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Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI
Before: SHRI GEORGE MATHAN & SHRI S. JAYARAMAN
आदेश / O R D E R
PER BENCH:
ITA Nos.823, 824, 825 & 826/Mds/2017 are filed by the assessee
against the Order of Commissioner of Income Tax (Appeals)-13, Chennai,
in ITA Nos.120/CIT(A)-13/AY 2009-10 dated 27.03.2017, No.119/CIT(A)-
13/AY 2010-11 dated 27.03.2017, No.54/CIT(A)-13/AY 2013-14 dated
27.03.2017 & No.118/CIT(A)-13/AY 2014-15 dated 27.03.2017.
ITA Nos.823 to 826/Mds/2017 :- 2 -:
Shri Sasikumar, JCIT, represented on behalf of the Respondents and
Shri K.Ravi, Adv., represented on behalf of the Appellants.
It is submitted by the Ld.AR that the issue in the appeal was against
the action of the Ld.CIT(A) in confirming the order of the AO in respect of
disallowance of the interest paid to co-operative societies on the ground
that no TDS has been made u/s.194A(3) of the Act. The Ld.AR submitted
that the issue was squarely covered by the decision of the Hon’ble
Jurisdictional High Court in the case of M/s.Coimbatore Central Co-
operative Bank Ltd. vs. the TDS Officer in Tax Case Appeal Nos.588 to
643, 647 to 688, 744 to 750, 942 to 948, 969 to 982 of 2015 reported in
382 ITR 266 (Madras) wherein in Para No.64 of the Order, it has been
held that the amendment made to Sec.194A in respect of TDS was
prospective in nature w.e.f. 01.06.2015.
In reply, the Ld.DR vehemently supported the order of the AO. It
was a submission that in view of the provisions of Sec.194A(3), it was
mandatory on the assessee to deduct the TDS on the interest paid on the
deposits by Co-operative societies involved in banking business.
We have considered the rival submissions. As it is noticed that the
issues in the appeals are squarely covered by the decision of the Hon’ble
Jurisdictional High Court (Madras) in the case of M/s.Coimbatore Central
ITA Nos.823 to 826/Mds/2017 :- 3 -:
Co-operative Bank Ltd. referred to supra wherein it has been held as
follows:
The relevant portion of the memorandum explaining the clauses in the Finance Bill reads as follows:- ”Section 194A(1) read with section 194A(3)(i) of the Act provide for deduction of tax on interest (other than interest on securities) over a specified threshold, i.e. Rs.10,000/- for interest payment by banks, co-operative society engaged in banking business (co-operative bank) and post office and Rs.5,000/- for payment of interest by other persons. Further, sub-section (3) of section 194A inter alia also provides for exemption from deduction of tax in respect of following interest payments by cooperative society:
(i) Interest payment by a co-operative society to a member thereof or any other co-operative society. [Section 194A(3)(v) of the Act]
(ii) Interest payments on deposits by a primary agricultural credit society or primary credit society or co-operative land mortgage bank or co- operative land development bank. [Section 194A(3) (viia)(a) of the Act]
(iii) Interest payment on deposits other than time deposit by a cooperative society engaged in the business of banking other than those mentioned in section 194A(3)(viia)(a) of the Act. [Section 194A(3)(viia)(b) of the Act]
Therefore, as per the provisions of section 194A(1) read with provisions of sections 194A(3)(i)(b) and 194A(3)(viia)(b), cooperative bank is required to deduct tax from interest payment on time deposits if the amount of such payment exceeds specified threshold of Rs.10,000/-. However, as the provisions of section 194A(3)(v) of the Act provide a general exemption from making tax deduction from payment of interest by all co-operative societies to its members, the co-operative banks tried to avail this exemption by making their depositors as members of different categories. This has led to dispute as to whether the co-operative banks, 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 cooperative 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 co-operative 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 co-operative 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 co-operative banks and other commercial banks, the Finance Act, 2006 and Finance Act, 2007 amended the provisions of the Act to provide for cooperative banks a taxation regime which is similar to that for the other commercial banks. Therefore, there is no rationale for treating the co-operative banks differently from other commercial banks in the matter of deduction of tax
ITA Nos.823 to 826/Mds/2017 :- 4 -:
and allowing them to avail the exemption meant for smaller credit co- operative societies farmed for the benefit of small number of members. However, as mentioned earlier, a doubt has been created regarding the applicability of the specific provisions mandating deduction of tax from the payment of interest on time deposits by the cooperative banks to its members by claiming that general exemption provided is also applicable for payment of interest to member depositors. In view of this, it is proposed to amend the provisions of the section 194A of the Act to expressly provide from the prospective date of 1st June, 2015 that the exemption provided from deduction of tax from payment of interest to members by a co-operative society under section 194A(3)(v) of the Act shall not apply to the payment of interest on time deposits by the cooperative banks to its members.”
It can be seen from the last part of the portion extracted above that the very note explaining the clause was specific to the effect that the proposal was to bring forth an amendment with prospective effect from 1.6.2015. There is no dispute now that on and from 1.6.2015 the appellant cannot escape the liability from deduction of tax at source.
Once an amendment is introduced, for the purpose of removing the anomalous situation or for the purpose of removing the confusions both in the manner in which the provisions stood and the manner in which they were understood, the same could be taken only to have prospective effect. It must be pointed out that the Parliament did not choose to answer a question. Rather it chose to amend the provisions. It is now well settled that an amendment can only be prospective unless it is made retrospective by express language or necessary implication. Apart from the fact that the express language of Section 194A after amendment does not indicate any retrospectively, the note explaining the clauses goes one step further in making it clear that it was intended to have prospective effect from 1.6.2015.
Therefore our answer to the first substantial question of law would be in favour of the assessee.
Respectfully following the decision of the Hon’ble Jurisdictional High
Court, the disallowance made by the AO and confirmed by the Ld.CIT(A)
stands deleted.
ITA Nos.823 to 826/Mds/2017 :- 5 -:
In the result, appeals filed by the assessee are stands allowed.
Order pronounced in the Open Court on June 12, 2017, at Chennai.
Sd/- Sd/- (एस जयरामन) (जॉज� माथन) (S. JAYARAMAN) (GEORGE MATHAN) लेखा सद!य/ACCOUNTANT MEMBER �या�यक सद!य/JUDICIAL MEMBER
चे�नई/Chennai, 2दनांक/Dated: June 12, 2017. TLN
आदेश क+ )�त3ल4प अ5े4षत/Copy to: 1. अपीलाथ(/Appellant 4. आयकर आयु6त/CIT 5. 4वभागीय )�त�न�ध/DR 2. )*यथ(/Respondent 6. गाड� फाईल/GF 3. आयकर आयु6त (अपील)/CIT(A)