THE PRINCIPAL COMMISSIONER vs. SHRI BASAVESHWARA CO OPERATIVE BANK LTD,

1 IN THE HIGH COURT OF KARNATAKA DHARWAD BENCH Dated this the 13th day of January 2017 Present THE HON’BLE MR. JUSTICE RAGHVENDRA S. CHAUHAN And THE HON’BLE MR. JUSTICE SREENIVAS HARISH KUMAR I.T.A. No. 100089/2015 Between 1. The Principal Commissioner Of Income Tax, Dr. B.R. Ambedkar Road, Belagavi. 2. The Assistant Commissioner of Income Tax, Circle-1, Belagavi. - Appellants (By Sri Y.V. Raviraj, Advocate) And: Shri Basaveshwara Co-operative Bank Ltd., Raviwar Peth, Belagavi, PAN: AAAAB3041M - Respondent (By Sri H.R. Kambiyavar, Advocate) This appeal is filed under Section 260A of the Income Tax Act, 1961, praying to formulate the substantial question of law and set aside the orders passed by the Income Tax Appellate Tribunal, Panaji Bench, Panaji, in ITA No. 347/PNJ/2014, dated 25.03.2015 for the assessment year 2011-12 and confirm the order passed by the Income Tax Officer, Ward-1, Bagalkot & etc.

2 This appeal coming on for admission this day, RAGHVENDRA S. CHAUHAN, J, delivered the following: JUDGMENT The learned counsel for the Revenue has frankly conceded, and in the opinion of this Court rightly so, that the present appeal is covered by decision of this Court in the case of CIT & Another V. Hubli Urban Co- Operative Bank Ltd. in I.T.A. No. 481/2015 decided by this Court on 19.09.2016. 2. The issue which was raised before the learned Income Tax Appellate Tribunal, Panaji Bench, was with regard to whether a Co-operative Bank is required to deduct tax on the interest paid to its members or not? The said issue has been decided by this Court in the case of Hubli Urban Co-Operative Bank Ltd. (supra). Relying on the Circular, bearing No. 19/2015 in F.No. 142/14/2015 TPL, issued by the Ministry of Finance, Government of India, this Court has clearly held that the Co-operative Banks are not required to deduct tax on the interest paid to its members on the ground that

3 they are exempted from Section 194(3)(v) of the Income Tax Act. For our purpose the relevant portion of the Circular reads as under: “42.5

In view of this, the provisions of the section 194(3)(v) of the Income-tax Act have been amended so as to expressly provide 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 Income-tax Act shall not apply to the payment of interest on time deposits by the co-operative banks to its members. As this amendment is effective from the prospective date of 1st June, 2015, the co-operative bank shall be required to deduct tax from the payment of interest on time deposits of its members, on or after the 1st June 2015. 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.” Therefore, the finding given by the learned Tribunal that the Co-operative Banks were not required to deduct tax on the interest paid to its members, is clearly justified in the light of the Circular mentioned above. Thus. the present case is also covered by the case of Hubli Co- operative Bank Ltd. (supra).

Therefore, the

4 substantial questions of law, being raised by the Revenue, do not arise for our consideration. Hence, the appeal is hereby dismissed. Sd/- JUDGE Sd/- JUDGE bvv