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TMI Blog2016 (11) TMI 1766X X X X Extracts X X X X X X X X Extracts X X X X ..... society to another cooperative society - Assessee is not an assessee in default under section 201(1) of the Act and consequently interest under section 201(1A). Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... amendment of clause (v) of section 194A(3) has been made w.e.f. 1.6.2005 and it required cooperative banks to deduct TDS on interest payments made to members. The said amendment had been held to be prospective by the I.T.A.T. Panaji Bench in the case of Belgaon District Cooperative Central Bank vide order dated 16.6.2015 which has been followed in another decision of the same Bench in the case of Goa State Cooperative Bank Vs. CIT dated 19.6.2016. In view of the same the CIT (Appeals) held that the assessee was entitled to exemption from tax deduction at source under section 194A(3)(v) and the Assessing Officer was not justified in creating the said liability under section 201(1) alongwith 201(1A) of the Act which was accordingly deleted. 4. Aggrieved by the same, the Revenue has come up in appeal before us. During the course of hearing before us, the learned counsel for the assessee drew our attention to the decision of the I.T.A.T., Chandigarh Bench in the case of The Punjab State Coop Bank Ltd., Chandigarh Vs. ITO(TDS-II), Chandigarh in ITA No. 279/Chd/2016 dated 1.7.2016 and stated that it has been categorically held by the Bench that the exemption provided under section 194A( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m deposits from House fed Punjab and KRIBHCO. On these term deposits, the assessee during the relevant assessment year had paid interest to House fed Punjab amounting to Rs. 13,40,476/- and KRIBHCO amounting to Rs. 2,55,15,595/-. Since the assessee had not deducted the tax at source on these interest payments, the ITO (TDS) treated the assessee, as 'an assessee in default' and passed the order under section 201(1) of the Act. The ITO(TDS) also levied interest under section 201(1A) of the Act. 13. Being aggrieved, the assessee preferred appeal before the CIT (Appeals). The CIT (Appeals) for his elaborate reasoning mentioned in paras 5.3 to 5.3(c) decided the issue in favour of the assessee. 14. The Revenue being aggrieved, is in appeal before us. The learned D.R. relied on the assessment order. On the other hand, the learned counsel for the assessee reiterated the submissions made before the Income Tax Authorities and relied on the findings of the CIT (Appeals). In furtherance, the learned counsel relied on the recent order of the Bangalore Bench of the Tribunal in the case of DCIT (TDS) Vs. Sree Thyagaraja Co-op Bank Ltd. in ITA Nos. 856 to 860/Bang/2015, (order dated 10.11.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks, for which the specific provisions of tax deduction exist in the form of section 194A (1), section 194A(3)(i)(b) and section 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 cooperative 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 the same by taking the plea of the general exemption provided under section 194A(3)(v) of the Act. This is because the specific provision of tax deduction provided under section 194A(3)(i)(b) and 194A(3)(viia)(b) of the Act for co-operative banks override the general exemption provided to all cooperative societies for non-deduction of tax from interest payment to members under section 194A(3)(v) of the Act. As there is no difference in the functioning of the cooperative banks and other commercial banks, the Finance Act, 2006 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of Bhagani Nivedita Sahakari Bank Ltd has been considered. It is discussed in the case of Raddi Sahakara Bank (supra) that Hon'ble ITAT Bangalore Bench in the case of Bagalkot District Central Cooperative Bank has dealt with identical issue wherein the Hon'ble Tribunal did not agree with the view expressed by the Hon'ble Pune ITAT (SMC Bench) in the case of Bhagani Nivedita Sahakari Bank Ltd. It was held by the Hon'ble ITAT, Bangalore Bench in the case of Bagalkot District Central Cooperative Bank that "we hold that the Assessee which is a co-operative society carrying on banking business when it pays interest income to a member both on time deposits and on deposits other than time deposits with such co-operative society need not deduct tax at source under section 194A by virtue of the exemption granted vide clause (v) of sub-section (3) of the said section." Relying upon the above decision, Hon'ble ITAT, Bangalore Bench decided in the case of M/s Raddi Sahakara Bank as "In our view, the above decision rendered by the co-ordinate bench is squarely applicable to the facts of the present case. Respectfully following the decision of the co-ordinate bench re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that exemption provided under section 194A(3)(v) of the Act from deduction of tax from interest paid by a co-operative society to another co-operative society existed before the amendment and shall continue to apply to the co-operative bank even after the amendment. It was made clear further that such exemption to co-operative bank is available only when the depositor is a co-operative society. In the instant case M/s Housefed & M/s KRIBHCO are members who has deposited the amount with the appellant Co-operative bank are co-operative societies only. Therefore in view of the above discussion it is held that the appellant, a cooperative society, is not required to deduct tax from the payment of interest on time deposit to its members being cooperative societies or other cooperative societies. Hence, the appellant is not liable under section 201(1) as person in-default for not deducting tax at source under section 194A(1) of the Act and also not liable for interest u/s 201 (1 A) of the Act and therefore the demand created in respect of M/s Housefed and M/s KRIBHCO is deleted. 16. On reading the memorandum of Finance Bill, 2015, it is clear that the exemption provided under section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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