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Income Tax Appellate Tribunal, “A” BENCH : BANGALORE
Before: SMT. ASHA VIJAYARAGHAVAN & SHRI JASON P. BOAZ
Per Bench
These appeals are by the Revenue directed against the separate orders, all dated 17.04.2015, of the CIT(Appeals)-13, Bangalore pertaining to assessment years 2011-12 to 2013-14. Cross objection has been filed by the assessee in ITA No.962/Bang/2015.
The assessee is a co-operative society engaged in the business of banking. The Assessing Officer noticed that the assessee had not deducted tax from interest paid to members on time deposits even though interest paid during the financial year exceeded Rs.10,000 for which assessee was required to deduct tax. The AO held that assessee was required to deduct tax u/s. 194A(1) from interests paid to all depositors irrespective of their membership status. Since there was failure on the part of assessee to make tax deduction us. 194A(1) in respect of its members, the AO invoked provisions of section 201(1) treating the assessee as an “assessee in default” and passed order u/s. 201(1) and 201(1A).
On appeal by the assessee, the ld. CIT(Appeals) held that a similar matter on identical issues was decided by the Bangalore Bench of the Tribunal in ITA No.1572/Bang/2013 for the AY 2009-10 in the case of The Bagalkot District Central Co-operative Bank wherein it was held that an
ITA Nos. 962 to 964/Bang/2015 & CO No.196/Bang/2015 Page 3 of 12 assessee which is a co-operative society carrying on banking business, when it pays interest income to a member both on time deposits and on deposits other than time deposits, such cooperative society need not deduct tax at source u/s. 194A by virtue of exemption granted vide clause (v) of sub-section 3 of the said section. The CIT(A) following the aforesaid decision of the Tribunal directed the AO not treat the assessee as an “assessee in default” for failure to deduct tax at source on interest income paid to its member depositors and deleted the tax demand.
Aggrieved, the Revenue is in appeal before us for all the assessment years under appeal on the following common grounds of appeal:-
“1. The ld.CIT(A) has erred in relying on the decision of Hon. ITAT, Bangalore Bench in the case of The Bagalkot District Central Co-op. Bank Vs. JCIT in ITA No.1512/Bang/2013 which is erroneous and against the law. 2. The Ld.CIT(A) ought to have considered the orders of the Hon’ble ITAT, Pune (857 lTD 569) and Hon. ITAT, Panaji Bench order in the case of Bailhongal Urban Co-operative Bank dtd.28.08.2013, which have been decided in favour of the Department. 3. The Ld. CIT(A) erred in relying on the decision of the Hon. ITAT, Bangalore which held that the provisions of sec.194A(3)(v) are applicable to the deposits made with the assessee, the assessee being a co-operative Bank. 4. The Ld.CIT(A) has erred in relying on the decision of the Hon. ITAT, Bangalore which had failed to appreciate the fact that the clause 194A(3)(viia) is a specific provision which has overriding effect on the general provisions of clause 194A(3)(v).
ITA Nos. 962 to 964/Bang/2015 & CO No.196/Bang/2015 Page 4 of 12 5. The Ld.CIT(A) has erred in relying on the decision of the Hon. ITAT, Bangalore which failed to appreciate that the clause 194A(3)(v) is a general clause applicable to Co-operative Societies in general, it is a normal principle of interpretation of law that in the presence of a specific provision the general provision will not apply.”
We find the CIT(Appeals) has followed the decision of the Bangalore Bench of the Tribunal in ITA No.1572/Bang/2013 for the AY 2009-10 in the case of The Bagalkot District Central Co-operative Bank, wherein it was held at paras 15 to 21 of the order as follows:-
“15. We have given a very careful consideration to the rival submissions. We are of the view that the submissions made by the learned counsel for the Assessee deserves to be accepted. As rightly contended by him Sec.194A(3)(i)(b) of the Act is a provision which mandates deduction of tax at source by a co- operative Society carrying on the business of banking, where the income in the form of interest which is paid by such society is in excess of ten thousand rupees. Sec.194A(3)(v) of the Act provides that tax need not be deducted at source where the income in the form of interest is credited or paid by a co- operative society to a member thereof or to any other co- operative society. This provision therefore applies to all co- operative societies including co-operative society engaged in the business of banking. It is not possible to exclude co-operative society engaged in the business of banking from the provisions of Sec.194A(3)(v) of the Act on the ground that the same is covered by the provisions of Sec.194A(3)(i)(b) of the Act. Sec.194A(3)(v) of the Act refers to payment by a co-operative Society to a member and payment by a co-operative society to non-member would continue to be governed by the provisions of Sec.194A(3)(i)(b) of the Act. Similarly u/s.194A(3)(viia)(b) interest on deposits other than time deposits even if the payment is made to a non-member by a co-operative society, the co- operative society need not deduct tax at source. Thus this section carves out another exception to Sec.194A(3)(i)(b) of the Act. We
ITA Nos. 962 to 964/Bang/2015 & CO No.196/Bang/2015 Page 5 of 12 do not think that any of the above provisions can be called a general provision and other provisions called specific provisions. Each provision over-lap and if read in the manner as indicated above, there is perfect harmony to the various provisions. We do not agree with the view expressed by the Pune ITAT SMC in the case of Bhagani Nivedita Sahakari Bank Ltd. (supra) when it says that Co-operative society as mentioned in cl. (v) is a general species, whereas the other five categories of co-operative societies which are specifically referred to in other provisions are specific co-operative societies. The further conclusion in the said decision that the term ‘co-operative society’ in cl. (v) of s. 194A(3) has to be interpreted as co-operative society other than co-operative bank, is again unsustainable. The law is well settled that by a process of interpretation one cannot add on words that are not found in the text of the statute. Such a course is permitted only when there is “causus omisus”. We do not think that the provisions of Sec.194A(3)(v) suffers from any causus omisus as has been interpreted by the ITAT Pune Bench SMC. 16. We are also of the view that the decision of the Hon’ble Kerala High Court in the case of Moolamattom Electricity Board Employees Co-op Bank Ltd. (supra) supports the plea of the Assessee before us. The petitioners in that case were primary credit societies registered under the Kerala Co-operative Societies Act. In view of the specific provisions of Sec.194A(3(viia) of the Act, they claimed that they need not deduct tax at source on interest paid. It was submitted by the petitioner that sub- s.194A(3)(v) deals with such income credited or paid by a co- operative society to a member whereas sub-s. (3)(viia)(a) provides a total exemption to deposits with the primary credit society. The Hon’ble Kerala High Court accepted their plea and in their judgment have observed that Sec.194A (3)(i) exemption limit of Rs. 10,000 to interest paid on time deposits with co- operative societies engaged in carrying on business of banking is allowed but that does not mean that all co-operative societies who have credited or paid exceeding Rs. 10,000 are liable to deduct tax at source. The Court held that co-operative society engaged in carrying on business of banking and primary credit societies stand on different footing and belong to different class. That does not mean that Sec.194A(3)(v) of the Act is applicable only to Co- operative Societies other than co-operative societies carrying on the business of banking as observed in para-37 of its judgment
ITA Nos. 962 to 964/Bang/2015 & CO No.196/Bang/2015 Page 6 of 12
the Pune ITAT in the case of Bhagani Nivedita Sah Bank Ltd. (supra). In fact in para-2 of Circular No.9 dated 11.9.2002, the CBDT has very clearly laid down that Co-operative societies carrying on banking business when it pays interest on deposits by its members need not deduct tax at source in view of the provisions of Sec.194A(3)(v) of the Act. 17. We also find that the CBDT in Circular No.9 dated 11.9.2002 clarified certain aspects which are relevant to the present case. The same reads thus: “Circular No.9 of 2002 “Sub : Tax deduction at source under section 194A of the Income-tax Act, 1961 —Applicability of the provisions in respect of income paid or credited to a member of co- operative bank—Reg. 11/09/2002 TDS 194A 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 co-operative 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 co- operative society engaged in carrying on the business of banking. 2. Representations have been received in the Board seeking clarification as to whether a member of a co- operative bank may receive without TDS interest on time deposit made with the co-operative bank on or after 1st July, 1995. The Board has considered the matter and it is clarified that a member of a co-operative bank shall receive interest on both time deposits and deposits other than time deposits with such co-operative bank without TDS under section 194A by virtue of the exemption
ITA Nos. 962 to 964/Bang/2015 & CO No.196/Bang/2015 Page 7 of 12 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 co-operative bank, who shall receive interest only on deposits other than time deposits made on or after 1st July, 1995 without TDS under section 194A. 3. A question has also been raised as to whether normal members, associate members and sympathizer members are also covered by the exemption under section 194A(3)(v). It is hereby clarified that the exemption is available only to such members who have joined in application for the registration of the co-operative society and those who are admitted to membership after registration in accordance with the bye-laws and rules. A member eligible for exemption under section 194A(3)(v) must have subscribed to and fully paid for at least one share of the co-operative bank, must be entitled to participate and vote in the General Body Meetings and/or Special General Body Meetings of the co-operative bank and must be entitled to receive share from the profits of the co-operative bank. [F. No. 275/106/2000-IT(B)] (2002) 177 CTR (St) 1” 18. It can be seen from para-2 of the Circular referred to above that the CBDT has very clearly laid down that Co-operative societies carrying on banking business when it pays interest on deposits by its members need not deduct tax at source. The above interpretation of the provisions by the CBDT which is in favour of the Assessee, in our view is binding on the tax authorities. 19. In the case decided by ITAT Panaji Bench in ITA No.85/PN/2013 for AY 09-10 in the case of The Bailhongal Urban Co-op Bank Ltd. Vs. JCIT order dated 28.8.2013, the tribunal proceeded on the footing that the aforesaid circular has been quashed by the Hon’ble Bombay High Court in the case of The Jalgaon District Central Co-operative Bank Ltd. Vs. Union of India 265 ITR 423 (Bom) and therefore chose to follow the decision rendered by Pune ITAT SMC in the case of Bhagani Nivedita Sahakari Bank Ltd. (supra). In our view the Hon’ble Bombay High Court in the case of Jalgaon District Central Co-
ITA Nos. 962 to 964/Bang/2015 & CO No.196/Bang/2015 Page 8 of 12 operative Bank Ltd.’s case was dealing with a case of challenge to para-3 of CBDT Circular No.9 dated 11.9.2002 which tried to interpret the word “member” as given in Sec.194A(3)(v) of the Act. It is only that part of the Circular that had been quashed by the Hon’ble Bombay High Court and the other paragraphs of the Circular had no connection with the issue before the Hon’ble Bombay high Court. How could it be said that the entire circular has been quashed by the Hon’ble Bombay High Court? In our view para-2 of the Circular still holds good and the conclusion of the ITAT Pune Bench in the case of The Bailhongal Urban Co-op Bank Ltd.(supra) are not factually correct. Consequently, the conclusions drawn in the aforesaid decision also contrary to facts and hence cannot be considered as precedent. 20. The learned counsel for the Assessee has brought to our notice that the ITAT Vishakapatnam Bench in the case of The Visakhapatnam Co-operative Bank ITA No.5 and 19 of 2011 order dated 29.8.2011 has held that co-operative societies carrying on banking business when it pays interest to its members on deposits it need not deduct tax at source in view of the provisions of Sec.194A(3)(v) of the Act. Similar view has also been expressed by the Pune Bench of the ITAT in the case of Ozer Merchant Co-operative Bank ITA No.1588/PN/2012 order dated 30.10.2013. We may add that in both these decisions the discussion did not turn on the interpretation of Sec.194A(3)(i)(b) of the Act vis-a-vis Sec.194A(3)(v) of the Act. It is thus clear that the preponderance of judicial opinion on this issue is that co- operative societies carrying on banking business when it pays interest to its members on deposits need not deduct tax at source in view of the provisions of Sec.194A(3)(v) of the Act. 21. For the reasons given above, we hold that the Assessee which is a co-operative society carrying on banking business when it pays interest income to a member both on time deposits and on deposits other than time deposits with such co-operative society need not deduct tax at source under section 194A by virtue of the exemption granted vide clause (v) of sub-section (3) of the said section.”
ITA Nos. 962 to 964/Bang/2015 & CO No.196/Bang/2015 Page 9 of 12 6. Since the facts in the present case are similar to that of the decision rendered in the case of The Bagalkot District Central Co-operative Bank (supra), respectfully following this decision, we hold that there is no infirmity in the order of the CIT(Appeals) and dismiss the grounds raised by the Revenue.
The appeals by the Revenue are dismissed.
CO No.196/Bang/2015
The grounds of appeal raised in the CO by the assessee are as follows:-
“2. The learned Commissioner of Income-tax (Appeals) failed to appreciate that in view of Section 201(3) of the act, the order u/s 201(1) holding the Respondent/Cross-Objector as an assessee in default is barred by limitation insofar as the first three quarters of the impugned F.Y.2010-11 are concerned and accordingly the order of Assessing officer is not sustainable in law and requires to be cancelled to that extent. 3. The authorities below failed to appreciate that the adjustment contemplated under section 194A(4) of the Act has nothing to do with limitation prescribed under section 201(3) of the Act and consequently the order passed beyond the limitation prescribed under section 201(3) is barred by limitation and learned CIT(A) ought to have cancelled the order for such period on the facts and circumstances of the case. 4. The authorities below failed to appreciate that the interpretation on limitation must be strictly construed and consequently in the instant case the order is clearly barred by limitation on the facts and circumstances of the case.”
ITA Nos. 962 to 964/Bang/2015 & CO No.196/Bang/2015 Page 10 of 12 9. We find that similar issue has been dealt with by the coordinate Bench of this Tribunal in CO Nos.48 to 62/Bang/2015 in ITA No.1408 to 1427/Bang/2014 by order dated 30.04.2015 in the case of Karnataka State Apex Cooperative Bank Ltd., Magadi Road Branch, Bangalore. The relevant paragraphs 15 to 18 are reproduced below:-
“15. As far as Cross-objections of the Assessee are concerned, they relate to time limit for passing of order u/s.201(1) of the Act. A Chart showing the dates on which the AO ought to have passed the order uls.201(1) & 201(1A) of the Act and the appeals in which the Assessee has raised the objection of limitation is annexed to this order. The provisions of Sec.20 1(3) provide for a of limitation for passing orders u/s.201(1) of the Act. Sub-section (3), by the Finance Act, 2012, w.r.e.f 1-4-2010, read as under: ‘(3) No order shall be made under sub-section (1) deeming a person to be an assessee in default for failure to deduct the whole or any part of the tax from a person resident in India at any time after the expiry of— (i) two years from the end of the financial year in which the statement is filed in a case where the statement referred to in section 200 has been filed; (ii) six years from the end of the financial year in which payment is made or credit is given, in any other case: Provided that such order for a financial year commencing on or before the 1st day of April, 2007 may be passed at any tune on or before the 31st day of March, 2011.” 16. According to the Assessee the time limit for filing statement referred to in Sec.200 is laid down in 31-A of the Income Tax Rules 1962 (Rules). As per the said rules the time limit is laid down for furnishing TDS returns for each quarter in a Financial Year. The Assessee has in the chart enclosed given the dates on which the Statement was filed u/s.200(3) of the Act for each of the quarter in the Financial year 2010- 11 of the various branches in column 4,7,10 & 13. The Assessee has also given the
ITA Nos. 962 to 964/Bang/2015 & CO No.196/Bang/2015 Page 11 of 12 end of the Financial year in which the order u/s.201(l) had to be passed in terms of Sec.201(3) of the Act in column 6,9 and 12 of the chart As per this chart the orders for 1st 2nd and 3 Quarter of Financial Year 2010-11 ought to have been passed on or before 31-3-2013 but the orders have been passed only on 31.3.2014 and therefore the same have to be held as bad in law. The orders in so far as they are bad, having been passed beyond the period of limitation is given in column 16 of the Chart. 17. On the plea of the Assessee that the orders are barred by time, the Revenue authorities held that since u/s. 194A of the Act the person making payment who has an obligation to deduct tax at source has time to deduct tax at source at any time during the Financial Year, though it might relate to any of the 1st three quarters of the Financial Year. Therefore the failure to deduct tax at source has to be reckoned only from 31.3.2011 the end of the Financial Year. This explanation given by the Revenue does not appear to be in tune with the express language of Sec.201(3) of the Act. This argument is open when the person responsible for deducting tax at source does not file the return of TDS. In such an event the time limit contemplated u/s.201(3)(ii) is the end of the financial year in which payment is made or credit is given. When a return of TDS is filed can such an argument be raised by the Revenue? 18. In our opinion this question is only academic and therefore does not require adjudication in the present cross objection as the Revenue’s appeals are being decided against the revenue on merits. The cross-objections are therefore dismissed as not requiring adjudication.”
Respectfully following the aforesaid decision in the case of The Karnataka State Apex Co-operative Bank Ltd. (supra) and since in the present case the appeals by the Revenue have been dismissed on merits, we are of the view that the issue raised in the CO by the assessee are only academic requiring no adjudication. Thus, the cross objection filed by the assessee is dismissed.
ITA Nos. 962 to 964/Bang/2015 & CO No.196/Bang/2015 Page 12 of 12 11. In the result, the appeals by the Revenue and CO by the assessee are dismissed.
Pronounced in the open court on this 4th day of November, 2015.
Sd/- Sd/-
( JASON P. BOAZ ) (ASHA VIJAYARAGHAVAN ) Accountant Member Judicial Member
Bangalore, Dated, the 4th November, 2015.
/D S/
Copy to:
Appellant 2. Respondents 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. 6. Guard file
By order
Assistant Registrar, ITAT, Bangalore.