DCIT, Dindigul V. Dindigul Central Co-op Bank Limited, Dindigul

ITA 1273/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8369 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 09-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Assessee Lawyers: K RAVI
• Keywords: Retrospective amendment
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A B ENCH, CHENNAI . . . , . , % BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NO.1273/MDS/2016 ( / ASSESSMENT YEAR: 2012-13) THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-I, DINDIGUL. VS M/S. DINDIGUL CENTRAL CO-OP. BANK LIMITED, KOOTTURAVU NAGAR, TRICHY ROAD,DINDIGUL. PAN: AAAJD0325P ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. SHIVA SRINIVAS, JCIT /RESPONDENT BY : MR. K.RAVI, ADVOCATE /DATE OF HEARING : 3 RD AUGUST,2016 /DATE OF PRONOUNCEMENT : 18 TH OCTOBER, 2016 / O R D E R PER A. MOHAN ALANKAMONY, AM:- THIS APPEAL IS FILED BY THE REVENUE AGGRIEVED BY T HE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS)- I, MADURAI DATED 08.02.2016 IN ITA NO.0019/2015-16 PASSED UNDER SECTION 143(3) R.W.S. 250(6) OF THE ACT. 2. THE REVENUE HAS RAISED SEVERAL GROUNDS IN ITS AP PEAL, HOWEVER, THE CRUX OF THE ISSUE IS AS FOLLOWS:- THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FAILED TO CONSIDER THE AMENDMENT IN FINANCE ACT , 2015 WHEREIN IT IS CLARIFIED THAT THE PROVISIONS OF SECTION 40(A)(IA) WOULD NOT COVER THE MEMBERS OF THE CO- 2 ITA NO.1273 /MDS/2016 OPERATIVE SOCIETY WHICH ENGAGED IN THE BUSINESS OF BANKING AND THEREBY ERRED IN DELETING THE DISALLOW ANCE MADE BY THE LEARNED ASSESSING OFFICER FOR NON- DEDUCTION OF TAX UNDER SECTION 194A OF THE ACT. 3. BRIEF FACTS ARE THAT THE ASSESSEE IS A CO-OPERAT IVE SOCIETY CARRYING ON THE BUSINESS OF BANKING FILED I TS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2012-13 ON 19.09.201 2 ADMITTING INCOME OF RS.9,16,71,780/-. THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) WAS IS SUED TO THE ASSESSEE ON 06.08.2013. THEREAFTER THE ASSESSMENT W AS COMPLETED UNDER SECTION 143(3) OF THE ACT ON 26.12. 2015 WHEREIN THE LEARNED ASSESSING OFFICER DISALLOWED RS.1,22,77,202/- BY INVOKING THE PROVISIONS OF SECT ION 40(A)(IA) OF THE ACT BEING INTEREST PAID BY THE AS SESSEE TO ITS MEMBERS DURING THE PREVIOUS YEAR 2011-12 WITHOUT DEDUCTING TAX AT SOURCE AS PER SECTION 194A OF THE ACT. 4. ON APPEAL, THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) ALLOWED THE APPEAL OF THE ASSESSEE BY OBS ERVING AS UNDER:- 4.5. I HAVE CONSIDERED THE SUBMISSIONS OF THE REPRESENTATIVE AND THE STAND TAKEN BY THE AO. ADMITTEDLY, THE APPELLANT PAID INTEREST TO ITS ASSO CIATE 3 ITA NO.1273 /MDS/2016 MEMBERS BUT THE AO FOUND THAT THE MEMBERS WERE NOT FULL TIME MEMBERS HAVING VOTING RIGHTS BUT WERE ADMITTED AS ASSOCIATE MEMBERS WHILE RECEIVING THE T ERM DEPOSITS FROM THEM. THE AO WAS OF THE OPINION THAT THE EXEMPTION FROM TAX DEDUCTION AT SOURCE PROVIDED UIS.194A(3)(V) IS APPLICABLE ONLY TO FULL TIME MEMB ERS AS PER CIRCULAR 9 OF 2002 DT.11.09.2002 AND BY RELYING ON THE ABOVE CIRCULAR HE MADE THE DISALLOWANCE. HOWEVER AS CONTENDED BY THE REPRESENTATIVE, THE RELEVANT PORTION OF THE CIRCULAR DISTINGUISHING FUL L TIME MEMBERS AND ASSOCIATE MEMBERS WAS CONSIDERED BY THE HON'BLE MUMBAI HIGH COURT IN THE CASE OF JALGAON DISTRICT CENTRAL CO-OPERATIVE BANK LTD., (134 TAXMANN.1) (CITED ABOVE) AND IT WAS HELD THAT SUCH DISTINCTION COULD NOT BE MADE. THE SLP FILED BY THE DEPARTMENT AGAINST THE ABOVE DECISION HAS BEEN DISMISSED AND THE CIT(TDS), CHENNAI HIMSELF ADDRESSED A LETTER TO THE GENERAL MANAGER, TAMILNAD U STATE APEX COOPERATIVE BANK LTD ON 25.03.2008 THAT THE EXEMPTION IS APPLICABLE TO ALL THE MEMBERS (INCLUDING ASSOCIATE MEMBERS) OF THE COOPERATIVE SOCIETY. FURTHER, AS POINTED OUT BY THE REPRESENTAT IVE, THE AMENDMENT BY FINANCE ACT,2015 PROVIDING THAT TH E COOPERATIVE BANKS HAVE TO DEDUCT TAX AT SOURCE IN RESPECT OF INTEREST PAID TO ITS MEMBERS IS EFFECTIV E ONLY FROM 1.6.2015 AND NOT BEFORE THAT DATE. ACCORDINGLY , I FIND THAT THE APPELLANT WAS NOT LIABLE TO DEDUCT TDS ON INTEREST PAID TO ITS ASSOCIATE MEMBERS FOR T HE ASSESSMENT YEAR 2012-13 AND THEREFORE THE DISALLOWANCE MADE BY THE ASSESSING OFFICER WAS NOT CORRECT AND THE SAME IS DELETED. AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) THE REVENUE IS IN APPEAL BEFOR E US. 5. AT THE OUTSET, THE LEARNED AUTHORIZED REPRESENTA TIVE POINTED OUT THAT THE ISSUE IS SQUARELY COVERED BY T HE DECISION OF THE HONBLE JURISDICTIONAL MADRAS HIGH COURT IN THE CASE OF M/S. THE COIMBATORE DISTRICT CENTRAL CO-OPERATIVE B ANK LTD. 4 ITA NO.1273 /MDS/2016 VS. ITO IN T.C.(A) NO.588 OF 2015 VIDE ORDER DATED 15.10.2015. THE LEARNED DEPARTMENTAL REPRESENTATIVE COULD NOT CONTROVERT TO THE SUBMISSIONS OF THE LEARNED AU THORIZED REPRESENTATIVE. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. ON PERUSING THE ORDER OF THE H ONBLE JURISDICTIONAL HIGH COURT (SUPRA), WE FIND THAT ON THE IDENTICAL ISSUE WHETHER A CO-OPERATIVE SOCIETY CARRYING ON B ANKING BUSINESS WITH THE APPROVAL OF THE RBI IS LIABLE TO DEDUCT TAX UNDER SECTION 194A OF THE INCOME TAX ACT, 1961 ON T HE INTEREST PAID TO ITS MEMBERS, IT WAS HELD AS UNDE R:- 63. IT CAN BE SEEN FROM THE LAST PART OF THE PORT ION EXTRACTED ABOVE THAT THE VERY NOTE EXPLAINING THE C LAUSE 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 T HE APPELLANT CANNOT ESCAPE THE LIABILITY FROM DEDUCTIO N OF TAX AT SOURCE. 64. ONCE AN AMENDMENT IS INTRODUCED, FOR THE PURPOS E 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. RAT HER IT CHOSE TO AMEND THE PROVISIONS. IT IS NOW WELL SETTL ED THAT AN AMENDMENT CAN ONLY BE PROSPECTIVE UNLESS IT IS M ADE RETROSPECTIVE BY EXPRESS LANGUAGE OR NECESSARY IMPLICATION. APART FROM THE FACT THAT THE EXPRESS L ANGUAGE OF SECTION 194A AFTER AMENDMENT DOES NOT INDICATE A NY RETROSPECTIVITY, THE NOTE EXPLAINING THE CLAUSES 5 ITA NO.1273 /MDS/2016 GOES ONE STEP FURTHER IN MAKING IT CLEAR THAT IT WA S INTENDED TO HAVE PROSPECTIVE EFFECT FROM 1.6.2015. 65. THEREFORE OUR ANSWER TO THE FIRST SUBSTANTIAL Q UESTION OF LAW WOULD BE IN FAVOUR OF THE ASSESSEE. 66. HOWEVER, MR J.NARAYANASAMY, LEARNED SENIOR STAN DING COUNSEL CONTENDS THAT IN COMMISSIONER OF INCOME TAX V. ALOM EXTRUSIONS LTD., (2009) 319 ITR 0306, THE SUPREME COURT CONSTRUED A SIMILAR AMENDMENT TO HAVE RETROSP ECTIVE EFFECT. BUT UNFORTUNATELY THE SUPREME COURT WAS CON CERNED IN THAT CASE WITH THE BENEFIT CONFERRED UPON THE AS SESSEE AND NOT A LEVY. THEREFORE ON THE BASIS OF A/OM EXT RUSIONS, IT CANNOT BE CONTENDED THAT THE AMENDMENT MERELY CL ARIFIED THE EXISTING PROVISIONS SO AS TO HAVE RETROSPECTIVE EFFECT OR TO BECOME RETROACTIVE. 7. SINCE THE ISSUE HAS BEEN ALREADY DECIDED BY THE HONBLE JURISDICTIONAL HIGH COURT IN FAVOUR OF THE ASSESSEE FOR THE RELEVANT ASSESSMENT YEAR 2012-13 WHICH IS WELL WITHIN 01/06/2015, WE DO NOT FIND IT NECESSARY TO INTERFER E WITH THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) WHICH IS ALSO IN PARITY WITH THE ORDER OF THE HONB LE JURISDICTIONAL HIGH COURT OF MADRAS. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 18 TH OCTOBER, 2016 SD/- SD/- ( . . . ) ( . ) (N.R.S.GANESAN) ( A.M OHAN ALANKAMONY ) # % / JUDICIAL MEMBER % / ACCOUNTANT MEMBER # /CHENNAI, ( /DATED 18 TH OCTOBER, 2016 6 ITA NO.1273 /MDS/2016 SOMU *+ ,+ /COPY TO: 1. APPELLANT 2. RESPONDENT 3. - () /CIT(A) 4. - /CIT 5. + 1 /DR 6. /GF