THE PHAMBRA MULTIPURPOSE CO-OP SOCIETY LIMITED,SHAHEED BHAGAT SINGH NAGAR vs. INCOME TAX OFFICER ( TDS), JALANDHAR

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ITA 142/ASR/2023Status: DisposedITAT Amritsar03 August 2023AY 2014-156 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal condoned the delay of 102 days in filing the appeal, as the revenue did not object. On the substantive issue, the Tribunal held that TDS under Section 194A is not applicable on interest payments to nominal members of a cooperative society. The Tribunal relied heavily on the ITAT Amritsar Bench's decision in The Jhingran Coop. Multipurpose Service Society Ltd. (supra), which in turn followed the jurisdictional High Court's ruling and the Bombay High Court's judgment in The Jalgon District Central Bank. These judgments established that the exemption under Section 194A(3)(v) is not affected by distinguishing between registered and nominal members, and that the CBDT cannot alter the scope of this exemption through circulars. The Tribunal also noted that the NFAC had previously accepted nominal members as eligible for this exemption in the assessee's own case for the same assessment year, invoking res judicata. Consequently, the addition of Rs. 53,050 was quashed, and the impugned order of the NFAC was held to be infirm and against the law. The Tribunal's ratio decidendi is that nominal members of a cooperative society are to be treated as 'members' for the purpose of the TDS exemption under Section 194A(3)(v), and any attempt by the CBDT to create a distinction is ultra vires.

What were the facts?

The assessee, The Phambra Multipurpose Cooperative Society Ltd., filed an appeal against the order of the NFAC, Delhi, which upheld the order of the ITO, TDS, Jalandhar. The assessment year in question is 2014-15. The dispute arose from the addition of TDS at 10% on interest payments to nominal members, amounting to Rs. 2,70,663, resulting in a TDS liability of Rs. 27,066 and interest under Section 201(1A) of Rs. 25,984, totaling Rs. 53,050. The assessee contended that TDS is not applicable on interest payments to nominal members. The NFAC rejected this plea. The appeal was filed with a delay of 102 days, which was condoned. The assessee's appeal before the Tribunal was filed after the NFAC's order.

What were the issues?

1. Whether the Tribunal has jurisdiction to entertain the appeal filed with a delay of 102 days, and if so, whether the delay should be condoned. (Procedural issue) 2. Whether Tax Deducted at Source (TDS) under Section 194A of the Income-tax Act, 1961, is applicable on interest payments made by a cooperative society to its nominal members. (Question of law) Assessee's Arguments: - The assessee argued that TDS is not applicable on interest payments to nominal members. They relied on the ITAT Amritsar Bench's decision in the case of The Jhingran Coop. Multipurpose Service Society Ltd vs. ITO (TDS), which followed the jurisdictional High Court's judgment in CIT vs. Punjab State Co-operative Bank Ltd. and the Bombay High Court's decision in The Jalgon District Central Bank Vs Union of India and Ore. The assessee also pointed to a previous order in their own case for AY 2014-15 where nominal members were accepted as members for TDS purposes, invoking the principle of res judicata. Revenue's Arguments: - The revenue's arguments are not explicitly detailed but are stated to have relied on the order of the revenue authority.

Which sections of the Income-tax Act were involved?

Section 201,Section 201(1A),Section 194A,Section 194A(3)(v),Section 119

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR.

Before: DR. M. L. MEENA & SH. ANIKESH BANERJEE

Hearing: 31.07.2023Pronounced: 03.08.2023

ORDER Per: Anikesh Banerjee, JM: The instant appeal of the assessee was filed against the order of the ld. NFAC, Delhi, (in brevity ‘the CIT (A)’) order passed u/s 250 of the Income-tax Act, 1961 (in brevity the Act) for assessment year 2014-15. The impugned order was emanated from the order of the ld. ITO, TDS, Jalandhar, (in brevity the ld. AO) order passed u/s 201(1) of the Act.

2.

The appeal of the assessee was filed with delay of 102 days. The assessee filed the petition for condonation of delay and an affidavit. The assessee explained that the delay was caused due taking permission from Asst. Registrar Co-operative, Nawanshahr which was caused ultimate delay for granting permission for filing appeal. The ld. DR had not made any objection in the issue. Accordingly, the delay for 102 days is condoned.

3.

Brief facts as culled out from the records are that the assessee is cooperative society. The assessment was framed U/s 201 with addition of TDS @10% on the interest payment to nominal members amount to Rs. 2,70,663/- which works out to amount of Rs. 27,066/- and interest was calculated U/s 201(1A) amount to Rs. 25,984/-. The total amount was calculated to Rs. 53,050/- (Rs.27,066/- + Rs. 25,984/-) which was ascertained the TDS liability by the ld. AO. Aggrieved assessee filed as appeal before the ld. CIT(A) and has taken plea that the TDS will not be applicable on the interest payment to nominal members. The ld. CIT(A) rejected the grounds of the assessee. Being dissatisfied the assessee filed an appeal before us.

4.

The ld. AR vehemently argued and placed that the TDS U/s 201 will not be applicable on the interest payment to nominal members. The ld. AR mentioned that the issue was decided in favour of the assessee by the order of ITAT-Amritsar Bench bearing date of pronouncement 20/06/2023 in case of The Jhingran Coop. Multipurpose Service Society Ltd vs. ITO (TDS).The relevant paragraph is extracted as below: -

“8. On parity of facts, following the judgment of the Hon’ble jurisdictional High Court, in the case of “CIT vs. Punjab State Co-operative Bank Ltd” (Supra), the ITAT Amritsar Bench in the case of “The Rurkee Coop Agri M/P Society Ltd; VPO: Rurkee Vs Jt CIT(OSD) Phagwara circle, Phagwara in ITAT No 459(ASR)/2012/Assessment Year 2009-10] has also held that the assessee was not required to deduct tax at source on interest payments to the nominal members, who are members of the society.

9.

The Hon’ble High Court of Bombay in the case of ‘The JalgonDistrict Central Bank Vs Union of India and Ore.’, (Supra) have adjudicated upon the question of whether the exemption granted to the co-operative society under Section 194A(3)(v) can be taken away be creating a distinction between duly registered member and a nominal member, which is unknown to the exemption. clause contained in Section 194A(3)(v) of the IT Act, 1961. Having examined the validity of the impugned circular from all angles, the Hon’ble High Court has \given clear opinion that CBDT has no authority to make a crack in the exemption clause contained in Section 194A(3)(v) of the IT Act, 1961, by issuing the impugned circular and that the CBDT cannot usurp the powers of Parliament by virtue of Section 119 of the IT Act, 1961. Meaning thereby that the CBDT, under the garb of Section 119 of the IT Act, 1961, cannot exercise wider powers than the powers bestowed on it. Thus, the CBDT has no power to introduce a substantial change or alteration in the provisions of the IT Act. 1961, by importing the ideas unknown to the IT Act. 1961. The impugned circular, therefore, does not stand to the legal test. Accordingly, the impugned Circular No. 9 of 2002 dt. 11th Sept., 2002 [F. No. 275/106/2000/IT(B)--Annexure*A] was quashed and set aside. Thus, in our view, the reliance of the Worthy CIT(A) NFAC, Delhi on this circular is against law.

10.

Further, the Hon’ble Supreme Court in the case of “Mavilayi Service Co-operative Bank Ltd: Vs. Commissioner of Income Tax, Calicut, [2021] 123 taxmann.com 161 (SC) has also observed that the expression “member” is not defined in the Act. Since a cooperative society has been established under the provisions of the law made by the State Legislature in that regard, the expression “member” in section 80-P(2)(a)(i) must therefore, be construed in the context of the provisions of the law enacted by the state Legislature under which the cooperative society claiming exemption has been formed.

11.

It is further noted that the CIT(A) NFAC, Delhi in the assesse’s own case for the proceeding in respect of the Assessment Year 2014-15, has accepted nominal members as members and held that interest paid to them is not liable for TDS u/s. 194 of the Income Tax Act,1961 (Copy of Order filed on record). In view of the matter, we hold that the CIT/NFAC has acted against Res Judicata.

12.

In the above view, we accept the grievance of the assessee genuine. The order of the Ld. CIT/NFAC is held to be infirm and against law. Accordingly, the impugned order is quashed.”

5.

The ld. DR vehemently argued and relied on the order of the revenue authority.

6.

We heard the rival submission and consider documents available in records. The assessee is a cooperative society and allowed the immunity under section 194A(3)(V)for non-deduction of TDS on payment of interest to the members of the cooperative society. The grievance revenue is thatthe nominal member cannot be eligible for non-deduction of TDS on payment of interest. The ld. AR relied on the order of ITAT Amritsar bench in the case ofThe Jhingran Coop. Multipurpose Service Society Ltd(supra). The said order is duly recognised the nominal member of cooperative society for granting immunity for non-deduction of TDs on interest payment. There is no violation under section 201 of the act related to non-deduction of TDS for nominal member of the cooperative society. We fully relied on the order of ITAT- Amritsar bench, The Jhingran Coop. Multipurpose Service Society Ltd(supra). The ld. DR was unable to place any contrary judgment against the submission of the ld. AR. The impugned appeal order is dismissed. Accordingly, the addition amount of Rs.53,050/- is quashed.

7.

In the result, the appeal of the assessee bearing is allowed.

Order pronounced in the open court on 03 .08.2023

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