DY. COMMISSIONER OF INCOME TAX, AINTHAPALI, SAMBALPUR vs. THE KORAPUT CENTRAL COOPERATIVE BANK LTD, JEYPORE

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ITA 475/CTK/2025Status: DisposedITAT Allahabad12 November 2026AY 2017-188 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

On the issue of disallowance under Section 40(a)(ia), the Tribunal noted that for 928 depositors without PAN, Form 15G/15H could not be furnished. The Tribunal directed the AO to examine this aspect and restrict the disallowance to cases where interest exceeded Rs. 10,000/- and Form 15G/15H was not submitted, recomputing the total income accordingly. The Revenue's appeal on this issue was allowed for statistical purposes. On the issue of disallowance under Section 14A, the Tribunal observed that it was not disputed that there was no exempt income for the year. Since the assessee's claim that income from investments formed part of total income was not disproved, the invoking of Section 14A was not justified. The Tribunal directed the AO to delete the disallowance of Rs. 12,57,777/-. The assessee's cross-objection was allowed.

What were the facts?

The assessee, The Koraput Central Cooperative Bank Ltd., is challenging an order of the NFAC, Delhi for Assessment Year 2017-18. The Assessing Officer (AO) made additions of Rs. 12,57,777/- under Section 14A and Rs. 9,36,33,272/- under Section 40(a)(ia). The CIT(A) upheld the Section 14A disallowance but deleted the Section 40(a)(ia) addition. The Revenue appealed against the deletion, and the assessee filed a cross-objection against the sustained Section 14A disallowance. The Section 40(a)(ia) disallowance pertained to interest paid on deposits where TDS was allegedly not deducted. The Section 14A disallowance was made by the AO without specific findings on exempt income.

What were the issues?

1. Whether the disallowance of Rs. 9,36,33,272/- under Section 40(a)(ia) of the Income Tax Act, 1961, for non-deduction of TDS on interest paid to individuals, is justified, considering the assessee's submission of Form 15G/15H and payments below Rs. 10,000/-? (Assessee argues no violation; Revenue argues failure to deduct TDS on Rs. 6,07,95,197/- due to non-furnishing of PAN/Form 15G/15H and late filing of Form 26Q). 2. Whether the disallowance of Rs. 12,57,777/- under Section 14A of the Act read with Rule 8D of the Income Tax Rules, 1962, is justified in the absence of any exempt income earned by the assessee? (Assessee argues disallowance is arbitrary, cannot exceed exempt income, and relies on ITAT decisions in Indus Valley Property, NDTV Network, Linguanext Technicalities, and Rajdeep Automation, and CBDT Circular No. 18/2015; Revenue relies on AO and CIT(A) orders).

Which sections of the Income-tax Act were involved?

Section 14A,Section 40(a)(ia),Section 194A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, CUTTACK ‘DB’ BENCH

Before: SHRI GEORGE MATHAN & SHRI GOPALAN GURUSAMY

For Appellant: Shri Rohit Singhania, AR
For Respondent: Shri Jeetendra Kumar, CIT, DR
Hearing: 09.09.2026Pronounced: 12.11.2026

Heard together (2 matters)

CO No.08/CTK /2025
ITA No.475/CTK/2025

Read from the judgment's own cause title. This page is filed under one of them.

IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK ‘DB’ BENCH (VIRTUAL HEARING AT KOLKATA) BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI GOPALAN GURUSAMY, ACCOUNTANT MEMBER

ITA No.475/CTK/2025 Assessment Year: 2017-18 DCIT, Sambalpur, Vs. The Koraput Central Odisha-768004 Cooperative Bank Ltd. NKT Road Near Laxmi Talkies Koraput Odisha-764001 [PAN: AAAAT2619K] APPELLANT RESPONDENT

CO No.08/CTK /2025 (In ITA No.475/CTK/2025) Assessment Year: 2017-18 The Koraput Central Vs. DCIT, Sambalpur, Cooperative Bank Ltd. Odisha-768004 NKT Road Near Laxmi Talkies Koraput Odisha-764001 [PAN: AAAAT2619K] APPELLANT RESPONDENT Appellant by : Shri Rohit Singhania, AR Respondent by : Shri Jeetendra Kumar, CIT, DR Date of hearing : 09.09.2026 Date of Pronouncement : 12.11.2026 O R D E R PER GOPALAN GURUSAMY, ACCOUNTANT MEMBER: The captioned Appeals of Revenue and Cross-Objection of the Assessee are directed against the order of the NFAC, Delhi [(hereinafter referred to as the “Ld. CIT(A)”] passed u/s 250 of the

ITA No.475/CTK/2025 & CO No.08/CTK/2025 The Koraput Central Cooperative Bank Limited; A.Y: 2017-18 Income Tax Act, 1961 (“the Act”, for short) dated 15.07.2025 for the Assessment Year 2017-18.

2.

Brief facts of the case are that, Assessee is a cooperative banking company and filed its return of income for the Assessment Year 2017-18, declaring total income of Rs.1,78,42,870/-. The Assessing Officer completed the assessment u/s 143(3) of the Act vide Order dated 14.12.2019 wherein the addition of Rs.12,57,777/- was added by way of disallowance u/s 14A of the Act and an amount of Rs.9,36,33,272/- was added by way of disallowance u/s 40(a)(ia) of the Act. On further Appeal, the Ld. CIT(A) vide his Order dated 15.07.2025 has upheld the disallowance made u/s 14A of the Act and allowed the relief in regard to the addition made of Rs.9,36,33,272/-. The Department has preferred Appeal against the deletion of the amount of Rs.9,36,33,272/-, whereas the Assessee has preferred Cross-Objection against the addition sustained by the Ld. CIT(A) of Rs.12,57,777/- u/s 14A of the Act read with Rule-8D of the Income Tax Rules, 1962 [hereinafter referred to as the ‘Rules’].

2.1. The Assessing Officer noted that the Assessee has claimed an amount of Rs.36,67,40,805/- towards interest paid on deposits in the Profit & loss account for the year ended 31.03.2017. Out of the said amount, it was noted that amount of Rs.31,21,10,908/- has been paid

ITA No.475/CTK/2025 & CO No.08/CTK/2025 The Koraput Central Cooperative Bank Limited; A.Y: 2017-18 to the individual towards interest paid on deposits (FD, RD & reinvestment of deposits etc), in respect of which the Assessee is under obligation to deduct TDS as per the provisions of Section 194A of the Act. The Assessing Officer called upon the Assessee to furnish details of the TDS deposits with supporting documents. As the Assessee failed to furnish any explanation. The Assessing Officer proceeded to make disallowance u/s 40(a)(ia) of the Act of amount of Rs.9,36,33,272/- (30% of Rs.31,21,10,908/-).

3.

The Ld. CIT(A) has deleted the said addition stating that the Assessee has furnished details of interest paid above Rs.10,000/- along with list of Form No. 15G/15H and the acknowledgment thereof. Therefore, the Ld. CIT(A) took the view that the addition is not warranted and deleted the same.

4.

The Department has preferred Appeal on this issue. It was the argument of the Department that out of the total aggregate amount of Rs.36,67,40,805/- debited as interest paid in its Profit and loss account, the amount of Rs.15,59,99,625/- has been paid as interest on FD/RD etc. to individuals. The Assessee under the obligation to deduct TDS on the interest paid to individuals where the interest income exceeds Rs.10,000/-. Out of the said amount of Rs.15,59,99,625/-, the interest amount of Rs.12,56,27,077/- pertains

ITA No.475/CTK/2025 & CO No.08/CTK/2025 The Koraput Central Cooperative Bank Limited; A.Y: 2017-18 to interest amount exceeding to Rs.10,000/- and amount of Rs.3,03,72,548/- pertain to the interest paid less than Rs.10,000/-. Further, it was submitted that out of the interest paid of Rs.12,56,27,077/- paid to 2374 number of depositors, Form No.15G/15H has been furnished in respect of 1446 depositors. It is evident that out of Rs.2,374 deductee that 928 deductee/ beneficiaries have no PAN and have not furnished non-deduction certificate in Form No.15G/15H, the amount of interest paid to such depositors aggregate to Rs.6,07,95,197/-. Thus, it was argued that the Assessee has failed to deduct TDS on the interest amount of Rs.6,07,95,197/-. It was argued that in respect of this amount disallowance u/s 40(a)(ia) of the Act. It was further submitted that the Assessee’s bank has furnished Form-26Q on 18.03.2020, it should have been filed on 15.06.2017. The Form No.15G and 15H submitted on the e-filing portal on 27.04.2000. The Assessee was required to furnish the statement of deduction of tax referred to in Rule 31A containing the particulars of declaration received by him during each quarter of the financial year along with the unique identification number allotted by him under sub-rule (3) in accordance with the provisions of clause (vii) of the sub-rule (4) of rule 31A irrespective of the fact that no tax has been deducted in the said quarter. Further under sub rule 6, an income-tax authority may, before the end of seven years from the end of the

ITA No.475/CTK/2025 & CO No.08/CTK/2025 The Koraput Central Cooperative Bank Limited; A.Y: 2017-18 financial year in which the declaration referred to in sub-rule (1) has been received, require the person referred in sub-rule (3) to furnish or make available the declaration for the purposes of verification or any proceeding under the Act in accordance with the procedures, formats and standards specified by Principal Director General of Income-tax (Systems) specified under sub-rule (7). In view of the above, the assessee was obligated to furnish copies of form 15G/15H to the Assessing Officer on being called for so. In view of the above, it is believed that the Assessee has not made TDS on payment of interest of Rs.31,21,10,908/- paid to individuals and the Assessing Officer has rightly disallowed the expense u/s 40(a)(ia) of the Act.

5.

On the other hand, the Ld. AR filed Paper Book and contended that in the case of payment of interest exceeding Rs.10,000/-, the Assessee has submitted Form No.15G/15H and therefore, disallowance is not attracted. It was also submitted that where the interest payment is less than Rs.10,000/- to individual, TDS provisions are not attracted. Thus, it was argued that there was no violation by the Assessee in regard to deduction of TDS on the interest paid to the depositors, therefore, the order of the Ld. CIT(A) may be upheld.

ITA No.475/CTK/2025 & CO No.08/CTK/2025 The Koraput Central Cooperative Bank Limited; A.Y: 2017-18 6. We have considered the rival submissions. It is seen that in respect of 928 persons/deductee/depositors, the Assessee has not furnished Form No.15G/15H, as they did not have the PAN. PAN is mandatory for filing Form No.15G/15H. Thus, these persons could not have filed Form No.15G/15H. As per the Department, this amounts to Rs.6,07,95,197/-. Therefore, we consider it appropriate to direct the Assessing Officer to examine this aspect and to restrict the disallowance made u/s 40(a)(ia) of the Act in respect of cases wherein the interest payment to individuals exceeds Rs.10,000/- and in respect of whom the Form No.15G/15H has not been submitted, and accordingly recompute the total income. As a result, Appeal of the Department is allowed for statistical purposes on this issue.

7.

In regard to the disallowance made u/s 14A, the Ld. AR submitted that the Assessing Officer has made the disallowance in an arbitrary manner, it was submitted that no part of income of the bank has been claimed as exempt and no part of interest received on investment has been claimed exempt. Therefore, it was contended that the disallowance u/s 14A of the Act read with Rule-8D of the Rules is not correct. The Ld. AR also contended that the disallowance cannot exceed the exempt income. In this regard, the Ld. AR relied on the decision of the ITAT, Bangalore Bench in the case of Indus Valley Property vs. ITO in ITA No.81/BANG/2025, Order dated 09.06.2025 Page | 6

ITA No.475/CTK/2025 & CO No.08/CTK/2025 The Koraput Central Cooperative Bank Limited; A.Y: 2017-18 and argued that disallowance should not exceed the exempt income earned during the year.

8.

The Ld. AR also relied on the decision of the ITAT, Delhi Bench in the case of NDTV Network vs. DCIT in ITA No.6647/DEL/2018, order dated 04.04.2025. and argued that no disallowance u/s 14A of the Act is warranted in the absence of exempt income. The Ld. AR also relied on the decision of the ITAT Pune, Bench in the case of Linguanext Technicalities Private Limited vs. ITO in ITA No.2535/PUN/2024, order dated 20.03.2025 and in the case of Rajdeep Automation Private Limited vs. DCIT in ITA No.1670/Pun/2025, order dated 12.09.2025.

9.

The Ld. AR also relied on the CBDT Circular No.18/2015 dated 02.11.2015, wherein it was clarified that interest income arising from non-SLR securities held by banks as stock-in-trade is taxable as business income, accordingly, the provisions of Section 14A of the Act are not attracted.

10.

On the other hand, the Ld. DR relied on the orders of the Assessing Officer and the Ld. CIT(A) and argued that the disallowance made u/s 14A of the Rules has been rightly made.

ITA No.475/CTK/2025 & CO No.08/CTK/2025 The Koraput Central Cooperative Bank Limited; A.Y: 2017-18 11. We have considered the rival submissions. It is not in dispute that there is no exempt income in the year under consideration. There is no finding as to any exempt income in the impugned assessment order or in the order of the Ld. CIT(A). The Assessee’s claim that the entire income credited in the Profit and loss account amounting to Rs.31,39,11,158/- are from investment forming part of the total income have not been disproved. In such scenario, the invoking of Section 14A for disallowance is not justified. We note that the impugned disallowance is based merely on assumption and hence, we direct the Assessing Officer to delete the impugned disallowance of Rs.12,57,777/-. As a result, the Cross-Objection of the Assessee is allowed.

12.

As a result, the Department’s Appeal is allowed for statistical purposes and the Cross-Objection filed by the Assessee is allowed.

Order pronounced on 12.11.2026. Sd/- Sd/- (GEORGE MATHAN) (GOPALAN GURUSAMY) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 12.11.2026 Deepak Prakash, PS

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