ITO(TDS)-1(2)(1), MUMBAI, MUMBAI vs. DATTATRAY MAHARAJ KALAMBE JAOLI SAH. BANK, MUMBAI

ITA 7404/MUM/2026Status: DisposedITAT Mumbai21 September 2026AY 2018-1934 pages
AI SummaryDismissed

What were the facts?

The Revenue filed a batch of appeals against orders of the Additional/Joint Commissioner of Income Tax (Appeals) for Assessment Years 2017-18 to 2019-20. The appeals were filed with a delay, which the Tribunal condoned after considering the Revenue's affidavit citing a change in the legal landscape and the need to protect public interest and ensure consistency in tax administration. The assessee, Dattatraya Maharaj Kalambe, is a cooperative bank. The dispute centers on the assessee's liability to deduct tax at source (TDS) under Section 194A on interest paid on time deposits to cooperative societies. The Assessing Officer held that the assessee failed to deduct TDS on interest amounting to Rs. 21,76,496/- paid to registered cooperative societies. The assessee contended that TDS was not applicable due to exemptions under Section 194A(3)(v) of the Income-tax Act, 1961.

What did the Tribunal hold?

The Tribunal held that the assessee is entitled to an exemption from deduction of tax at source under Section 194A(3)(v) of the Income-tax Act, 1961, concerning interest amounts paid to its depositors who are non-member co-operative societies. The Tribunal's decision was based on the Hon'ble Bombay High Court's interpretation of Section 194A(3)(v). The High Court held that the legislature's intention was to grant co-operative banks the benefit of exemption from Section 194A(1) in respect of interest payments to non-member co-operative societies, as the second part of clause (v) does not exclude co-operative banks. This interpretation was fortified by CBDT Circular No. 19 of 2015, specifically paragraph 42.7, which clarified that the existing exemption under Section 194A(3)(v) from TDS on interest paid by a cooperative society to another cooperative society shall continue to apply to a co-operative bank. Consequently, the assessee cannot be held as an assessee-in-default under Section 201(1) read with Section 201(1A) for non-deduction of TDS on such interest payments. The Tribunal quashed and set aside the impugned orders and answered the substantial questions of law in favor of the assessee. The appeals filed by the Revenue were dismissed.

What were the issues?

1. Whether on the facts and in the circumstances of the case and in law, the Ld. Addl./JCIT(A) was justified in holding that a co-operative bank is not liable to deduct tax at source u/s 194A on interest paid on time deposits to co-operative societies, despite specific provisions contained in sections 194A(3)(i)(b) and 194A(3)(viia)(b) of the Income-tax Act, 1961. 2. Whether the Ld. Addl./JCIT(A) erred in law in holding that exemption under the second limb of section 194A(3)(v) overrides and excludes applicability of the specific provisions governing deduction of tax by co-operative banks under sections 194A(3)(i)(b) and 194A(3)(viia)(b). 3. Whether the Ld.Addl./JCIT(A) failed to appreciate that after amendment by Finance Act, 2015 w.e.f. 01.06.2015, co-operative banks were specifically brought within TDS framework in respect of interest on time deposits and, therefore, could not claim exemption available to ordinary co-operative societies under section 194A(3)(v). Assessee's Contention: The assessee argued that TDS provisions are not applicable in light of Section 194A(3)(v) of the Act, citing the exemption for interest paid to co-operative societies. They also referred to CBDT Circular No. 19 of 2015. The assessee relied on the decision in the case of Citizen Credit Co-op Bank Ltd. (ITA Nos. 6035 to 6042/M/2025 & 6385 to 6442/M/2025) where it was held that specific provisions prevail over general ones. Revenue's Contention: The Revenue contended that the Ld. Addl./JCIT(A) erred in holding that a co-operative bank is not liable to deduct TDS, despite specific provisions in Sections 194A(3)(i)(b) and 194A(3)(viia)(b). They argued that the exemption under Section 194A(3)(v) does not override these specific provisions. The Revenue also argued that co-operative banks were specifically brought within the TDS framework after the amendment by the Finance Act, 2015, and that the Ld. Addl./JCIT(A) wrongly relied on explanatory memorandums/CBDT circulars when statutory provisions mandated TDS.

Which sections of the Income-tax Act were involved?

Section 194A,Section 194A(1),Section 194A(3)(i)(b),Section 194A(3)(v),Section 194A(3)(viia)(b),Section 201(1),Section 201(1A)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “H(SMC

Before: SHRI VIKRAM SINGH YADAV & MS. DEBJANI MITRA NEOGY

Hearing: 09.09.2026Pronounced: 21.09.2026

PER BENCH:

These are batch of appeals filed by the Revenue against the respective orders of the Learned Additional/Joint Commissioner of Income Tax (Appeals) [‘Ld.Addl/JCIT(A)’] as per details tabulated below: ITA 7350/MUM/2026 AY: 2

The order continues below.

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