Daivadnya Sahakara Bank Niyamit, Belgaum V. Income Tax Officer, (TDS) Ward-1, Belgaum,

ITA 142/PAN/2015

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1528 (ITAT-PANAJI)
• Duration Of Justice: 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 06-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SMRITI BHARDWAJ
• Assessee Lawyers: JAYANT D KALPAVRIKSHA
• Keywords: Recovery proceedings
• Section: 133A; 201(1); 10; 2; 11; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI N.S. SAINI , HONBLE ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, HONBLE JUDICIAL MEMBER ITA NO S . 139 TO 14 2 /PNJ/201 5 (ASST. YEAR S : 20 1 0 - 1 1 TO 2013 - 1 4 ) DAIVADNAYA SAHAKARA BANK NIYAMIT, 1169, SARAF GALLI, SHAHAPUR, BELAGAVI. V S. THE ITO (TDS) , BEL A GA VI. PAN NO. AAAAD 0328 D (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI JAYANT D. KALPAVRIKSHA CA DEPARTMENT BY : S MT. SMRITI BHARDWAJ - D R DATE OF HEARING : 0 4 / 0 8 /2015 . DATE OF PRONOUNCEMENT : 04 / 0 8 /201 5 . O R D E R PER BENCH TH E S E ARE THE APPEALS FILED BY THE ASSESSEE AGAINST THE SEPARATE ORDER S OF COMMISSIONER OF INCOME TAX (APPEALS) , BEL A GA VI , EACH DATED 21/01/2015 . 2. THE SOLE ISSUE INVOLVED IN ALL THESE APPEALS IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ORDER OF ASSESSING OFFICER HOLDING THE ASSESSEE AS ASSESSEE IN DEFAULT FOR TDS UNDER SEC. 201(1) AND LEVYING INTEREST UNDER SEC. 201(1A) AS UNDER: - ASSESSMENT YEAR U/S. 201(1) U /S. 201(1A) 2010 - 11 RS. 16,76,715/ - RS. 7,37,748/ - 2011 - 12 RS. 18,78,600/ - RS. 6,01,088/ - 2012 - 13 RS. 23,69,868/ - RS. 4,73,960/ - 2013 - 14 RS. 32,49,718/ - RS. 2,59,968/ - 2 ITA NO. 139 - 142 /PNJ/201 5 3 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COOPERATIVE BANK ENGAGED IN THE BUSINESS OF BANKING. A SURVEY UNDER SEC. 133A OF THE ACT WAS CONDUCTED AT THE ASSESSEES PREMISES ON 03/07/2013 TO VERIFY COMPLIANCE WITH TDS/TCS PROVISIONS AND IT WAS FOUND THAT THE ASSESSEE HAD NOT DEDUCTED TDS FROM INTEREST PAYMENT ON TERM DEPOSITS TO THE MEMBERS FOR THE FINANCIAL YEARS 2009 - 10 TO 2012 - 13 WHICH WERE LIABLE FOR TDS @ 10% AS PER THE PROVISIONS OF SEC. 194A (3)(I)(B) OF THE ACT. THEREFORE, ASSESSING OFFICER HELD THAT THE ASSESSEE FAILED TO DEDUCT TAX AT SOURCE FROM INTEREST EXCEEDING RS. 10,000/ - AND THEREFORE, THE PROVISIONS OF SEC. 201(1) & 201(1A) OF THE ACT ARE APPLICABLE IN THE CASE OF THE ASSESSEE. CONSEQUENTLY , HELD THE ASSESSEE TO BE IN DEFAULT FOR TDS UNDER SEC. 201(1) & LEVIED INTEREST UNDER SEC. 201(1A) FOR ASSESSMENT YEAR 2010 - 11 OF RS. 16,76,715/ - & RS. 7,37,748/ - , FOR ASSESSMENT YEAR 2011 - 12 OF RS. 18,78,600/ - & RS. 6,01,088/ - , FOR ASSESSMENT YEAR 2012 - 13 OF RS. RS. 23,69,868/ - & RS. 4,73,960/ - AND FOR ASSESSMENT YEAR 2013 - 14 OF RS. RS. 32,49,718/ - & RS. 2,59,968/ - . 4 . ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) DISMISSED THE APPEAL OF THE ASSESSEE BY OBSERVING AS UNDER: - 6. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, SUBMISSIONS MADE BY THE ASSESSEE AND ALSO PERUSED THE ORDER OF THE ASSESSING OFFICER. IT IS AN UNDISPUTED FACT THAT THE APPELLANT HAS PAID INTEREST ON TERM DEPOSITS TO THE TUNE OF RS.1,67,67,153/ - TO DE POSITORS WITHOUT DEDUCTING TAX AT SOURCE. THE APPELLANT CONTENDED THAT THE PROVISIONS OF TDS ARE NOT ATTRACTED IN VIEW OF CLAUSE - (V) OF SUB - SECTION (3) OF SECTION 194A AS THE INTEREST PAYMENTS TO THE EXTENT OF RS.1,67,67,153/ - HAVE BEEN MADE TO THE MEMBERS OF THE BANK WHICH IS A CO OPERATIVE SOCIETY. IN THIS REGARD, THE ITO, TDS WARD, BELGAUM HAS INTERPRETED THE WORD COOPERATIVE SOCIETY AS EMPLOYED IN SEC.194A(3)(V) TO MEAN CO - OPERATIVE SOCIETY OTHER THAN COOPERATIVE BANK AS DECIDED BY THE ITA T; PUNE BENCH, IN BHAGANI NIVEDIT A SAHAKARI BANK LTD V. ACIT 87 I TD 569 WHEREIN, THE HONBLE ITAT HAS HELD THAT THE TERM CO - OPERATIVE SOCIETY MENTIONED IN SECTION 194A(3)(V) TO BE INTERPRETED AS CO - OPERATIVE SOCIETY OTHER THAN COOPERATIVE BANK. THUS, THE ITO PASSED AN ORDER U/S 201(1)/(1A) AND CALCULATED THE AMOUNT PAYABLE AT RS.24,14,463/ - ; RS.16,76,715 / - U/S 201(1) AND RS. 7,37,748/ - U/S. 201(1A). 3 ITA NO. 139 - 142 /PNJ/201 5 6.1 ON GOING THROUGH THE PROVISIONS OF SECTION 194A(3), IT IS SEEN THAT THE ITO IS JUSTIFIED IN PASSING AN ORDER U/S 201(1)/(1A) AND CALCULATING THE AMOUNT PAYABLE AT RS.24,14,463/ - ; RS.16,76,715/ - U/S 201(1) AND RS.7,37,748/ - U/S. 201(1A). THE SUBMISSIONS OF THE APPELLANT ARE NOT ACCEPTABLE IN VIEW OF THE DECISION OF HONBLE PUNE ITAT IN THE CASE OF BHAGANI NIVEDITA SAHAKARI BANK LTD CITED SUPRA WHEREIN, IT IS CLEARLY HELD THAT SECTION 194A(3)(VIIA)(B) MAKES NO DISTINCTION BETWEEN MEMBERS AND NON - MEMBERS OF CO - OPERATIVE BANK FOR PURPOSE OF DEDUCTION OF TAX AT SOURCE ON INTEREST ON TIME DEPOSITS PAID/ CREDITED AND THEREFORE, CO - OPERATIVE BANK WOULD BE LIABLE TO DEDUCT TAX 1 S OURCE UNDER SECTION 194A(1) ON IN TEREST ON TIME DEPOSITS PAID/CREDITED TO ITS DEPOSITORS, IF SUCH INTEREST AMOUNT EXCEEDED THE LIMIT PRESCRIBED IN PROVISO TO SECTION 194A(3)(I). FU RTHER, THE HONBLE KERALA HIGH COURT IN THE CA SE OF MOOLAMATTOM ELECTRICITY BOARD EMPLOYEES CO - OP BANK LTD 238 ITR 630 HAS MADE A CLEAR DISTINCTION BETWEEN PRIMARY CREDIT SOCIETY AND A CO - OP SOCIETY ENGAGED IN BANKING BUSINESS. THUS, SECTION 194A DEALS WIT H CO - OP SOCIETIES ENGAGED IN THE BUSINESS OF BANKING. AS HAS BEEN RIGHTLY HELD BY THE ITO THAT THE MOMENT THE AMOUNT PAID/CREDITED TO ANY DEPOSITOR DURING THE YEAR EXCEEDS RS.10,000, THE PROVISIONS OF SECTION 194A(1) SHALL APPLY AND THE CO OPERATIVE SOCIET Y ENGAGED IN THE BANKING BUSINESS SHALL HAVE TO DEDUCT TAX ON SUCH PAYMENTS. FROM THE FACTS OF THE CASE, IT IS SEEN THAT THE I TO HAS CATEGORICALLY BROUGHT OUT THE MATERIAL ON RECORD TO PROVE THAT THE APPELLANT BANK IS COVERED BY THE PROVISIONS OF SUB - CLAUS E (B) OF CLAUSE (I) OF SEC.194A(3) AS WELL AS THE PROVISIONS OF CLAUSE (VIIA) OF SEC.194A(3) WHICH ARE SPECIFIC IN NATURE AND THE APPELLANT CANNOT PUT FORTH ITS CLAIM UNDER SECTION 194(3)(V) WHICH ARE GENERAL IN NATURE. AS THE APPELLANT IS CO - OPERATIVE SOC IETY ENGAGED IN THE BUSINESS OF BANKING, IT IS COVERED UNDER THESE SPECIFIC CLAUSES AND AS HAS BEEN HELD BY THE HONBLE ITAT, PUNE BENCH, PUNE IN BHAGANI NIVEDITA SAHAK ARI BANK LTD V. ACIT (2003) 87 I TD 569 THAT THE TERM CO - OP SOCIETY IN SUB - CLAUSE (V) T O BE INTERPRETED AS CO - OP SOCIETY OTHER THAN CO - OPERATIVE BANK, THE APPELLANT IS LIABLE FOR TDS PROVISIONS UNDER SECTION 194A. 6.2 THE APPELLANTS ARGUMENT THAT CLAUSE(V) TO SEC.194A(3) MAY BE TAKEN AS APPLYING TO MEMBERS AND OTHER CLAUSES TO THE SAID SE CTION MAY BE TAKEN TO APPLY TO NON MEMBERS IS WITHOUT ANY BASIS IN AS MUCH AS CLAUSES (I) AND (VIIA) APPLY TO BOTH THE MEMBERS AS WELL AS NON MEMBERS. WHERE EVER THE LEGISLATURE INTENDS TO APPLY A PARTICULAR PROVISION TO MEMBER OR TO A NON MEMBER, IT HAS D ONE SO EXPRESSLY. 4 ITA NO. 139 - 142 /PNJ/201 5 6.3 NOW COMING TO THE CIRCULAR NO.9 OF 2002 ISSUED BY THE CBDT RELIED UPON BY THE APP ELLANT, THE BOARD VIDE SAID CIRCULAR HAD SOUGHT TO INTERPRET THE DEFINITION OF WORD MEMBER CLARIFY ING THAT THE WORD MEMBER DOES NOT INCLUDE WORD NOMINAL MEMBER. IT WAS HELD BY THE BOMB AY HIGH COURT IN THE CASE OF J ALGAON DISTRICT CENTRAL CO - OP BANK LTD & ANR V. UNION OF INDIA 265 ITR 423 (BORN), THAT THE BOARD HAS NO POWER TO INTERPRET THE PROVISIONS OF LAW BY WAY OF CIRCULAR. THE ISSUE AT HAND OF THE BOMBAY HIGH COURT WAS THE DEFINITION OF THE WORD MEMBER AS APPEARING IN CLAUSE (V) OF SECTION 194(3) AND THE POWERS OF THE CENTRAL BOARD OF DIRECT TAXES TO ISSUE CIRCULARS U/S 119 WHICH WOULD OVERRIDE O R DETRACT FROM THE PROVISIONS OF THE INCOME TAX ACT. THE CIRCULAR NO.9 OF 2002 DATED 11 - 09 - 2002 ISSUED BY THE CBDT HAS BEEN QUASHED AND SET ASIDE BY THE HONBLE HIGH COURT. THEREFORE, THE CIRCULAR NO.9 OF 2002 DATED 11 - 09 - 2002 ISSUED BY THE CBDT DOES NOT H ELP THE CASE OF THE APPELLANT. THE APPELLANTS RELIANCE ON THE SAID CIRCULAR IS FOUND TO BE ILL FOUNDED. SIMILARLY, THE APPELLANTS RELIANCE ON THE DECISION S OF THE HIGH COURT IN THE CASES OF JALGAON DISTRICT CO - OP BANK 265 ITR 423, SUPRA AS WELL AS IN THE CASE OF THE GUJARAT URBAN CO - OPERATIVE BANK FEDERATION DO NOT HELP THE CASE OF THE APPELLANT AS IN BOTH THE CASES THE DECISION IS SAME AS DISCUSSED ABOVE. 6.4 IN ORDER TO UNDERSTAND THE LEGISLATIVE INTENT IN THIS REGARD, IT IS NECESSARY TO REFER TO THE E XPLANATORY NOTES TO FINANCE (NO. 2) ACT, 1991 GIVEN IN THE CIRCULAR NO. 621 DATED 19 - 12 - 1991 WHICH AMONG OTHERS, PROVIDES THAT - WITH A VIEW TO IMPROVING TAX COMPLIANCE, SEC. 194A OF THE ACT HAS BEEN AMENDED TO SECURE DEDUCTION OF TAX AT SOURCE FROM INTER EST ON TIME DEPOSITS WITH THE AFORESAID BANKING COMPANIES AND CO - OPERATIVE SOCIETIES ENGAGED IN CARRYING ON THE BUSINESS OF BANKING. THIS CIRCULAR OF THE CBDT EXPLAINS IN NO UNCERTAIN TERMS THAT THE INTENTION OF THE LEGIS LA TURE IN AMENDMENT OF SECTION 19 4A, INTER ALIA WAS TO SECURE DEDUCTION OF TAX AT SOURCE FROM INTEREST ON TIME DEPOSITS WITH THE BANKING COMPANIES AND CO - OPERATIVE SOCIETIES ENGAGED IN CARRYING ON THE BUSINESS OF BANKING. THE APPELLANT BEING A CO - OPERATIVE SOCIETY ENGAGED IN CARRYING ON T HE BUSINESS OF BANKING IS LIABLE TO MAKE TDS U/S 194A. 6.5 IN A RECENTLY DELIVERED JUDGMENT, THE HONBLE ITAT PANAJI BENCH, PANAJI IN THE CASE OF THE BAILHONGAL URBAN CO - OP. BANK LTD., VS. JCIT RANGE 1, BELGAUM IN ITA J. NO.85/PNJ/2013 DATED 28.08.2013 HA S UPHELD THE DECISION OF THE ASSESSING OFFICER AND THE COMMISSIONER OF INCOME TAX (APPEALS) IN DISALLOWING U/S. 5 ITA NO. 139 - 142 /PNJ/201 5 40(A)(IA) OF THE L.T. ACT THE INTEREST AMOUNT PAID BY THE ASSESSEE CO - OPERATIVE BANK ON TERM DEPOSIT IN EXCESS OF RS.10,000/ - WITHOUT MAKING TDS U/S. 194A(3)(I) AND NOT ALLOWING ASSESSEES CONTENTION THAT IT WAS NOT LIABLE TO DEDUCT TAX AT SOURCE BY VIRTUE OF THE PROVISIONS OF SECTION 194A(3)(V) OF THE I .T. ACT. 6.6 THE APPELLANT HAS ALSO RELIED ON THE DECISION OF THE HONBLE I TAT, BANGALORE BENCH A BANGALORE DECIDED IN FAVOUR OF THE APPELLANT. 6.7 THE APPELLANT HAS SOUGHT TO RELY ON FIRST PROVISIO TO SECTION 201 OF THE I .T.ACT, INTRODUCED BY THE FINANCE ACT, 2012, W.E.F 01 - 07 - 2012 AND WHICH PROVIDES THAT THE DEDUCTOR SHALL NOT BE DEEMED TO BE AN ASSESSEE IN DEFAULT IF THE DEDUCTEE: I) HAS FURNISHED HIS RETURN OF INCOME U/S 139; II) HAS TAKEN INTO ACCOUNT SUCH SUM FOR COMPUTING INCOME IN SUCH RETURN OF INCOME; AND III) HAS PAID THE TAX DUE ON THE INCOME DECLARED BY HIM IN SUCH RETURN OF INCOME, AND THE PERSON FURNISHES A CERTIFICATE TO THIS EFFECT FROM AN ACCOUNTANT IN SUCH FORM AS MAY BE PRESCRIBED. THOUGH THE A.O IN HIS AFORESAID REMAND REPORT HAS MENTIONED THAT THE APPELLANT HAS FILED FORM NO.26A, HE HAS ALSO MENTIONED THAT THE DEDUCT EES HAVE NOT PAID ANY TAX AS THEIR INCOME IS CLAIMED TO BE EXEMPT. MOREOVER, THE PERIOD UNDER APPEAL IS A.Y.2010 - 11, THEREFORE, THE ASSESSEES CASE IS NOT COVERED BY THE AFORESAID PROVISO WHICH COMES INTO EFFECT FROM 01 - 07 - 2012. THEREFORE, EVEN IF THE DEDU CTEES HAVE PAID THE TAXES OR OTHERWISE COMPLY WITH THE REQUIREMENTS OF AFORESAID PROVISIO TO SECTION 201, THE APPELLANT IS NOT ENTITLED TO BE COVERED BY THE SAID PROVISIO. THE APPELLANT IS ALSO RIOT COVERED BY THE AFORESAID SUPREME COURT DECISION IN THE CA SE OF HINDUSTAN COCA COLA (P) LTD. V/S CIT (2007) 243 ITR 226/163 TAXMANN 355(SC) WHEREIN IT WAS HELD THAT ONCE THE TAX IS PAID BY THE DEDUCTEE, THE DEDUCTOR CAN NOT BE TREATED AN ASSESSEE IN DEFAULT FOR THE PURPOSE OF SECTION 201 OF THE ACT. IN THE PRESE NT CASE, IT IS CLEAR THAT NO TAX HAS ACTUALLY BEEN PAID BY THE DEDUCTEES. 6.8 THE APPELLANT HAS ALSO CONTENDED THAT THE A.O HAS MADE DISALLOWANCE OF THE AFORESAID AMOUNT OF RS.1,67,67,153/ - U/S 40(A)(IA) OF THE ACT AND THEREFORE, TO DEMAND TAX UNDER SECTI ON 201 WOULD AMOUNT TO DOUBLE TAXATION. IN THIS CONTEXT, THE APPELLANT HAS NOT CLARIFIED AS TO WHETHER IT HAS FINALLY ACCEPTED THE ORDER OF THE A.O MAKING DISALLOWANCE U/S 40(A)(IA) OF THE ACT AND NO APPEAL AGAINST THE SAID ORDER OF THE AO IS CONTEMPLATED. 6 ITA NO. 139 - 142 /PNJ/201 5 WITHOUT PREJUDICE, THE INTENT AND PURPOSE OF BOTH THE SECTIONS 201 AND 40(A)(IA) IS DIFFERENT AS HELD BY THE MUMBAI BENCH OF THE ITAT IN THE CASE OF ACIT V. DICGC LT D.(ITA NO.2361 & 2524 /MUM/2011 , DATED 03 - 02 - 2012.WHEREIN IT HAS BEEN HELD THAT SECTION 201 OF THE ACT DEALS WITH THE MODE OF RECOVERY OF TAXES AND ONCE TAX DUES HAVE BEEN PAID, THE SAME DEMAND CANNOT BE ENFORCED AGAIN. HOWEVER, SECTION 40(A)(IA) OF THE ACT DEALS WITH THE DISALLOWANCE O F EXPENDITURE ITSELF. THEREFORE, MERELY BY INVOKING THE HEYDINS PRINCIPLE, THE STATUTORY PROVISIONS CANNOT BE RENDERED REDUNDANT. THEREFORE, ONCE THE TAX HAS BEEN DEDUCTED AND EVEN IF SUCH TAX HAS BEEN PAID B THE DEDUCTEE, DISALLOWANCE UNDER SECTION 40(A) (IA) OF THE ACT CAN STILL BE MADE. THUS, THE PLEA OF THE ASSESSEE THAT DEMAND OF TAX U/S. 201 AMOUNTS TO DOUBLE TAXATION IS REJECTED. 6.9 THE ITAT PANJIM BENCH HAS RECENTLY IN THE CASE OF SARASWAT CO - OPERATIVE BANK, ITA NO.233 TO 236 /PNJ/2014 FOR THE A.Y S 2010 - 11 TO 2013 - 14 DATED 01 - 10 - 2014 AFTER GOING IN DETAIL INTO THE HISTORY OF LEGISLATIVE AMENDMENTS OF SECTION 194A HAS HELD AS UNDER: THEREFORE, IN TERMS OF CLAUSE(V) WHICH IS GENERAL IN NATURE WILL NOT APPLY TO COOPERATIVE BANK. THE PROVISIONS OF SE CTION 194A(1)(VIIA) IS CLEARLY APPLICABLE AND THEREFORE, THE ASSESSEE HAS TO DEDUCT TOS ON INCOME CREDITED OR PAID IN RESPECT OF DEPOSITS EXCEPT WHICH FALLS UNDER THAT PROVISIONS. WE THEREFORE, DISMISS THE APPEAL OF THE ASSESSEE. 7. IN VIEW OF THE ABOV E DISCUSSION AND TAKING INTO CONSIDERATION THE VARIOUS ARGUMENTS GIVEN BY THE ITO IN HIS ORDER, THE LEGISLATURES INTENT BEHIND THE INTRODUCTION OF RELEVANT PROVISIONS OF SECTION 194A AS EXPLAINED IN THE EXPLANATORY NOTES TO FINANCE (NO. 2) ACT, 1991, SUPR A, LEGISLATIVE HISTORY OF THE AMENDMENTS OF SECTION 194A AND RESPECTFULLY FOLLOWING THE DECISION OF HONBLE ITAT PANAJI BENCH IN THE CASE OF BALIHONGAL URBAN CO - OP. BANK LTD., SUPRA, AND SARASWAT CO - OPERATIVE BANK, SUPRA THE DECISION OF THE ITO IN PASSING ORDER U/S 201(1)/(1A) AND CALCULATING THE AMOUNT PAYABLE AT RS.24,14,463/ - ; RS.16,76,715/ - U/S 201(1) AND RS. 7,37,748/ - U/S. 201(1A) IS CONFIRMED. 5. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE RELIED ON THE DECISION OF THIS BENCH OF THE TRIBUNAL IN THE CA SE OF BELGAUM DISTRICT CENTRAL COOPERATIVE BANK LTD. VS. ITO, TDS WARD, BELGAUM IN I.T.A.NO. 312 TO 315/PNJ/2014 DATED 16/06/2015 AND SUBMITTED THAT THE ISSUE UNDER 7 ITA NO. 139 - 142 /PNJ/201 5 CONSIDERATION IS COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 6 . DEPARTMENTAL REPRESENTATIVE CONCURRED WITH THE SUBMISSIONS OF THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE . 7 . WE FIND THAT THE TRIBUNAL IN THE CASE OF BELGAUM DISTRICT CENTRAL COOPERATIVE BANK LTD. (SUPRA) HAS HELD AS UNDER: - 4. THE SUM AND SUBSTANCE OF THE GRIEVANCE OF THE ASSESSEE FOR ALL THE YEARS UNDER CONSIDERATION IS THAT THE LD. CIT(A) FAILED TO APPRECIATE THE TRUE IMPORT OF SEC. 194(V) AND SEC. 194A(VIIA) SUB - CLAUSE (B) AND ERRED IN DENYING THE EXEMPTION FROM SEC. 194A IN RESP ECT OF PAYMENTS OF INTEREST TO MEMBERS. 5. THE ASSESSEE IS A COOPERATIVE BANK ENGAGED IN THE BUSINESS OF BANKING. A SURVEY WAS CONDUCTED AT THE BANK PREMISES ON 28/10/2013 TO VERIFY THE COMPLIANCE WITH TDS PROVISIONS. A SHOW - CAUSE NOTICE WAS ISSUED TO T HE ASSESSEE CALLING FOR DETAILS OF INTEREST PAID ON DEPOSITS AND TAX DEDUCTED AT SOURCE THEREIN. THE DETAILS WERE FILED. AFTER PERUSING THE DETAILS, THE ASSESSING OFFICER FOUND THAT THE DEFAULTS HAVE BEEN MADE BY THE ASSESSEE FOR NOT DEDUCTING TAX AT SOU RCE ON PAYMENT OF INTEREST ON TERM DEPOSIT IN EXCESS OF RS. 10,000/ - AS PER THE PROVISIONS OF SEC. 194A(3)(I)(B) READ WITH SEC. 194A(3)(VIIA)(B) OF THE ACT. THE ASSESSING OFFICER WAS OF THE FIRM BELIEF THAT BY NOT DEDUCTING TAX AT SOURCE, THE ASSESSEE HAS VIOLATED THE STATUTORY PROVISIONS OF THE ACT. DRAWING SUPPORT FROM THE DECISION OF THE TRIBUNAL PANAJI BENCH IN THE CASE OF BAILHONGAL URBAN COOPERATIVE BANK LTD. VS. JCIT, BELGAUM IN ITA NO. 85/PNJ/2013 AND THE DECISION OF THE TRIBUNAL PUNE BENCH IN THE CASE OF BHAGINI NIVEDITA SAHAKARA BANK LTD. VS. ACIT (87 ITD 569), THE ASSESSING OFFICER COMPUTED THE LIABILITY OF THE ASSESSEE U/S. 201(1) & 201(1A) OF THE ACT. 6. AGGRIEVED BY THIS, ASSESSEE CARRIED THE MATTER BEFORE THE LD.CIT(A) AND REITERATED ITS CLAIM THAT THE ASSESSING OFFICER HAS RELIED UPON WRONG DECISIONS REFERRING TO ITS OWN ORDERS FOR THE A.Y. 2002 - 03. IT WAS POINTED OUT TO THE LD. CIT(A) THAT THE THEN LD. CIT(A) HAS ALLOWED THE ASSESSEES APPEAL BASED ON THE DECISION OF JALGAON DISTRICT CE NTRAL CO - OP BANK LTD. & ANOTHER VS. UNION OF INDIA (265 ITR 423). AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS OF THE LD. CIT(A) AT PARA 6.3 HAS OBSERVED AS UNDER: - 8 ITA NO. 139 - 142 /PNJ/201 5 6.3 NOW COMING TO THE CIRCULAR NO. 9 OF 2002 ISSUED BY THE CBDT RELIED UPON BY THE APP ELLANT, THE BOARD VIDE SAID CIRCULAR HAD SOUGHT TO INTERPRET THE DEFINITION OF WORD MEMBER CLARIFYING THAT THE WORD 'MEMBER' DOES NOT INCLUDE WORD 'NOMINAL MEMBER'. IT WAS HELD BY THE BOMBAY HIGH COURT IN THE CASE OF JALGAON DISTRICT CENTRAL CO - OP BANK L TD & ANR V. UNION OF INDIA 265 ITR 423 (BOM), THAT THE BOARD HAS NO POWER TO INTERPRET THE PROVISIONS OF LAW BY WAY OF CIRCULAR. THE ISSUE AT HAND OF THE BOMBAY HIGH COURT WAS THE DEFINITION OF THE WORD 'MEMBER' AS APPEARING IN CLAUSE (V) OF SECTION 194(3) AND THE POWERS OF THE CENTRAL BOARD OF DIRECT TAXES TO ISSUE CIRCULARS U/S 119 WHICH WOULD OVERRIDE OR DETRACT FROM THE PROVISIONS OF THE INCOME TAX ACT. THE CIRCULAR NO.9 OF 2002 DATED 11 - 09 - 2002 ISSUED BY THE CBDT HAS BEEN QUASHED AND SET ASIDE BY THE HON'BLE HIGH COURT. THEREFORE, THE CIRCULAR NO.9 OF 2002 DATED 11 - 09 - 2002 ISSUED BY THE CBDT DOES NOT HELP THE CASE OF THE APPELLANT. THE APPELLANT'S RELIANCE ON THE SAID CIRCULAR IS FOUND TO BE ILL FOUNDED. SIMILARLY, THE APPELLANT'S RELIANCE ON THE DECIS IONS OF THE HIGH COURT IN THE CASES OF JALGAON DISTRICT CO - OP BANK 265 ITR 423, SUPRA AS WELL AS IN THE CASE OF THE GUJARAT URBAN CO - OPERATIVE BANK FEDERATION DO NOT HELP THE CASE OF THE APPELLANT AS IN BOTH THE CASES THE DECISION IS SAME AS DISCUSSED ABOV E. LD. CIT(A) FURTHER DRAWING SUPPORT FROM THE DECISION OF THE TRIBUNAL PANAJI BENCH IN THE CASE OF BAILHONGAL URBAN CO. BANK (SUPRA), CONFIRMED THE ORDER OF THE ASSESSING OFFICER MADE U/S.201(1) & 201(1)(A) OF THE ACT. 7. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. 8. AT THE VERY OUTSET, COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE MEMORANDUM EXPLAINING THE PROVISIONS IN THE FINANCE BILL 2015. THE RELEVANT PORTION OF WHICH READS AS UNDER: - SECTION 194A(1) READ WITH SECTION 194A(3)(I) OF THE ACT PROVIDE FOR DEDUCTION OF TAX ON INTEREST (OTHER THAN INTEREST ON SECURITIES)'OVER A SPEC IFIED THRESHOLD, I.E., RS. 10,000 FOR INTEREST PAYMENT BY BANKS, CO - OPERATIVE SOCIETY ENGAGED IN BANKING BUSINESS (CO - OPERATIVE BANK) AND POST OFFICE AND RS . 5,000 FOR PAYMENT OF INTEREST BY OTHER PERSONS. FURTHER, SUB - SECTION (3) OF SECTION 194A, INTER ALIA, ALSO PROVIDES FOR EXEMPTION FROM DEDUCTION OF TAX IN RESPECT OF FOLLOWING INTEREST PAYMENTS BY CO - OPERATIVE SOCIETY: (I) INTEREST PAYMENT BY A CO - OPERA TIVE SOCIETY TO A MEMBER THEREOF OR ANY OTHER CO - OPERATIVE SOCIETY. (SECTION 194A(3)(V) OF THE ACT] (II) INTEREST PAYMENTS ON DEPOSITS BY A PRIMARY AGRICULTURAL CREDIT SOCIETY OR PRIMARY CREDIT SOCIETY OR CO - 9 ITA NO. 139 - 142 /PNJ/201 5 OPERATIVE LAND MORTGAGE BANK OR CO OPERATIVE LA ND DEVELOPMENT BANK. [SECTION 194A(3)(VIIA)(A) OF THE ACT] (III) INTEREST PAYMENT ON DEPOSITS OTHER THAN TIME DEPOSIT BY A CO OPERATIVE SOCIETY ENGAGED IN THE BUSINESS OF BANKING OTHER THAN THOSE MENTIONED IN SECTION 194A(3)(VIIA)(A) OF THE ACT. [SECTION 194A(3)(VIIA)(B) OF THE ACT] THEREFORE, AS PER THE PROVISIONS OF SECTION 194A(1) READ WITH PROVISIONS OF SECTION 194A(3)(I)(B) AND 194A(3)(VIIA)(B), CO - OPERATIVE BANK IS REQUIRED TO DEDUCT TAX FROM INTEREST PAYMENT ON TIME DEPOSITS IF THE AMOUNT OF SUCH P AYMENT EXCEEDS SPECIFIED THRESHOLD OF RS. 10,000. HOWEVER, AS THE PRO VISIONS OF SECTION 194A(3)( V ) OF THE ACT PROVIDE A GENERAL EXEMPTION FROM MAKING TAX DEDUCTION FROM PAYMENT OF INTEREST BY ALL CO - OPERATIVE SOCIETIES TO ITS MEMBERS, THE CO - OPERATIVE BAN KS TRIED TO AVAIL THIS EXEMPTION BY MAKING THEIR DEPOSITORS AS MEMBERS OF DIFFERENT CATEGORIES. THIS HAS LED TO DISPUTE AS TO WHETHER THE CO - OPERATIVE BANKS, FOR WHICH THE SPECIFIC PRO - VISIONS OF TAX DEDUCTION EXIST IN THE FORM OF SECTION 194A(1), SECTION( C)4A(3)(I)(B) AND 194A(3)(VIIA)(B) OF THE ACT CAN TAKE THE BENEFIT OF GENERAL EXEMPTION PROVIDED TO ALL CO - OPERATIVE SOCIETIES FROM DEDUCTION OF TAX ON PAYMENT OF INTEREST TO MEMBERS. THE MATTER HAS BEEN CARRIED TO JUDICIAL FORUMS AND IN SOME CASES A VIEW HAS BEEN TAKEN THAT THE PROVISIONS OF SECTION 194A(3)(VIIA)(B) OF THE ACT MAKES NO DISTINCTION BETWEEN MEMBERS AND NON - MEMBERS OF CO - OPERATIVE BANKS FOR THE PURPOSES OF DEDUCTION OF TAX, HENCE, THE CO - OPERATIVE BANKS ARE REQUIRED TO DEDUCT TAX ON PAYMENT O F INTEREST ON TIME DEPOSIT AND CANNOT AVOID THE SAME BY TAK - ING THE PLEA OF THE GENERAL EXEMPTION PROVIDED UNDER SECTION 194A(3)(V) OF THE ACT. THIS IS BECAUSE THE SPECIFIC PROVISION OF TAX DEDUCTION PROVIDED UNDER SECTION 194A(3)(I)(B) AND 194A(3)(VIIA)(B ) OF THE ACT FOR CO - OPERATIVE BANKS OVERRIDE THE GENERAL EXEMPTION PROVIDED TO ALL CO - OPERATIVE SOCIETIES FOR NON - DEDUCTION OF TAX FROM INTEREST PAYMENT TO MEMBERS UNDER SECTION 194A(3)(V) OF THE ACT. AS THERE IS NO DIFFERENCE IN THE FUNCTIONING OF THE CO - OPERATIVE BANKS AND OTHER COMMERCIAL BANKS, THE FINANCE ACT, 2006 AND FINANCE ACT, 2007, AMENDED THE PROVISIONS OF THE ACT TO PROVIDE FOR CO - OPERATIVE BANKS A TAXATION REGIME WHICH IS SIMILAR TO THAT F OR THE OTHER COMMERCIAL BANKS. THEREFORE, THERE IS NO RATIONALE FOR TREATING THE CO - OPERATIVE BANKS DIFFERENTLY FROM OTHER COMMERCIAL BANKS IN THE MATTER OF DEDUCTION OF TAX AND ALLOWING THEM TO AVAIL THE EXEMPTION MEANT FOR SMALLER CREDIT CO - OPERATIVE SOC IETIES FORMED FOR THE BENEFIT OF SMALL NUMBER OF MEMBERS. HOWEVER, AS MENTIONED EARLIER, A DOUBT HAS BEEN CREATED REGARDING THE APPLICABILITY OF THE SPECIFIC PROVISIONS MANDATING DEDUCTION OF TAX FROM THE PAYMENT OF INTEREST ON TIME DEPOSITS BY THE CO - OPER ATIVE BANKS TO ITS MEMBERS BY 'CLAIMING THAT GENERAL EXEMPTION PROVIDED IS ALSO APPLICABLE FOR PAYMENT OF INTEREST TO MEMBER DEPOSITORS. IN VIEW OF THIS, IT IS PROPOSED TO AMEND THE PROVISIONS OF THE SECTION 194A OF THE ACT TO EXPRESSLY PROVIDE FROM THE P ROSPECTIVE DATE OF 1ST JUNE, 2015 THAT THE 10 ITA NO. 139 - 142 /PNJ/201 5 EXEMPTION PROVIDED FROM DEDUCTION OF TAX FROM PAYMENT OF INTEREST TO MEMBERS BY A CO - OPERATIVE SOCIETY UNDER SECTION 194A(3)(V) OF THE ACT SHALL NOT APPLY TO THE PAYMENT OF INTEREST ON TIME DEPOSITS BY THE COOPERA TIVE BANKS TO ITS MEMBERS. IT IS THE SAY OF THE COUNSEL THAT WITH THIS AMENDMENT, IT IS ABUNDANTLY CLEAR THAT THE IMPUGNED PROVISION WAS NOT APPLICABLE DURING THE YEARS UNDER APPEAL AND IT IS CLEAR THAT THE PROVISIONS ARE APPLICABLE W.E.F. 01/06/2015. COUNSEL FURTHER DREW OUR ATTENTION TO THE CIRCULAR NO. 9 OF 2002 OF THE CBDT AND STATED THAT THE BOARD HAS CLARIFIED THAT THE PROVISIONS OF TDS ARE NOT ENFORCEABLE IN RESPECT OF INTEREST PAID BY THE COOPERATIVE SOCIETY/BANK TO ITS MEMBERS, BUT TAX DEDUCTED AT SOURCE IS TO BE DEDUCTED FROM THE INTEREST PAID TO THE NON - MEMBERS. 9. PER CONTRA, LEARNED DR STRONGLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER. IT IS THE SAY OF THE DR THAT THE AMENDMENT IS ONLY OF CLARIFICATORY IN NATURE. LEARNED DR FURTHER PO INTED OUT THAT THE CIRCULAR 9 OF 2002 HAS BEEN WITHDRAWN BY THE CBDT AS IT HAS BEEN STRUCK DOWN BY THE BOMBAY HIGH COURT IN THE CASE OF JALGAON DISTRICT CENTRAL CO. BANK (SUPRA). 10. HAVING GIVEN A THOUGHTFUL CONSIDERATION TO THE RIVAL CONTENTIONS. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE ALSO GONE THROUGH THE DECISIONS RELIED UPON BY THE RIVAL PARTIES AND THE CIRCULARS OF THE CBDT BROUGHT TO OUR NOTICE. 11. FIRSTLY, THE ASSESSING OFFICER AND THE LD. CIT(A) HAVE HEAVILY RELIED UPON THE DECISION OF THE TRIBUNAL PANAJI BENCH IN THE CASE OF BAILHONGAL URBAN CO. BANK LTD. (SUPRA), WHEREIN THE TRIBUNAL HAS HELD THAT CIRCULAR NO. 9 OF 2002 DATED 11/09/2002 ISSUED BY THE CBDT HAS BEEN QUASHED AND SET ASIDE BY THE HONBLE HIGH CO URT OF BOMBAY IN THE CASE OF JALGAON DISTRICT CO. BANK (SUPRA). THEREFORE, ASSESSEES RELIANCE ON THE SAID CASE AND THE CIRCULAR IS FOUND TO BE ILL - FOUNDED. THE TRIBUNAL DECIDED THE APPEAL IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. WITH DUE RES PECT TO THE SAID DECISION OF THE TRIBUNAL, WE HAVE TO SAY THE OBSERVATIONS MADE BY THE TRIBUNAL ARE ILL - FOUNDED BECAUSE SUBSEQUENT TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF JALGAON DISTRICT CO. BANK (SUPRA) AN INFORMATION WAS REQUIRED FROM THE CBDT UNDER THE RIGHT TO INFORMATION ACT, 2005. THE INFORMATION REQUIRED AND THE REPLY OF THE BOARD READS AS UNDER: - 11 ITA NO. 139 - 142 /PNJ/201 5 THUS, WITH THIS CLARIFICATION, IT IS CLEAR THAT THE CIRCULAR HAS NOT BEEN WITHDRAWN. MOREOVER, A PERUSAL OF THE DECISION OF T HE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF JALGAON DISTRICT CO. BANK (SUPRA) SHOWS THAT THE HONBLE HIGH COURT HAS HELD THAT THE IMPUGNED NOTIFICATION ISSUED BY THE CBDT WHICH IS IN THE FORM OF A CLARIFICATION WITH REGARD TO THE RIGHTS AND PRIVILEGES O F A DULY REGISTERED MEMBER AND NOMINAL MEMBER IS OUTSIDE THE SCOPE OF SEC.119 OF THE ACT. THE HONBLE HIGH COURT FURTHER HELD THAT THE CBDT CANNOT ISSUE A CIRCULAR U/S. 119 OF THE ACT WHICH WOULD OVERRIDE OR RETRACT FROM THE PROVISIONS OF INCOME - TAX ACT, 1961. THUS, THE OBSERVATIONS OF THE HONBLE HIGH COURT WERE MORE TOWARDS THE CLARIFICATION REGARDING MEMBER AND NOMINAL MEMBER. CONSIDERING ALL THE FACTS IN TOTALITY IN THE LIGHT OF THE MEMORANDUM EXPLAINING THE PROVISIONS IN THE FINANCE BILL 2015 (SUPRA) AND THE CLARIFICATION BY THE BOARD THAT THE CIRCULAR HAS NOT BEEN WITHDRAWN, MAKES IT AMPLE CLEAR THAT THE IMPUGNED PROVISIONS RELATING TO THE LIABILITY OF TDS WOULD COME WITH EFFECT FROM 01/06/2015, WE, THEREFORE, SET ASIDE THE FINDINGS OF THE LD . CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED ADDITIONS MADE IN THE ORDER U/S. 201(1) & 201(1A) OF THE ACT. 12 IN THE RESULT, ALL THESE APPEALS FILED BY THE ASSESSEE ARE ALLOWED. 12 ITA NO. 139 - 142 /PNJ/201 5 8. FACTS BEING IDENTICAL, RESPECTFULLY FOLLOWING THE PRECEDENT, WE SET ASIDE THE ORDER S OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND ALL OW THE GROUND OF APPEAL OF THE ASSESSEE. 9 . IN THE RESULT, APPEAL S OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE COURT AT THE CLOSE OF THE HEARING ON TUESDAY , THE 0 4 TH DAY OF AUGUST , 201 5 AT GOA . S D / - S D / - (GEORGE MATHAN) (N.S.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 0 4 RD AUGUST , 201 5 . VR/ - COPY TO: 1 . THE ASSESSEE. 2 . THE REVENUE. 3 . THE CIT 4 . THE CIT(A) 5 . THE D.R . 6 . GUARD FILE. BY ORDER ASSISTANT REGISTRAR I.T.A.T., PANAJI 13 ITA NO. 139 - 142 /PNJ/201 5 DATE INITIAL ORIGINAL DICTATION PAD & DRAFT ARE ENCLOSED IN THE FILE 1. DRAFT DICTATED ON 0 4 .0 8 .2015 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 0 4 .08 .2015 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 04 /08 /2015 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 04 /0 8 /2015 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 04 /08 /2015 SR.PS 6. DATE OF PRONOUNCEMENT 04 /0 8 /2015 SR.PS 7. FILE SENT TO THE BENCH CLERK 0 5 /08 /2015 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER