not include the nominal member. It was held by the Bombay High Court in the case of Jalgaon District Central Co-operative Bank Ltd. & Anors. vs. Union of India 265 ITR 423, that the Board has no power to interpret the provisions of law by way of circular. The issue in hand of Hon‟ble Bombay High Court was the definition of word "member" as appearing in clause-(v)of Section 194A(3) and power of Central Board of Direct Tax to issue circular u/s 119 which would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 in relation to deduct tax at source in the case of income credited or paid in respect of deposit with a bank company to which banking regulation Act 1949 applies or with a co-operative society engaged in carrying on the business of banking, "including co-operative land mortgage bank or co-operative land development bank" This was brought into w.e.f., 1.4.1992. Finance Act 1995 w.e.f., 1st July 1995 again withdrawn the exemption for interest on time deposit payable by bank. The amendment Section 194A now provides for deduction of tax at source at the rate in force from payment for interest exceeding ₹ 10,000/-in a financial year on time deposits made on or after 1st July,1995 with a banking company or with a Co-operative society engaged in carrying on business of banking. The aforesaid limit of ₹ 10,000/- shall be computed with reference to the income credited or paid by branch of banking company or Co-operative Society as the case may be. The interest on time deposit made with a primary agricultural society or a credit society or a co-operative land mortgage bank or a Co-operative land development bank will not be subject to requirement of deduction of tax at source ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credited or paid or likely to be credited or paid during the financial year by the person referred to in sub- section (1) to the account of, or to, the payee, does not exceed 6 ten thousand rupees................. (v) to such income credited or paid by a co- operative society 5 to a member thereof or] to any other co- operative society; (viia) to such income credited or paid in respect of,- (a) deposit with a primary agricultural credit society or a primary credit society or a co-operative land mortgage bank or a co-operative land development bank; (b) deposits (other than time deposits made on or after the 1st day of July, 1995) with a co-operative society, other than a co-operative society or bank referred to in sub-clause (a), engaged in carrying on the business of banking The TDS on time deposits is dealt in clauses (vii) & (viia) of 194A (3) which are extracted below: (3) The provisions of sub-section (1) shall not apply (vii) : to such income credited or paid in respect of deposits (other than time deposits made on or after the 1st day of July, 1995) with a banking company to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iia) nor in clause (i) there is anything to restrict their applicability only to non-members and therefore they apply to all depositors. Going by the above understanding, the co-op bank is required u/s 194A(1) to make TDS from the interest paid to all depositors. However co-op bank holds the view that clause (viia) applies only to non-members and not to the members. However, on perusal of clause (viia), nothing in it to restrict its application only to non-members. The stand taken by co-op bank is that the interest paid to members is exempted in clause(v). The appellant is placing reliance on Circular no 9 of 2002 in its support. In this scenario, the moot question for consideration is: Whether, in respect of interest paid on time deposits by a co-op bank, the clause(v) which deals with cooperative societies will apply or the clause (viia) which mentions specifically „a co-operative society engaged in the business of banking‟ finds application? 2. Legislative history of TDS on interest: a. The Finance act 1968, inserted clause (v) in 194A(3) to exempt interest paid by on co-op society to another co-op society from TDS purview. b. The Finance Act 1970, inserted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viia) applied to specially created category of cooperative societies. This reaffirms the decision of legislature to apply a specific clause to the specific genre cooperative societies, which were earlier carved out of the genus as envisaged in general clause(v). The effect of above amendment was explained by the CBDT in Circular no 617 dated 22-11-1991 where in it is clarified that: The effect of the aforesaid change is that income-tax shall now be deductible at source from the interest income on the deposits with. (i) a banking company, or cii) a co-operative society engaged in carrying on the business of banking, other than a co-operative land mortgage bank, a co-operative land development bank, primary agricultural credit society or a primary credit society (emphasized) The above circular clearly states that, it was only by introduction of clause (viia), a cooperative society engaged in the business of banking was brought under the purview of TDS on time deposits. The TDS on time deposits was withdrawn very next year by way of substituting above mentioned clauses (vii) & (viia) with a combined clause (vii) and status quo ante was restored. f. The Finance Act 1995 inserte ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
