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Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
आदेश / ORDER
PER SUSHMA CHOWLA, JM:
The appeal filed by assessee is against order of CIT(A)-1, Nashik, dated 23.06.2016 relating to assessment year 2012-13 against order passed under section 143(3) of the Income-tax Act, 1961 (in short ‘the Act’).
The assessee has raised the following ground of appeal:- On facts and in law,
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1] The learned CIT(A) erred in holding that the assessee co-op, bank was liable to deduct TDS u/s 194A on the interest paid on term deposits to its members and thereby confirming the disallowance u/s 40(a)(ia) without appreciating that the said disallowance was justified. 2] The learned CIT(A) failed to appreciate that as per the provisions of section 194A(3)(v) applicable for A.Y.2012 -13, co-operative banks were not liable to deduct TDS u/s 194A in respect of interest paid to its members and hence, there was no reason to make any disallowance u/s 40(a)(ia) in the case of the assessee for this year. 3] The learned CIT(A) erred in not appreciating that the said issue is covered in favour of the assessee by the decision of Hon'ble Bombay H.C. in the case of 'The Jalgaon Dist. Central Co-op. Bank Ltd. v. Anr [265 ITR 423] wherein it has been held that the co-op, banks are not liable to deduct TDS u/s 194A in respect of interest paid to its members. 4] The learned CIT(A) further erred in not appreciating that the interest paid by co-operative banks to its members was made liable to deduction of TDS u/s 194A only w.e.f. 01.06.2015 vide amendment made to section 194A(3)(v) and hence, prior to the insertion of said amendment which is prospective in nature, the co-operative banks were not liable to deduct TDS in respect of interest paid to its members and therefore, the disallowance u/s 40(a)(ia) made for this year is not justified. 3. The issue raised in the present appeal is against obligation of assessee Co-operative bank to deduct tax at source out of interest paid on deposits of its members.
The learned Authorized Representative for the assessee at the outset pointed out that the issue raised in the present appeal is squarely covered by the ratio laid down by the Hon’ble Bombay High Court in Saraswat Co- operative Bank Ltd. Vs. ITO and Anr in Tax Appeal Nos.3 to 9 & 11 of 2015, judgment dated 07.03.2017 and the Pune Bench of Tribunal applied in Abhyudaya Co-op. Bank Ltd. Vs. ITO in ITA No.52/PUN/2016, relating to assessment year 2014-15, order dated 05.04.2018.
The learned Departmental Representative for the Revenue placed reliance on the orders of authorities below.
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We have heard the rival contentions and perused the record. We find that similar issue i.e. the obligation of assessee Co-operative bank to deduct tax out of interest payment to the members or other Co-operative societies on time deposits arose before the Hon’ble Bombay High Court in Saraswat Co- operative Bank Ltd. Vs. ITO and Anr (supra), which principle has been applied by the Pune Bench of Tribunal in Abhyudaya Co-op. Bank Ltd. Vs. ITO (supra) and it has been held as under:- “9. We have heard the rival contentions and perused the record. The only issue which is raised in the present appeal is the liability of assessee Co- operative bank to deduct tax at source out of interest payments made by the assessee to its members or other Co-operative societies and on time deposits. The assessee had claimed shelter under section 194A(3)(v) of the Act. Section 194A(1) of the Act lays down that any person who is responsible for paying to a resident any income by way of interest, then he shall be liable at the time of credit of such income to the account of payee or at the time of payment thereof in cash or by cheque / draft or by any other mode, whichever is earlier, to deduct income tax thereon at the rates in force. In respect of an individual or Hindu Undivided Family, the said provisions are applicable on satisfaction of certain conditions, but for deciding the present issue before us, same are not relevant. 10. The assessee before us is a Co-operative Bank. Certain exemptions are provided which are enlisted in sub-section (3) of section 194A of the Act, which lays down that provisions of sub-section (1) shall not apply and we are concerned with clause (v) thereunder, which reads as under:- “194A(3) The provisions of sub-section (1) shall not apply – ….. (v) – to such income credited or paid by a co-operative society (other than a co-operative bank) to a member thereof or to such income credited or paid by a co-operative society to any other co-operative society.” 11. The assessee seeks shelter under the said section for the relevant year to point out that in view of specific provisions of clause (v) to section 194A(3) of the Act, where the assessee is a Co-operative Society being Co-operative Bank, then any payment made to its members or Co-operative society being interest income is outside the purview of section 194A(1) of the Act. 12. The assessee in this regard has pointed out that this position of law is also clarified by the amendment made by the Finance Ac, 2015 w.e.f. 01.06.2015. In this regard, he has invited our attention to the Memorandum explaining the aforesaid provisions vide paras 42.4 and 42.5. The Memorandum further explains in respect of applicability of specific provisions mandating deduction of tax from the payment of interest on time deposits by the Co-operative banks to its members by claiming that general exemption was also applicable for payment of interest to member depositors by the amendment. The provisions of section 194A(3)(v) of the Act have been amended so as to expressly provide that exemption provided from deduction of
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tax from payment of interest to members by Co-operative society shall not apply to the payment of interest on deposits by the Co-operative Bank to its members. This amendment was made effective from prospective date of 01.06.2015 as explained in clause 42.5 of Explanatory Notes and it was directed that Co-operative bank shall be required to deduct tax from payment of interest on time deposits of its members, on or after 01.06.2015. It is also clarified that Hence, a cooperative bank was not required to deduct tax from the payment of interest on time deposits of its members paid or credited before 1st June, 2015. 13. The Hon’ble Bombay High Court in Saraswat Co-operative Bank Ltd. Vs. (1) ITO & (2) Union of India (supra) referred to the Explanatory Notes of the provisions of the Finance Act, 2015, dated 27.11.2015, wherein the position was clarified about obligation of Co-operative banks from deduction of tax at source under section 194A of the Act. The Hon’ble High Court referred to the Explanatory Note para 42.5 and stated that position of relevant law is clearly specified in the said para and held that Explanatory Note has made the position of law clear that such Co-operative banks are not liable to deduct any amount of TDS prior to the effective date of 01.06.2015. 14. In the facts of the present case also, the year under appeal is assessment year 2014-15 i.e. prior to the date of introduction of amendment from 01.06.2015 and under the old provisions of section 194A(3)(v) of the Act, the assessee Co-operative bank was not obliged to deduct tax on the income of members and Co-operative societies. Applying the ratio laid down by the Hon’ble Bombay High Court in Saraswat Co-operative Bank Ltd. Vs. (1) ITO & (2) Union of India (supra), we hold that the assessee had not defaulted in not deducting tax at source out of such payments made to its members / Co- operative societies. Thus, there was no liability to deduct tax at source and the assessee cannot be said to have violated the provisions of section 194A(1) of the Act. The ground of appeal No.1 raised by the assessee is allowed. The issue in ground of appeal No.2 is on without prejudice basis and the same is dismissed.
In the facts of the present case also, the year under appeal is assessment year 2012-13 i.e. prior to the date of introduction of amendment from 01.06.2015 and under the old provisions of section 194A(3)(v) of the Act, the assessee Co-operative bank was not obliged to deduct tax on the income of members and Co-operative societies. Applying the ratio laid down by the Hon’ble Bombay High Court in Saraswat Co-operative Bank Ltd. Vs. ITO & Anr. (supra), we hold that the assessee had not defaulted in not deducting tax at source out of such payments made to its members / Co-operative societies. Thus, there was no liability to deduct tax at source and the assessee cannot be
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said to have violated the provisions of section 194A of the Act. The grounds of appeal raised by the assessee are allowed.
In the result, appeal of assessee is allowed.
Order pronounced on this 25th day of September, 2018.
Sd/- Sd/- (ANIL CHATURVEDI) (SUSHMA CHOWLA) ऱेखा सदस्य / ACCOUNTANT MEMBER न्याययक सदस्य / JUDICIAL MEMBER ऩुणे / Pune; ददनाांक Dated : 25th September, 2018. GCVSR आदेश की प्रयतलऱपप अग्रेपषत/Copy of the Order is forwarded to : 1. अऩीऱाथी / The Appellant; 2. प्रत्यथी / The Respondent; 3. आयकर आयुक्त(अऩीऱ) / The CIT(A)-1, Nashik; 4. The Pr.CIT-1, Nashik; ववबागीय प्रतततनधध, आयकर अऩीऱीय अधधकरण, ऩुणे “फी” / DR 5. ‘B’, ITAT, Pune; 6. गार्ड पाईऱ / Guard file. आदेशािुसार/ BY ORDER, सत्यावऩत प्रतत //True Copy// वररष्ठ तनजी सधिव / Sr. Private Secretary आयकर अऩीऱीय अधधकरण ,ऩुणे / ITAT, Pune