ACIT, Circle-1, Warangal, Warangal V. Warangal Urban Co-operative Bank Ltd., Warangal, Warangal

ITA 1413/HYD/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6360 (ITAT-HYDERABAD)
• Duration Of Justice: 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 09-06-2016
• Assessment Year: 2012-2013
• Appeal Filed On: 15-12-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B KURMI NAIDU
• Assessee Lawyers: D SATYANARAYANA

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 1413/HYD/2015 ASSESSMENT YEAR: 2012-13 ASST. COMMISSIONER OF INCOME- TAX, CIRCLE 1, WARANGAL. VS. WARANGAL URBAN COOPERATIVE BANK LTD., WARANGAL. PAN AAAA W 06517 (APPELLANT) (RESPONDENT) REVENUE BY : SHRI B. KURMI NAIDU ASSESSEE BY : SHRI D. SATYANARAYANA DATE OF HEARING : 09-06-2016 DATE OF PRONOUNCEMENT : 22-07-2016 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST TH E ORDER DATED 24/09/2015 OF LD. CIT(A) - 3, HYDERABAD FOR THE AY 2012-13. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE IS AN URBAN COOPERATIVE BANK HAVING ITS HEAD QUARTERS AT WARANG AL. IT FILED ITS RETURN OF INCOME OF RS. 50,70,880/- ON 06/09/2012. IN THE SCRUTINY ASSESSMENT, THE AO MADE DISALLOWANCE OF RS. 1,52,36 ,988/- U/S 40(A)(IA) OF THE INCOME-TAX ACT, 1961 (IN SHORT AC T). 3. THE ASSESSEE DEBITED INTEREST OF RS. 1,52,36,988 /- BEING THE INTEREST PAID ON TIME DEPOSITS. THE AO DISALLOWED T HE SAID AMOUNT ON THE GROUND THAT SUCH PAYMENT IS LIABLE TO TAX DEDUC TION U/S 194A, AS NO TDS WAS DEDUCTED, IN ACCORDANCE WITH THE PROVISI ONS OF SECTION 40(A)(IA) THE INTEREST DEBITED WAS DISALLOWED. AO A LSO OBSERVED THAT THE ASSESSEE CLAIMED EXEMPTION FROM TDS U/S 194A(3) (V). HOWEVER, THIS PROVISION IS GENERAL IN NATURE. THERE ARE SPEC IFIC PROVISIONS 2 ITA NO. 1413 /HYD/2015 WARANGAL URBAN COOPERATIVE BANK LTD. 194A(3)(I) AND 194A(3)(VIIA) WHICH CLEARLY SPECIFY THAT TDS IS DEDUCTIBLE ON INTEREST PAID BY A COOPERATIVE BANK. 4. AGGRIEVED WITH THE ABOVE ORDER, THE ASSESSEE PRE FERRED AN APPEAL BEFORE THE CIT(A). 5. BEFORE THE CIT(A), THE ASSESSEE STATED AS UNDER: A. THAT THE INTEREST PAID TO MEMBERS BY COOPERATIV E BANK ARE EXEMPT UNDER 194A(3)(V) IN ACCORDANCE WITH THE CBD T CIRCULAR NO. 09/2002, DATED 11/09/2002. B. THE INTEREST PAID OF RS. 1,52,36,988 CONSISTS O F I. INTEREST OF LESS THAN RS. 10,000 PAID TO EACH P ERSON RS. 64,89,904 II. INTEREST OF MORE THAN RS. 10,000 PAID TO THE SHAREHOLDERS RS. 66,97,058 III. INTEREST OF MORE THAN RS. 10,000 PAID TO THE NON-MEMBERS RS. 20,50,008 C. WITH REFERENCE TO PAYMENTS MADE OF LESS THAN RS . 10000 THEY ARE NOT LIABLE TO TDS U/S 194A AS THE AMOUNT PAID IS BELOW THE PRESCRIBED LIMITS. D. THE INTEREST PAID TO MEMBERS (SHAREHOLDERS) IS EXEMPT U/S 194A THEREFORE NO DISALLOWANCE CAN BE MADE U/S 40( A)(IA). E. WITH REFERENCE TO AMOUNT OF RS. 20,50,008, TO N ON- SHAREHOLDERS IT WAS SUBMITTED THAT SINCE THESE PER SONS HAVE GIVEN FORM 15G, NO TDS SHOULD BE DEDUCTED. IT WAS F URTHER SUBMITTED THAT AS PER THE DECISION OF SPECIAL BENCH IN CASE OF MERLYN SHIPPING TRANSPORT & OTHERS VS. ACIT, 136 I TR 23 (SB) (VIZ.), SINCE THE AMOUNT WAS ALREADY PAID AND WAS N OT PAYABLE AS ON 31/03/2012, TDS PROVISIONS ARE NOT APPLICABLE . 6. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E AND REFERRING TO THE PROVISIONS OF SECTION 194A AS WELL AS CBDT C IRCULAR NO. 09 DATED 11/09/2002, THE CIT(A) DELETED THE DISALLOWAN CE MADE BY THE AO BY OBSERVING AS UNDER: IN VIEW OF THE ABOVE DISCUSSION, THE INTEREST PAYM ENTS MADE BELOW RS. 10,000, THE TDS PROVISIONS ARE NOT APPLIC ABLE. THE INTEREST PAYMENTS MADE TO MEMBER SHAREHOLDERS ARE E XEMPT U/S 3 ITA NO. 1413 /HYD/2015 WARANGAL URBAN COOPERATIVE BANK LTD. 194A(3)(VIIA). WITH REFERENCE TO INTEREST PAYMENT T O NON- MEMBERS THEY ARE AGAIN NOT LIABLE TO TDS AS THE AMO UNT WAS ALREADY PAID DURING THE FY AND THE SAME WAS NOT PAY ABLE AS ON 31.03.2012 IN ACCORDANCE WITH DECISION OF HON'BLE S PECIAL BENCH VIZAG IN THE CASE OF MERILYN SHIPPING & TRANSPORTER S OF 136 ITD 23 AND ALSO IN ACCORDANCE WITH HON'BLE AP HIGH COUR T IN THE CASE OF JANAPRIYA ENGINEERS SYNDICATE (PRONOUNCED O N 24.06.2004). SINCE THE ENTIRE AMOUNT OF INTEREST WAS PAID AND NO THING WAS PAYABLE AS ON 31.03.2012 THE PROVISIONS OF TDS ARE NOT APPLICABLE THEREFORE NO DISALLOWANCE CAN BE MADE U/ S 40(A)(IA). THEREFORE THESE TWO GROUNDS OF APPEAL ARE ALLOWED. 7. AGGRIEVED WITH THE ABOVE ORDER, THE REVENUE IS I N APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE LD.CIT(A) ERRED BOTH IN LAW AND FACTS OF THE CASE. 2. THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANC E OF RS.1,52,36,988/- MADE BY INVOKING PROVISIONS OF SEC TION 40(A)(IA) OF THE I.T.ACT. 3. THE LEARNED CIT(A) ERRED IN DELETING THE DISALLO WANCE OF EXPENDITURE U/ S 40(A)(IA) OF THE ACT, HOLDING THAT THE AMOUNTS ARE NOT PAYABLE AS AT THE END OF THE YEAR, IGNORING THAT THE PROVISIONS ARE APPLICABLE IN RESPECT OF PAYMENTS MA DE DURING THE YEAR WITHOUT TDS BEING MADE. 4. THE LD.CIT(A) ERRED IN RELYING UPON THE DECISION OF HON'BLE ITAT, SPECIAL BENCH, VISHAKHAPATNAM, IN THE CASE OF MERLYN SHIPPING & TRANSPORTING NOT CONSIDERING THE CIRCULA R OF CBDT IN NO:10/DV/2013[F.NO:279/MISC./M61/2012-ITJ DATED 16/ 12/2013. 8. IT DESERVES TO BE NOTICED THAT AS PER THE APPROV AL GRANTED BY THE CIT(A) U/S 253(2) OF THE ACT, THE FOLLOWING SIX GROUNDS WERE DIRECTED TO BE RAISED BEFORE THE ITAT: 1. LD. CIT(A) ERRED IN BOTH LAW AND FACTS OF THE CA SE. 2. THE LD. CIT(A) ERRED IN DELETING THE DISALLOWAN CE OF RS. 1,52,36,988/- MADE BY INVOKING PROVISIONS OF SECTIO N 40(A)(IA) OF THE IT ACT. 3. THE LD. CIT(A) ERRED IN DELETING THE DISALLOWAN CE OF EXPENDITURE U/S 40(A)(IA) OF THE ACT, HOLDING THAT THE AMOUNTS ARE NOT PAYABLE AS AT THE END OF THE YEAR, IGNORING THA T THE PROVISIONS ARE APPLICABLE IN RESPECT OF PAYMENTS MADE DURING T HE YEAR WITHOUT TDS BEING MADE. 4 ITA NO. 1413 /HYD/2015 WARANGAL URBAN COOPERATIVE BANK LTD. 4. THE LD. CIT(A) ERRED IN RELYING UPON THE DECISI ON OF HONBLE ITAT, SPECIAL BENCH, VISAKHAPATNAM, IN THE CASE OF MERYLIN SHIPPING & TRANSPORTING NOT CONSIDERING THE CIRCULAR OF CBDT NO. 10/DV/2013, [F.NO. 279/MISC./M-61/2012-ITJ DATED 16/12/2013. 5. THE LD. CIT(A) ERRED IN RELYING UPON THE DECISI ON OF HONBLE ITAT, SPECIAL BENCH, VISAKHAPATNAM, IN THE CASE OF MERYLIN SHIPPING & TRANSPORTING, NOT CONSIDERING THE FACT T HAT SAID DECISION IS PLACED UNDER INTERIM SUSPENSION BY HON BLE HIGH COURT OF JUDICATURE AT HYDERABAD FOR THE STATE OF T ELANGANA AND STATE OF A.P. 6. ANY OTHER GROUND(S) THAT MAY BE URGED AT THE TI ME OF HEARING. HOWEVER, THE APPELLANT/AO RAISED BEFORE US ONLY FOU R GROUNDS. EVEN THOUGH THE REVENUE SOUGHT TO FILE REVISED FORM NO. 36 ON 20/01/2006, THE REVENUE DID NOT ADHERE TO THE DIRECTIONS GIVEN BY THE CIT. LD. DR SEEKS FURTHER TIME TO FILE REVISED GROUNDS OF APPEA L. HOWEVER, IN THESE CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT BY GRANTING ADJOURNMENT WOULD AMOUNT TO GIVE PREMIUM TO THE CAS UAL APPROACH OF THE AO AND, THEREFORE, WE REJECT THE REQUEST OF THE LD. DR. AT ANY RATE, THE ISSUE ARISING OUT OF THE GROUNDS OF APPEA L PROPOSED BY THE CIT(A) AND GROUNDS TAKEN BEFORE THE ITAT BY THE AO BROADLY ARE THE SAME. THEREFORE, WE PROCEED TO DISPOSE OF THE APPEA L ON MERITS. 9. THOUGH, LD. AR SHRI D. SATYANARAYANA APPEARED, H E HAS NOT ADVANCED ANY ARGUMENTS BEFORE US, THEREFORE, WE TRE AT THIS APPEAL AS HEARD. 10. CONSIDERED THE MATERIAL FACTS ON RECORD AS WELL AS THE ORDERS OF REVENUE AUTHORITIES. THE ASSESSEE IS A COOPERATIVE BANK AND ASSESSEE PAID INTEREST OF RS. 152,36,988/- WHICH CO NSISTS OF A) INTEREST PAID LESS THAN RS. 10,000 RS. 64,89,9 04 B) INTEREST PAID MORE THAN RS. 10,000 TO ITS MEMBERS/SHARE HOLDERS RS. 66,97,058 C) INTEREST PAID MORE THAN RS. 10,000 TO THE NON-MEMBERS RS. 20,50,008 5 ITA NO. 1413 /HYD/2015 WARANGAL URBAN COOPERATIVE BANK LTD. FROM THE ABOVE FACTUAL POSITION, IT IS CLEAR THAT T HE ASSESSEE HAD PAID RS. 64,89,904/- TO THE DEPOSITORS, WHICH IS LESS TH AN RS. 10,000/- LIMIT, WHICH IS EXEMPT FROM TDS PROVISION U/S 194A( 3)(I) OF THE ACT. 10.1 WITH REGARD TO INTEREST PAYMENT OF MORE THAN R S. 10,000 TO INDIVIDUAL MEMBERS/SHAREHOLDERS, ASSESSEE REPRESENT ED BEFORE CIT(A) THAT IT IS EXEMPT U/S 194A, WHEREAS THE SECT ION DEFINES AS BELOW: 1. 194A(3)(V) TO SUCH INCOME CREDITED OR [PAID BY A COOPERATIVE SOCIETY (OTHER THAN A COOPERATIVE BANK) TO A MEMBER THEREOF OR TO SUCH INCOME CREDITED OR PAID BY A COOPERATIVE SOCIETY] TO ANY OTHER COOPER ATIVE SOCIETY. 2. 194A(3)(VIIA), TO SUCH INCOME CREDITED OR PAID IN RESPECT OF A) DEPOSITS WITH A PRIMARY AGRICULTURAL CREDIT SOC IETY OR A PRIMARY CREDIT SOCIETY OR A COOPERATIVE LAND MORTG AGE BANK OR A COOPERATIVE LAND DEVELOPMENT BANK. B) DEPOSITS (OTHER THAN TIME DEPOSITS MADE ON OR A FTER THE 1 ST DAY OF JULY, 1995) WITH A COOPERATIVE SOCIETY, OTH ER THAN A COOPERATIVE SOCIETY OR BANK REFERRED TO IN SUB-CLA USE (A), ENGAGED IN CARRYING ON THE BUSINESS OF BANKING). BY READING THE ABOVE SUB-SECTION 194A(3)(V), IT IS CLEAR THAT IT IS APPLICABLE TO THE COOPERATIVE SOCIETIES AND NOT COO PERATIVE BANK. IN THE PRESENT CASE, ASSESSEE IS A COOPERATIVE BANK. A T THE SAME TIME READING THE SUB-SECTION 194A(3)(VIIA), IT EXPLAINS THE TYPE OF DEPOSITS WHICH IS ELIGIBLE FOR EXEMPTION. IN THE PRESENT CAS E, WE ARE NOT SURE, WHETHER THESE DEPOSITS ARE TIME DEPOSITS OR OTHER D EPOSITS OF MEMBER/SHAREHOLDERS OF THE ASSESSEE. HENCE, IN OUR CONSIDERED VIEW, THIS IS A FIT CASE TO BE REMITTED TO THE FILE OF THE AO TO VERIFY THE TYPE OF DEPOSITS. IF IT IS FOUND THAT IT IS NOT TIM E DEPOSIT, EXEMPTION MAY BE GRANTED. NEEDLESS TO MENTION THAT PROPER OPP ORTUNITY OF HEARING MAY BE GIVEN TO ASSESSEE. 6 ITA NO. 1413 /HYD/2015 WARANGAL URBAN COOPERATIVE BANK LTD. 11. WITH REGARD TO INTEREST PAYMENT OF RS. 20,50,00 8 TO THE NON- MEMBERS, THE ASSESSEE REPRESENTED BEFORE THE CIT(A) THAT ASSESSEE HAVING OBTAINED FORM 15G, NO TDS SHOULD BE DEDUCTED . IT WAS ALSO REPRESENTED THAT AS PER THE DECISION OF THE SPECIAL BENCH OF ITAT IN THE CASE OF MERLYN SHIPPING & TRANSPORTS (SUPRA), T HE AMOUNT WAS ALREADY PAID AND NOT PAYABLE AS ON 31/03/2012, IN W HICH EVENT, TDS PROVISIONS ARE NOT APPLICABLE. ON CAREFUL PERUSAL OF THE ABOVE TWO REPRESENTATIONS, WE ARE OF THE VIEW THAT IF THE ASS ESSEE HAD COLLECTED FORM 15G, IT SHOULD BE MADE AVAILABLE TO THE AO SO THAT IT CAN BE VERIFIED AND EXEMPTIONS MAY BE GRANTED TO THE ASSES SEE. IN THE INTEREST OF JUSTICE, WE REMIT THIS MATTER ALSO TO T HE FILE OF THE AO TO VERIFY THE FORM 15G AND GRANT EXEMPTION. WE DIRECT ASSESSEE TO FILE THE RELEVANT FORM 15G BEFORE THE AO IN SUPPORT OF I TS CASE. 12. AS REGARDS THE ALTERNATIVE SUBMISSIONS OF THE A SSESSEE I.E. PAYMENT HAVING BEEN ALREADY MADE, THERE IS NO OUTST ANDING BALANCE AS ON 31/03/2012 SO AS TO ATTRACT TDS PROVISIONS A ND, HENCE, THE ASSESSEE CANNOT BE SAID TO BE IN DEFAULT, SO AS TO DISALLOW THE PAYMENT U/S 40(A)(IA) OF THE ACT. HOWEVER, IT DESER VES TO BE NOTICED THAT THE HONBLE JURISDICTIONAL HIGH COURT HAD AN O CCASION TO CONSIDER THE SAME ISSUE (IN THE CASE OF JANAPRIYA ENGINEERS SYNDICATE, ORDER DATED 24/06/2014) WHEREIN THE COURT HELD THAT DESPI TE THE DECISION OF THE SPECIAL BENCH DECISION IS UPSET BY THIS HIGH CO URT, THE SPECIAL BENCH VERDICT IN MERLYIN SHIPPING IS BINDING ON THE ITAT DUE TO JUDICIAL DISCIPLINE. UNDER THESE CIRCUMSTANCES, WE FOLLOW THE DECISION OF THE SPECIAL BENCH. SINCE IT IS BINDING ON ALL TH E BENCHES OF ITAT, GOING BY THE RULE OF JUDICIAL DISCIPLINE, WE HOLD T HAT IF THE PAYMENT ALREADY MADE, THE PROVISIONS OF SECTION 40(A)(IA) W OULD NOT GET ATTRACTED. NO DOUBT THERE ARE CONTRARY DECISIONS ON THIS ASPECT BY VARIOUS OTHER HIGH COURTS. HOWEVER, WE PREFER TO FO LLOW THE VIEW WHICH IS IN FAVOUR OF THE ASSESSEE IN THE LIGHT OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. VEGETA BLE PRODUCTS LTD., [1973] 88 ITR 192. THE AO IS, HOWEVER, DIRECT ED TO VERIFY 7 ITA NO. 1413 /HYD/2015 WARANGAL URBAN COOPERATIVE BANK LTD. WHETHER THE PAYMENTS WERE ALREADY MADE OR IF THERE IS ANY DUE/PAYABLE AS AT THE END OF THE YEAR. 13. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 22 ND JULY, 2016. SD/- SD/- (D. MANMOHAN) (S. RIFAUR RAHMAN) VICE PRESIDENT AC COUNTANT MEMBER HYDERABAD, DATED: 22 ND JULY, 2016 KV COPY TO:- 1) ACIT, CIRCLE 1, AAYAKAR BHAVAN, STATION RO AD, WARANGAL. 2) M/S WARANGAL URBAN COOPERATIVE BANK LTD., D.N O. 8-11-45, 1 ST FLOOR, RNT ROAD, OPP. INTEZARGUNJ POLICE STATION, WARANGAL. 3) CIT(A)-3, HYDERABAD 4) PR. CIT - 3, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., H YDERABAD.