Appeal Details
Counselvise Citation
[2016] 131 COUNSELVISE.COM (IT) 6264 (ITAT-HYDERABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
6 month(s) 15 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
24-08-2016
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
A
Next Hearing Date
11-08-2016
Assessment Year
2012-2013
Appeal Filed On
08-02-2016
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NOS. 126 & 127 /HYD/2016 ASSESSMENT YEAR: 2011-12 AND 2012-13 DY. COMMISSIONER OF INCOME- TAX, TDS, TDS CIRCLE 1(1), HYDERABAD. VS. M/S APSRTC EMPLOYEES THRIFT & CREDIT SOCIETY LTD., HYDERABAD. PAN AAATA3057F (APPELLANT) (RESPONDENT) REVENUE BY : SHRI K.E. SUNIL BABU ASSESSEE BY : SHRI A. SRINIVAS DATE OF HEARING 11-08-2016 DATE OF PRONOUNCEMENT 24-08-2016 O R D E R PER S. RIFAUR RAHMAN, A.M.: BOTH THESE APPEALS OF THE DEPARTMENT ARE DIRECTED A GAINST THE ORDER DATED 24/11/2015 PASSED BY LD. CIT(A) - 8, HY DERABAD FOR THE AYS 2011-12 & 2012. ITA NO. 126/HYD/2016 FOR AY 2011-12 2. BRIEFLY THE FACTS ARE, ASSESSEE A SOCIETY IS REG ISTERED UNDER THE AP STATE COOPERATIVE SOCIETIES ACT, 1964. FOR V ERIFYING ASSESSEES COMPLIANCE TO TDS PROVISIONS, A SURVEY U /S 133A OF THE ACT WAS CONDUCTED ON THE ASSESSEE ON 03/11/2011. IN COURSE OF SURVEY, IT WAS FOUND THAT THE SOCIETY WAS PAYING IN TEREST ON DEPOSITS KEPT WITH IT TO DIFFERENT CATEGORIES OF MEMBERS SUC H AS REGULAR MEMBERS, ASSOCIATE MEMBERS AND NOMINAL MEMBERS. HOW EVER, WHILE MAKING SUCH INTEREST PAYMENTS, ASSESSEE SOCI ETY HAS NOT DEDUCTED TAX AT SOURCE. WHEN ASSESSEE WAS CALLED UP ON TO EXPLAIN ITA NOS.126 & 127/HYD/2016 M/S. APS RTC EMPLOYEES THRIFT & CREDIT SOCIETY LTD . 2 THE REASON FOR NOT DEDUCTING TAX ON INTEREST PAYMEN TS, IT WAS SUBMITTED BY ASSESSEE THAT ON THE PRINCIPLE OF MUTU ALITY, TDS PROVISIONS ON INTEREST PAYMENTS TO MEMBERS WOULD NO T APPLY IN VIEW OF PROVISION CONTAINED U/S 194A(3)(V) OF THE ACT. A O AFTER EXAMINING THE SUBMISSIONS OF ASSESSEE, FOUND THAT DURING THE RELEVANT YEAR, ASSESSEE HAD 851 REGULAR MEMBERS, 4880 ASSOCIATE ME MBERS AND 47 NOMINAL MEMBERS. HE FURTHER NOTICED THAT WHILE A SSESSEE PAYS INTEREST @ 10% ON THE DEPOSITS RECEIVED FROM REGULA R MEMBERS, IT PAYS 9.5% INTEREST ON THE DEPOSITS RECEIVED FROM AS SOCIATE MEMBERS AND 10% INTEREST ON THE DEPOSITS RECEIVED F ROM NOMINAL MEMBERS. ON GOING THROUGH THE BYE-LAWS OF THE SOCIE TY, AO ALSO FOUND DIFFERENCE IN RIGHTS AND PRIVILEGES BETWEEN R EGULAR MEMBERS ON ONE SIDE AND ASSOCIATE/NOMINAL MEMBERS ON THE OT HER. HE, THEREFORE, OPINED THAT EXEMPTION AS CONTEMPLATED U/ S 194A(3)(V) WOULD APPLY ONLY TO A REGULAR MEMBER AND NOT ASSOCI ATE/NOMINAL MEMBERS. THOUGH, ASSESSEE OBJECTED TO SUCH PROPOSIT ION OF THE AO AND CONTENDED THAT AS THE PROVISION CONTAINED U/S 1 94A(3)(V) ONLY SPEAKS OF MEMBER WITHOUT ANY DIFFERENTIATION, AO CA NNOT MAKE A DIFFERENCE BETWEEN REGULAR MEMBER AND ASSOCIATE/NOM INAL MEMBER WHILE GRANTING EXEMPTION U/S 194A(3)(V) OF THE ACT. ASSESSEE IN SUPPORT OF SUCH CONTENTION, RELIED UPON A DECISION OF THE HONBLE BOMBAY HIGH COURT IN CASE OF JALGAON DISTRICT COOPE RATIVE SOCIETY BANK VS. UNION OF INDIA (265 ITR 423). AO, HOWEVER, DID NOT FIND MERIT IN THE CONTENTIONS OF ASSESSEE. HE OBSERVED THAT MEMBER AS ENVISAGED U/S 194A(3)(V) ONLY REFERS TO A REGULAR M EMBER AND NOT ALL THE MEMBERS OF THE SOCIETY. AS FAR AS CBDT CIR CULAR NO. 9 IS CONCERNED, AO HELD THAT THOUGH IT MAY BE A FACT THA T THE SAID CIRCULAR HAS BEEN QUASHED BY THE HONBLE BOMBAY HIG H COURT, BUT, SINCE THE BOARD HAS NOT WITHDRAWN OR REPEALED THE S AID CIRCULAR, IT IS BINDING ON BOTH ASSESSEE AND REVENUE. HOLDING AS AFORESAID, AO PROCEEDED TO COMPUTE DEMAND U/S 201(1) AND 201(1A), AS UNDER: MEMBER FY 2010-11 INTEREST PAID TAX U/S 201(1) INTEREST U/S 201(1A) ASSOCIATE MEMBER 14,89,26,397 1,48,92,640 35,74,233 ITA NOS.126 & 127/HYD/2016 M/S. APS RTC EMPLOYEES THRIFT & CREDIT SOCIETY LTD . 3 NOMINAL MEMBER 14,80,706 1,48,070 35,536 TOTAL 15,04,07,103 1,50,40,710 36,09,769 THUS, AO PASSED THE ORDER ACCORDINGLY ON 30/03/2013 RAISING THE TOTAL DEMAND OF RS. 1,86,50,479. BEING AGGRIEVED OF THE ASSESSMENT ORDER SO PASSED, ASSESSEE PREFERRED APPE AL BEFORE LD. CIT(A). THE CIT(A) FOLLOWING HIS EARLIER ORDER DATE D 10/09/2013 IN ASSESSEES OWN CASE, HELD THAT THE ASSESSEE NEED NO T DEDUCT TAX. 3. IN THE MEANWHILE, THE AO INITIATED PENALTY PROC EEDINGS U/S 271C ON THE GROUND THAT THE ASSESSEE IS LIABLE TO D EDUCT TAX AT SOURCE U/S 194A(1) ON THE INTEREST ON TIME DEPOSITS PAID/CREDITED TO ITS MEMBERS. THE ASSESSEE DEDUCTOR WAS LIABLE TO DE DUCT TAX AT SOURCE @ 10% U/S 194A OF THE ACT. SINCE, THE ASSESS EE HAS FAILED TO DO SO, THE ASSESSEE WAS IN DEFAULT FOR NON DEDUC TING TAX AT SOURCE TO THE TUNE OF RS. 1,68,20,577/- BEING 10% O F THE AMOUNT OF RS. 16,82,05,775/-. ACCORDINGLY, AO IMPOSED PENALTY OF RS. 1,68,20,577/- U/S 271C OF THE ACT. 4. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE CIT(A). 5. BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THAT PENALTY U/S.271C CAN BE LEVIED IF THERE IS ANY FAILURE ON T HE PART OF THE ASSESSEE TO DEDUCT TAX AT SOURCE. IT WAS SUBMITTED THAT THERE IS NO REQUIREMENT ON PART OF THE ASSESSEE TO DEDUCT TAX B Y VIRTUE OF PROVISIONS OF SEC. 194A(3)(V) OF THE INCOME TAX ACT . THIS HAS BEEN UPHELD BY THE THEN COMMISSIONER OF INCOME TAX ACT A PPEALS II, HYDERABAD, VIDE ORDER DATED 10/09/2013. FURTHER TH E HON'BLE ITAT FOR THE SAME ASSESSMENT YEAR HAS DISMISSED THE APPE AL OF THE DEPARTMENT FILED AGAINST THE ORDER OF THE CIT - APP EALS: IL, HYDERABAD. COPY OF THE ORDER OF THE ITA T ENCLOSED. THE ASSESSEE SUBMITTED THAT IF THERE IS NO REQUIREMENT FOR DEDUC TION OF TAX AT SOURCE THEN THE QUESTION OF LEVY OF PENALTY U/S. 27 1C DOES NOT ARISE. ITA NOS.126 & 127/HYD/2016 M/S. APS RTC EMPLOYEES THRIFT & CREDIT SOCIETY LTD . 4 6. THE CIT(A) OBSERVED THAT THE CIT(A)-II, HYDERAB AD VIDE IN ITA NO.0066/CIT(A)-II,HYD/2013-14, DT.10.09.2013 HAS DE CIDED THE ISSUE IN RESPECT OF ORDER U/S, 201(1) & 201(1A) FOR THE AY 2011-12 IN FAVOUR OF THE APPELLANT. THE HON'BLE ITAT, HYDER ABAD IN ITA NO.1689/2013, DT.12.08.2015 FOR THE AY 2011-12 HAD UPHELD THE ORDER OF THE CIT(A)-II, HYDERABAD AND DISMISSED THE DEPARTMENTAL APPEAL FILED. THE ORDER U/S.271C WAS PASSED ON 29.1 1.2013 AFTER RECEIPT OF THE ABOVE SAID ORDER OF CIT(A)-II, HYDER ABAD. 6.1 IN VIEW OF THE ABOVE, , THE CIT(A) HELD THAT TH E ISSUE RELATING TO QUANTUM HAS BEEN ADJUDICATED BY THE CIT(A)-II, H YDERABAD AND ITAT, HYDERABAD AND, THEREFORE, THE BASIS FOR LEVY OF PENALTY DOES NOT LIE AND THAT CHAPTER XVII-B DEALS WITH COLLECTI ON AND RECOVERY OF TAX DEDUCTION OF SOURCES. SECTIONS 201(1) AND 201 (1A) ARE PART OF CHAPTER XVII-B AND FURTHER THAT INN THE ABSENCE OF ORDERS UNDER 201(1) AND 201(1A), THE QUESTION OF LEVYING PENALTY U/S 271C WOULD NOT OBVIOUSLY ARISE. 7. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US RA ISING THE FOLLOWING GROUNDS OF APPEAL: 1 IN THE FACTS & CIRCUMSTANCES OF THE CASE, THE CIT (A) ERRED IN DELETING THE PENALTY U/S 271C. 8. CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES A ND PERUSED THE MATERIAL FACTS ON RECORD AS WELL AS THE ORDERS OF REVENUE AUTHORITIES. AS OBSERVED BY THE CIT(A), AGAINST THE ORDER PASSED BY THE AO U/S 201(1) & 201(1A), WHEN THE ASSESSEE APPE ALED BEFORE THE CIT(A)-II, WHO PASSED THE ORDER IN FAVOUR OF TH E ASSESSEE. WHEN THE REVENUE APPEALED BEFORE THE ITAT AGAINST THE SA ID ORDER, THE ITAT DISMISSED THE REVENUE APPEAL BY OBSERVING AS U NDER: 7. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL A S OTHER MATERIALS ON RECORD. AS FAR AS FACTUAL ASPECT IS CO NCERNED, THERE IS NO DISPUTE THAT ASSESSEE DURING THE RELEVA NT PY HAS PAID INTEREST TO DIFFERENT CATEGORIES OF MEMBERS, V IZ., REGULAR MEMBERS, ASSOCIATE MEMBERS AND NOMINAL MEMBERS. AS COULD BE SEEN, AO WHILE ALLOWING ASSESSEES CLAIM OF EXEM PTION U/S ITA NOS.126 & 127/HYD/2016 M/S. APS RTC EMPLOYEES THRIFT & CREDIT SOCIETY LTD . 5 194A(3)(V) IN RESPECT OF INTEREST PAYMENT TO REGULA R MEMBERS, HE HELD THAT INTEREST PAYMENT TO ASSOCIATE/NOMINAL MEMBERS ARE NOT COVERED UNDER THE SAID PROVISION. HOWEVER, ON PERUSAL OF THE PROVISIONS CONTAINED U/S 194A(3)(V), IT IS V ERY MUCH CLEAR THAT THERE IS NO DISTINCTION MADE UNDER THE SAID PR OVISION BETWEEN DIFFERENT CATEGORIES OF MEMBERS. THE LANGUA GE USED U/S 194A(3)(V) IS MEMBER, THE HONBLE BOMBAY HIG H COURT IN CASE OF THE JALGAON DISTRICT CENTRAL COOPERATIVE BA NK LTD. & ANR. VS. UNION OF INDIA AND OTHERS (SUPRA), WHILE E XAMINING THE PROVISION CONTAINED U/S 194A(3)(V), HELD THAT EXEMP TION GRANTED TO A COOPERATIVE SOCIETY U/S 194A(3)(V) CANNOT BE T AKEN AWAY BY CREATING A DISTINCTION BETWEEN DULY REGISTERED M EMBER AND NOMINAL MEMBER. THE AFORESAID DECISION OF THE HON BLE BOMBAY HIGH COURT HAS BEEN AFFIRMED BY THE HONBLE SUPREME COURT WHILE DISMISSING SLP PREFERRED BY THE DEPARTM ENT. IN VIEW OF THE PRINCIPLE LAID DOWN IN THE JUDICIAL PR ECEDENTS, AS NOTED ABOVE, TO THE EFFECT THAT NO DISTINCTION CAN BE MADE BETWEEN DIFFERENT CATEGORIES OF MEMBERS WHILE APPLY ING THE PROVISIONS OF SECTION 194A(3)(V) OF THE ACT, IN OUR VIEW DECISION OF LD. CIT(A) CANNOT BE INTERFERED WITH. IT MAY BE WORTHWHILE TO NOTE HERE THAT THE IMPUGNED ASSESSMENT ORDER WAS AL SO SUBJECT MATTER OF REVISION PROCEEDING U/S 263 OF TH E ACT. LD. CIT WHILE REVISING THE ASSESSMENT ORDER U/S 263 OF THE ACT, HELD THAT AO SHOULD ALSO HAVE APPLIED TDS PROVISION S TO REGISTERED/REGULAR MEMBERS. WHEN ASSESSEE CARRIED AN APPEAL, AGAINST THE AFORESAID ORDER OF LD. CIT PASS ED U/S 263, ITAT IN AN ORDER PASSED IN ITA NO. 1070/HYD/14 DT. 29/04/2015, HELD AS UNDER: ON CAREFUL ANALYSIS OF THE SAID DECISION, IT IS VERY MUCH CLEAR THAT HONBLE BOMBAY HIGH COURT WHILE QUASHI NG THE CBDT CIRCULAR NO. 09 OF 2002 DT. 11/09/2002 IN NO UNCERTAIN TERMS HELD THAT EXEMPTION GRANTED TO A COOPERATIVE SOCIETY U/S 194A(3)(V) CANNOT BE TAKEN AWAY BY CREATING A DIST INCTION BETWEEN DIFFERENT CATEGORIES OF MEMBERS. IT IS FUR THER EVIDENT, SLP FILED BY THE DEPARTMENT AGAINST THE AFORESAID JUDGMENT OF THE HONBLE BOMBAY HIGH COURT WAS ALSO DISMISSED B Y THE HONBLE SUPREME COURT. THUS, AS PER THE DECISION OF THE HONBLE BOMBAY HIGH COURT AS AFORESAID, WHICH WAS ALSO FOLLOWED BY LD. CIT(A), NO DIFFERENTIATION CAN BE MADE BETWEEN THE MEMBERS OF A COOPERATIVE SOCIETY WHILE APPLYING THE EXEMPTION PROVISION OF SECTION 194A(3)(V) OF T HE ACT. IN FACT, LD. CIT HIMSELF WHILE ISSUING NOTICE U/S 263 AS WELL AS IN MORE THAN ONE PLACE IN THE IMPUGNED ORDER HAS HELD THE ASSESSMENT ORDER PASSED TO BE ERRONEOUS AND PREJUD ICIAL TO THE INTERESTS OF REVENUE ON THE REASONING THAT NO DIFFERENTIATION BETWEEN MEMBERS CAN BE MADE WHILE APPLYING TDS PROVISION U/S 194A(3). THUS, APPLYING THE SAM E LOGIC, IT IS TO BE HELD THAT LD. CIT(A)S ORDER HOLDING THAT INTEREST PAYMENT TO ASSOCIATE/NOMINAL MEMBERS IS EXEMPT FRO M DEDUCTION OF TAX AT SOURCE IN VIEW OF SECTION 194A (3)(V) WOULD ALSO IMPLIEDLY APPLY TO THE REGULAR MEMBERS AS SHE CAME TO SUCH CONCLUSION ON THE PRINCIPLE THAT NO DIFFERENT IATION CAN BE ITA NOS.126 & 127/HYD/2016 M/S. APS RTC EMPLOYEES THRIFT & CREDIT SOCIETY LTD . 6 MADE BETWEEN MEMBERS OF THE COOPERATIVE SOCIETY. T HAT BEING THE CASE, ORDER PASSED BY LD. CIT(A) ALSO CO VERS THE ISSUE OF APPLICATION OF SECTION 194A(3)(V) TO REGU LAR MEMBERS ALSO. EXPLANATION C TO SECTION 263(1) CLEARLY S PELLS OUT THAT LD. CIT CAN EXERCISE HIS POWER U/S 263 TO AN ISSUE WHICH IS NOT CONTESTED AND DECIDED IN APPEAL PROCEEDING. TH EREFORE, AS IN THE PRESENT CASE, THE ISSUE IN DISPUTE IS CL EARLY THE SUBJECT MATTER OF APPEAL BEFORE LD. CIT(A) AND A D ECISION HAS ALREADY BEEN RENDERED BY LD. CIT(A) MUCH PRIOR TO THE EXERCISE OF POWER U/S 263 OF THE ACT, IN OUR VIEW, ASSESSMENT ORDER HAS MERGED WITH THE ORDER OF LD. CIT(A), HEN CE, COULD NOT HAVE BEEN REVISED BY INVOKING THE PROVISIONS O F SECTION 263. THEREFORE, THE EXERCISE OF POWER U/S 263 IS INVALID. IN VIEW OF THE AFORESAID, FINDING NO INFIRMITY IN T HE ORDER OF LD. CIT(A), WE UPHOLD THE SAME BY DISMISSING GROUNDS RA ISED BY REVENUE. AS THE QUANTUM ADDITION HAS BEEN DELETED BY THE CIT (A) AND ITAT, THE BASIS FOR LEVY OF PENALTY DOES NOT ARISE AND SU CH PENALTY CANNOT WITHSTAND IN THE EYE OF LAW. THEREFORE, WE DO NOT F IND ANY INFIRMITY IN THE ORDER OF THE CIT(A) IN CANCELLING THE PENALT Y LEVIED BY THE AO U/S 271C OF THE ACT, AND THE SAME IS HERE BY UPHELD DISMISSING THE GROUND RAISED BY THE REVENUE. ITA NO. 127/HYD/16 FOR AY 2012-13 9. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLO WING GROUNDS OF APPEAL: 1. THE LEARNED CIT(APPEAL) HAS FAILED TO APPRECIATE THE FACT THAT THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN T HE CASE OF JALGAON DISTRICT COOPERATIVE BANK LTD. VS. UNION OF INDIA (2004) IN 265 ITR 423 HAS NOT BEEN DECIDED BY THE H ON'BLE SUPREME COURT ON MERITS. 2. THE LEARNED CIT(APPEALS) HAS FAILED TO APPRECIAT E THE FACT THAT BOARD CIRCULAR NO.9 OF 2002 HAS NOT BEEN REPEA LED BY THE CBDT. 3. ANY OTHER GROUND WHICH THE APPELLANT MAY URGE EI THER BEFORE OR AT THE TIME OF HEARING. 10. THE AO PASSED ORDER U/S 201(1) & 201(1A) ON 30/ 03/2015 RAISING A DEMAND OF RS. 2,89,97,729/-. ITA NOS.126 & 127/HYD/2016 M/S. APS RTC EMPLOYEES THRIFT & CREDIT SOCIETY LTD . 7 11. ON APPEAL BEFORE THE CIT(A), THE CIT(A) FOLLOWI NG THE DECISION OF THE ITAT IN ASSESSEES OWN CASE FOR AY 2011-12, ALLOWED THE APPEAL OF THE ASSESSEE. 12. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 13. CONSIDERED THE SUBMISSIONS OF THE BOTH THE COUN SELS AND PERUSED MATERIAL FACTS ON RECORD AS WELL AS THE ORD ERS OF REVENUE AUTHORITIES. AS THE ISSUE IN DISPUTE IS SQUARELY CO VERED BY THE DECISION OF THE ITAT IN ASSESSEES OWN CASE FOR AY 2011-12 (SUPRA), RESPECTFULLY FOLLOWING THE SAME, WE UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THE GROUNDS RAISED BY THE REVENU E. MOREOVER, THE GROUNDS RAISED BY THE DEPARTMENT ARE HYPOTHETIC AL. HENCE, THEY ARE NOT PROPER GROUNDS TO ADJUDICATE. 14. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 24 TH AUGUST, 2015 SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED: 24 TH AUGUST, 2015 KV COPY TO:- 1) DCIT, CIRCLE 1(1) (TDS), B BLOCK, 4 TH FLOOR, INCOME TAX TOWERS AC GUARDS, MASAB TANK, HYDERABAD 500 004. 2) M/S APSRTC EMPLOYEES THRIFT & CREDIT SOCIETY LTD ., SATYANARAYANA REDDY MARG., AZAMBAD, HYDERABA D 500 020 3) CIT(A)-8, HYDERABAD 3) CIT(TDS), HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. ITA NOS.126 & 127/HYD/2016 M/S. APS RTC EMPLOYEES THRIFT & CREDIT SOCIETY LTD . 8 DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON SR.P.S. 2. DRAFT PLACED BEFORE AUTHOR SR.P.S 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER VP 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S. 6. KEPT FOR PRONOUNCEMENT ON SR.P S. 7. FILE SENT TO THE BENCH CLERK SR.P.S. 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER
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