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TMI Blog2023 (10) TMI 908X X X X Extracts X X X X X X X X Extracts X X X X ..... ered member and a nominal member, which is unknown to the exemption clause contained in Section 194A(3)(v), gave a clear opinion that CBDT has no authority to make a crack in the exemption clause contained in Section 194A(3)(v) by issuing the impugned circular and that the CBDT cannot usurp the powers of Parliament by virtue of Section 119 of the IT Act, 1961. Meaning thereby that the CBDT, under the garb of Section 119 of the IT Act, 1961, cannot exercise wider powers than the powers bestowed on it. CBDT has no power to introduce a substantial change or alteration in the provisions of the IT Act. 1961, by importing the ideas unknown to the IT Act. 1961. The impugned circular, therefore, does not stand to the legal test. Accordingly, the impugned Circular No. 9 of 2002 dt. 11 th Sept., 2002 [F. No. 275/106/2000/IT(B)--Annexure A] was quashed and set aside. Thus, in our view, the reliance of the Worthy CIT(A) NFAC, Delhi on this circular is against law. Hon ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd. [ 2021 (1) TMI 488 - SUPREME COURT ] has also observed that the expression member is not defined in the Act. Since a cooperative society has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er records are that the appellant has paid interest exceeding Rs. 5,000/- to non-members/nominal member without deducting TDS. The Ld. CIT(A) confirmed the action of the AO by observing that it is very clear in this regard under Section 194A(3)(v) of the Income Tax Act, 1961, that exemption of TDS provision is allowed only to a member of a co-operative society. He further noted that the CBDT has clearly defined member for the purpose of this section vide Circular No. 9 of 2022 dated 11.09.2022. The Assessing Officer has clearly dealt with this issue and for sake of brevity needs no reiteration. Thus, the appellant does not get any benefit from the order of the Jurisdictional High Court in CIT vs Punjab State Cooperative Bank Ltd, 2008 which is given in a totally different context of section 80P of the Act. First of all when specific provision is there (CBDT Circular as mentioned above) then general provision can not be resorted to. Even otherwise the referred case law does not apply to the circumstances of this case. The TDS provision has been brought, inter alia, to keep a tab upon illegal money transactions/tax evasion instruments and any liberal interpretation allowing exempti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by a cooperative society to any other co-operative society. Thus as per the said provision the provisions of section 194A are not applicable in the case of payment of interest paid by the co-operative Society to its members. It is respectfully submitted that as per The Punjab Co Operative Societies Act, 1961 definition of Member as defined in section 2(g) is as under: Member: Member means a person joining in the application for the registration of a co operative society and a person admitted to membership after such registration in accordance with this act, the rules and the bye-laws, and includes a nominal member, and an associate member and the Government when it subscribed to the share capital of a society. And section 2(ggg) Nominal member means a person admitted to membership as such after registration in accordance with the bye laws. The jurisdictional High Court has also held that a nominal member is a member of a co-operative society in CIT Vs Punjab State Co operative bank Ltd; 2008 300 ITR 24 Punjab Haryana High court [ANNEXURE A] 2.(g) member means a person joining in the application for the registration of a cooperative society and a per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not derived by the cooperative bank from the credit facilities provided to its members. In our view, a nominal member who has become a member of the society after its registration on payment of the prescribed fees as per the bye laws of the society, will also be considered as a member of the society as per the definition given under the Societies Act. Therefore, in the facts and circumstances of the case, it makes no difference whether the income is derived from the loan advanced to the nominal members or members or otherwise to a third party because every income of interest derived by a co-operative banking society from the banking business activity is to exempt under Section SOP (a)(i) of the Act. Thus as per the law laid down by the jurisdictional High Court, a Nominal Member is also an member of the Society. As such interest paid to a member as well as nominal member is just interest paid to members only. As such as per the proviso 3(v) of section 194A, the said section is not applicable on the assessee as such the assessee/appellant cannot be treated in default under section 201 (1) 201 (1A) of the I.T. Act,1961. Following the said judgment of the Hon ble jurisdic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT Act, 1961 generates some power in CBDT, But the power so generated by virtue of Section 119 is required to be utilized in a prescribed manner. CBDT is empowered to issue only administrative instructions to the subordinate authorities for the purpose of proper administration and enforcement of the provisions of the IT Act. 1961. Under the garb of Section 119 of the IT Act, 1961, CBDT has crossed its authority. What is not contemplated in exemption clause under Section 194A(3)(v) of the IT 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 IT Act. 1961. The CBDT has overstepped its authority and has issued the impugned circular directly in conflict with the provisions contained in Section 194A(3)(v) of the IT Act, 1961. Section 119 of the IT Act, 1961, does not at all support the action of CBDT. 24. The Division Bench of this Court, in the case of Banque Nationale De Paris (cited supra), has ruled out that CBDT 'cannot issue a circular under Section 119 of the Act, which would override or detract from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) NFAC, Delhi in the case of the assessee itself for the proceeding Asstt. Year i.e for 2014-15, has held that nominal members are members and interest paid to them is not liable for TDS u/s. 194 of the Income Tax. Act, 1961 [Copy of Order attached herewith] [ANNEXURE also similar view taken in appeal no NFAC/2014-15/10109750 Appeal No. NFAC/2013-14/10010485 [Copies attached herewith] [ANNEXURE G H respectively] Thus in view of the above said submission, keeping in view the above stated facts as well as legal position, it is requested before the hon ble Bench that the appeal of the appellant may kindly be allowed and impugned order under appeal, which is arbitrary and illegal being against law and facts of the case may kindly be cancelled/ annulled and/or such other relief may kindly be granted to the appellant which may be deemed fit and proper by the hon ble Bench, under the circumstances and facts of the case. 6. Per contra, the Ld DR although supported the impugned order. however, he has failed to rebut the contention of the counsel. 7. We have heard the rival contentions, perused the material on record, impugned order, written submission and case law cited. Now ..... 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