Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM
Before: SHRI V. DURGA RAO& SHRI D.S. SUNDER SINGH
Per Shri D.S.Sunder Singh, Accountant Member :
Delay: The revenue has filed appeal with the delay of 73 days and also filed condonation petition requesting to condone the delay. We have considered the submissions made by the revenue and condone the delay. The assessee also filed cross objections with a delay of 37 days, but not filed condonation petition for condoning the delay. Hence, the cross objections of the assessee are dismissed in limine.
These appeals are filed by the revenue against the order of the Commissioner of Income Tax (Appeals) [CIT(A)]-1, Visakhapatnam in I.T.A. No.10380/2016-17/AC,C-1(1),VSP/2018-19 and 10151/2017- 18/AC,C-1(1),VSP/2018-19 dated 29.01.2019 for the Assessment Year (A.Y.) 2014-15 and 2015-16. Cross objections are filed by the assessee in support of the order of the Ld.CIT(A). For the sake of convenience, these appeals are clubbed, heard together and a common order is being passed as under:
Facts are extracted from the appeal of the assessee for the A.Y.2014- 15 and identical to A.Y.2015-16 also. The first issue is related to the
3 I.T.A. No.453/Viz/2019 & 454/Viz/2019, CO No.146/Viz/2019 and 147/Viz/2019, A.Y.2014-15 & 2015-16 The Maharaja Co-operative Urban Bank Ltd., Visakhapatnam disallowance of interest on fixed deposits of the members of the co- operative society amounting to Rs.3,94,12,695/- representing the interest on deposits paid to the members of the Cooperative Society u/s 40(a)(ia) of the Income Tax Act, 1961 (in short ‘Act’).
The assessee is a cooperative bank, filed its return of income for the A.Y.2014-15 on 29.11.2014 admitting total income of Rs.85,98,940/-. The case of the assessee was taken up for scrutiny by issue of notice u/s 143(2) on 28.08.2015 and the assessment was completed u/s 143(3) of the Act vide order dated 27.12.2016 and the total income was assessed at Rs.4,80,34,850/-. The Assessing Officer(AO) made two additions. The first addition was in respect of disallowance of interest u/s 40(a)(ia) of the Act amounting to Rs.3,94,12,695 and the second addition was towards the disallowance of amortization of premium on government securities amounting to Rs.23,213/- 4.1. The assessee paid interest on deposits to its members without deduction of Tax at source. The AO proposed to disallow the interest u/s 40(a)(ia) of the Act as the assessee did not deduct the tax at source. The assessee submitted that it is a Cooperative Society and therefore the interest paid to its members is not liable for deduction of tax at source. The
4 I.T.A. No.453/Viz/2019 & 454/Viz/2019, CO No.146/Viz/2019 and 147/Viz/2019, A.Y.2014-15 & 2015-16 The Maharaja Co-operative Urban Bank Ltd., Visakhapatnam AO did not agree with the plea made by the assessee and viewed that though the assessee is registered under the Cooperative Societies Act, it is not a cooperative society and it is a cooperative bank. Taking into consideration of the nature of activities carried on by the assessee, AO held that the assessee is liable to deduct the tax on the interest paid to members also. The AO took support from the decision of Hon’ble ITAT in the case of ACIT circle -2,Belgaum Vs.Belgaum District Central Coop Bank Ltd.- 2015(1)TMI 743-ITAT-Panaji. Further, the AO is of the view that the amendment to section 194A of the Act vide Finance Act, 2015 is clarificatory and therefore retrospective in nature. The Ld.CIT(A) followed the order of this Tribunal in I.T.A. No.211 & 212/Viz/2018 dated 17.08.2018 in the assessee’s own case and allowed the appeal of the assessee. For the sake of convenience, we extract relevant part of the order of this Tribunal in assessee’s own case for the A.Y.2012-13 and 2013-14 which reads as under : “9. We have heard both the parties and perused the material placed on record. This issue is squarely covered by the order of this Tribunal in ITA Nos. 444 & 445, 449, 450/VIZ/2012. We extract relevant part of the order of this Tribunal which reads as under : “43. In so far as another appeal filed by the revenue for the same assessment year i.e. 2010-11 vide ITA No.38/Vizag/2014 is concerned, the facts are in brief that the assessee has paid interest to various depositors and no TDS was deducted. The A.O. of the opinion that assessee being a cooperative society engaged in the banking business is
5 I.T.A. No.453/Viz/2019 & 454/Viz/2019, CO No.146/Viz/2019 and 147/Viz/2019, A.Y.2014-15 & 2015-16 The Maharaja Co-operative Urban Bank Ltd., Visakhapatnam
under obligation to deduct the TDS on interest payment exceeding Rs.10,000/- in view of the specific provision u/s 194A(3)(i)(b) of the Act and the assessee has failed to deduct TDS. Therefore, the A.O. has disallowed the claim of the assessee. The Ld. CIT(A) initially confirmed the order of the A.O. Subsequently, the assessee has filed a rectification u/s 154 of the Act dated 14.12.2013 and submitted that the very same issue has been considered by the CIT(A) as well as ITAT for earlier years and decided in favour of the assessee. The Ld. CIT(A) has considered the submissions of the assessee and directed the A.O. to delete the addition by observing as under: 5.2. I have considered the submissions. The issue considered in the above appellate order was whether the assessee, a cooperative bank is required to effect TDS on payment of interest made to its members, when the amounts exceed Rs.10,000/-. A view was taken that in the above order dtd.22.10.2013 that if the interest amount exceeds Rs.10,000/- then the appellant is required to deduct TDS even if the payment was made to the members. Such a view was taken with reference to provision contained in section 194A(3)(i)(b) and it was held that section 194A(3)(i)(b) would prevail over section 194A(3)(v) of the Act. Such a view was taken without considering the clarification given in the CBDT circular No.9 of 2002 dtd.11.09.2002. The relevant clarification in the circular reads as under: Under section 194A of the Income-tax Act, 1961, tax is deductible at source from any payment of income by way of interest other than income by way of interest on securities. Clause(v) of sub-section (3) of section 194A exempts such income credited or paid by a cooperative society to a member thereof from the requirement of TDS. On the other hand, clause (viia) of sub-section(3) of section 194A exempts from the requirement of TDS such income credited or paid in respect of deposits (other than time-deposits made on or after 1st July, 1995) with a cooperative society engaged in carrying on the business of banking. Representations have been received in the Board seeking clarification as to whether a member of a cooperative bank may receive without TDS interest on time deposit made with the cooperative bank on or after 1st July, 1995. The Board has considered the matter and it is clarified that a member of a cooperative bank shall receive interest on both time deposits and deposits other than time deposits with such cooperative bank without TDS under section 194A by virtue of the
6 I.T.A. No.453/Viz/2019 & 454/Viz/2019, CO No.146/Viz/2019 and 147/Viz/2019, A.Y.2014-15 & 2015-16 The Maharaja Co-operative Urban Bank Ltd., Visakhapatnam
exemption granted vide clause (v) of sub-section (3) of the said section. The provisions of clause (viia) of the said sub-section are applicable only in case of a non-member depositor of the cooperative bank, who shall receive interest only on deposits other than time deposits made on or after 1st July, 1995 without TDs under section 194A. (emphasis underlined) Thus the circular clarifies that provisions of section 194A(3)(v) would prevail. 5.3. In view of the clarification given in the circular the view taken in the appellate order dtd.22.10.2013 suffers from mistake and, as such a view was taken without consideration of the above referred CBDT circular clarifying the position of law, it would amount to mistake apparent from record and rectifiable u/s.154 of the I.T. Act. Further, it is noted that the assessee had relied on the CBDT circular No.9/2002 dtd.11.09.2002 and the decision of Bombay High Court in the case of Jalgaon District Central Co-operative Bank, in its appeal for A.Y.2007-08, which has been discussed and considered by the learned CIT(A) while deciding the assessee's appeal for A.Y.2007-08. The relevant extract of the CIT(A) order has been referred and discussed in the Hon'ble ITAT's order for A.Y.2007-08, (copy of which submitted as part of paper-book in the original appeal). Therefore, it cannot be said that this aspect was not considered by the Hon'ble ITAT while passing order in the assessee's appeal for A.Y.2007-08. 5.4 In view of the above discussion, I am convinced that the appellate order dtd.22.10.2013 suffers from mistake apparent from record and the mistake is rectified by substituting the following operative para in the place of the para 6.3, 6.4 & 6.5 of the appellate order dtd.22.10.2013. 6.3 I have considered the submissions made. In view of the clarification given in the CBDT circular No.9/2002, it is held that the assessee is not required to effect TDS on the interest payment made to its members even if it exceeds Rs.10,000/-. The impugned disallowance made in the assessment is not in accordance with the clarification given in the CBDT Circular No.9/2002 and accordingly the AO is directed to delete the impugned disallowance made of Rs.5,64,79,087/-. This ground of appeal is allowed in favour of the appellant.
7 I.T.A. No.453/Viz/2019 & 454/Viz/2019, CO No.146/Viz/2019 and 147/Viz/2019, A.Y.2014-15 & 2015-16 The Maharaja Co-operative Urban Bank Ltd., Visakhapatnam
5.5. The appellate order dtd.22.10.2013 in ITA No.0297/12-13 be considered to be modified and rectified accordingly with reference to ground No.3 of the appeal.
The Ld. CIT(A) by following his own decision for the assessment year 2007-08 and also order of the Tribunal for the very same year in the rectification order has deleted the addition made by the A.O. We find no reason to interfere with the order passed by the Ld. CIT(A). This appeal raised by the revenue is dismissed.”
9.1. Since the facts are identical and the Ld.CIT(A) followed the order of Tribunal, we decide the issue in favour of the assessee and uphold the order of the Ld.CIT(A). The revenue’s appeal on this ground is dismissed. The appeal of the revenue for the assessment year 2012-13 and 2013- 14 on this issue is dismissed.” 4.2. The amendment to section 194A was expressly provided from the prospective date of 1st June 2015 but not retrospectively. In the instant case the A.Y. involved is 2014-15, hence, the amendment to section 194A has no application in assessee’s case. Since the facts are identical and the Ld.CIT(A) followed the order of this Tribunal, we decide the issue in favour of the assessee and uphold the order of the Ld.CIT(A). The revenue’s appeal on this ground is dismissed.
The second issue in this appeal is related to the amortization of government securities. The AO found that the assessee has deposited a sum of Rs.23,213/- in the Profit & Loss account towards amortization of
8 I.T.A. No.453/Viz/2019 & 454/Viz/2019, CO No.146/Viz/2019 and 147/Viz/2019, A.Y.2014-15 & 2015-16 The Maharaja Co-operative Urban Bank Ltd., Visakhapatnam government securities. The assessee is required to maintain 25% of its demand and time liabilities in the form of liquid assets as per the provisions of section 24 of the Banking Regulation Act, 1949. In compliance with these provisions, the assessee purchased some government securities. As per the RBI guidelines, where the cost of acquisition of these securities is more than their face value, such excess amount has to be amortised over the remaining period of maturity. The assessee claimed Rs.23,131/- towards amortization for the impugned assessment year. The AO treated the same as contingent liability and disallowed the same. Against which the assessee went on appeal before the Ld.CIT(A) and the Ld.CIT(A) allowed the appeal of the assessee following the order of this Tribunal in the assessee’s own case for the A.Y. 2012-13 and 2013-14 supra. For the sake of clarity and convenience, we extract relevant part of the order of this Tribunal which reads as under : “11. We have heard both the parties and perused the material placed on record. The issue on identical facts has come before this Bench for the assessment year 2011-12 and 2012-13 in the case of Visakhapatnam Cooperative Bank Ltd. in ITA No.362 and 371 dated 31.12.2016. For the sake of clarity and convenience, we extract para No.67 of the order of this Tribunal which reads as under : “67. The very similar issue came up for consideration before the ITAT in the Assessment Year 2008-09 in ITA No.444/Vizag/2012, order dated 30.09.2016. The Tribunal has considered and remitted the matter back to the file of the Assessing Officer for fresh examination to decide in accordance with law. We find in the Assessment Year 2008-09, amortization of premium on government securities has been dissolved by the Assessing Officer on the
9 I.T.A. No.453/Viz/2019 & 454/Viz/2019, CO No.146/Viz/2019 and 147/Viz/2019, A.Y.2014-15 & 2015-16 The Maharaja Co-operative Urban Bank Ltd., Visakhapatnam
ground that it is a contingent liability. The Commissioner of Income Tax (Appeals) has confirmed the order the of Assessing Officer. On appeal, ITAT remanded the matter back to the Assessing Officer for fresh consideration. In the year under consideration, the Commissioner of Income Tax (Appeals) allowed the ground raised by the assessee by following the CBDT Instruction No.17/2008 dated 26.09.2008 and also the decision of the Hon’ble Gujarat High Court in the case of Rajkot District Co-operative Bank (supra) directed the Assessing Officer to allow this claim. In our opinion, to maintain a consistency, the issue has to be remitted back to the Assessing Officer to consider the factual matrix of the case and decide in accordance with law. We therefore, set aside the order passed by the Commissioner of Income Tax (Appeals) and direct the Assessing Officer to consider the issue afresh keeping in view of the directions given by the Commissioner of Income Tax (Appeals) for the year under consideration and also following the observations of the Tribunal for the Assessment Year 2008-09 after giving opportunity of hearing to the assessee. This ground of appeal raised by the Revenue is allowed for statistical purpose.” 11.1. Following the rule of consistency, the issue is remitted back to the file of the AO with a direction to decide the appeal afresh as per the directions given by the Ld.CIT(A) and also keeping in view of latest direction of the RBI. Accordingly appeal of the revenue on this ground is allowed for statistical purpose.”
5.1. Since the facts are identical and the Ld.CIT(A) followed the order of this Tribunal, we find no reason to interfere with the order of the Ld.CIT(A) and uphold the same. The appeal of the revenue on this ground is dismissed.
For the AY 2015-16 also the issues involved are disallowance u/s 40(a)(ia) relating to the interest paid on members deposits and the amortization expenses. Since facts are identical, following the Rule of consistency, we, dismiss the appeal of the revenue.
10 I.T.A. No.453/Viz/2019 & 454/Viz/2019, CO No.146/Viz/2019 and 147/Viz/2019, A.Y.2014-15 & 2015-16 The Maharaja Co-operative Urban Bank Ltd., Visakhapatnam
In the result, appeals of the revenue as well as the cross objections of the assessee are dismissed. Order pronounced in the open court on 18th December, 2019.
Sd/- Sd/- (िी.दुगाा राि) (धड.एस. सुन्दर धसंह) (V. DURGA RAO) (D.S. SUNDER SINGH) न्याधयक सदस्य/JUDICIAL MEMBER लेखा सदस्य/ACCOUNTANT MEMBER नवशधखधपटणम /Visakhapatnam नििधंक /Dated : 18.12.2019 L.Rama, SPS
आदेश की प्रतितिति अग्रेतिि/Copy of the order forwarded to:-
रधजस्व/The Revenue – Dy.Commissioner of Income Tax, Circle-1(1), Visakhapatnam 2. निर्धाऩरती/ The Assessee – The Maharaja Co-operative Urban Bank Ltd, D.No.49-9-14, Dwaraka Nagar, Ganta Arcade, Visakhapatnam 3. The Principal Commissioner of Income Tax-1, Visakhapatnam 4. The Commissioner of Income Tax (Appeals)-1, Visakhapatnam 5. तिभागीय प्रतितिति, आयकर अिीिीय अतिकरण, तिशाखािटणम/DR, ITAT, Visakhapatnam 6.गार्ड फ़ाईि / Guard file
आदेशािुसार / BY ORDER // True Copy //
Sr. Private Secretary ITAT, Visakhapatnam