M/s. The Government Employees Co-operative Bank Limited, Dharwad V. The Assistant Commissioner Of Income Tax, Circle- 2(1), Hubli

ITA 1485/BANG/2019

• Counselvise Citation: [2020] 109 COUNSELVISE.COM (IT) 9513 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 02-12-2020
• Assessment Year: 2015-2016
• Appeal Filed On: 19-06-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K.MALLAHA RAO
• Keywords: Non-deduction of tax
• Section: 40(a)(ia); 201; 194A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI B.R. BASKARAN , ACCOUNTANT MEMBER ITA NO. 1485 /BANG/201 9 ASSESSMENT YEAR : 201 5 - 1 6 M/S THE GOVERNMENT EMPLOYEES CO-OPERATIVE BANK LIMITED, COURT CIRCLE, KOSMOS CLUB ROAD, DHARWAD 585 001, PAN: AAAAT 4827D VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE 2(1), HUBBALLI. APPELLANT RESPONDENT APPELLANT BY : SHRI K. MALLAHA RAO , ADVOCATE RESPONDENT BY : S MT R. PREMI , JT. CIT(DR)(ITAT), BENGALURU. DATE OF HEARING : 02 . 1 2 .2020 DATE OF PRONOUNCEMENT : 31 . 1 2 .2020 O R D E R PER N.V. VASUDEVAN, VICE PRESIDENT THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DATED 25.03.2019 OF THE CIT(APPEALS), HUBBALLI, IN RELATION TO ASS ESSMENT YEAR 2015-16. 2. THE SOCIETY IS A CO-OPERATIVE SOCIETY ENGAGED I N THE BUSINESS OF BANKING. IN THE COURSE OF ASSESSMENT PROCEEDINGS, T HE AO NOTICED THAT THE SOCIETY HAD PAID INTEREST ON DEPOSITS TO THE EXTENT OF 1,47,84,915/-. THE AO CALLED UPON THE ASSESSEE TO FURNISH EVIDENCE REG ARDING DEDUCTION OF TAX AT SOURCE ON THE INTEREST PAID U/S 194A OF THE ACT. ITA NO.1485/BANG/2019 PAGE 2 OF 5 3. THE AO ALSO CALLED UPON THE SOCIETY TO EXPLAIN A S TO, WHETHER ANY INTEREST WAS PAID TO MEMBERS LESS THAN RS.10,000/- SO THAT THE PROVISIONS OF SECTION 194A OF THE ACT WILL NOT APPLY TO SUCH P AYMENTS. 4. A PERUSAL OF THE ORDER OF AO SHOWS THAT THE SOCI ETY DID NOT FURNISH THE REQUIRED DETAILS. THE FOLLOWING ARE THE RELEVAN T OBSERVATIONS OF AO IN THIS REGARD:- OPPORTUNITY HAS BEEN GIVEN TO THE ASSESSEE FOR THE SUBMISSION OF THE DETAILS OF MEMBERS AND NON-MEMBERS TO WHOM THE INTEREST ON DEPOSITS OF RS.10,000/- AND ABOVE TOTALLING OF RS.1 ,47,84,915/- HAS BEEN PAID DURING THE YEAR 2014-15, COPY OF THE SHARE APPLICATIONS AND SHARE HOLDINGS OF THE MEMBERS AND NON MEMBERS. FAILURE TO DEDUCT TAXES ON INTEREST PAID O F RS.10,000/- AND ABOVE ATTRACTS PROVISIONS OF SECTIONS OF 194A O F THE I.T. ACT,1961. DURING THE COURSE OF ASSESSMENT PROCEEDINGS OPPORT UNITY HAS BEEN GIVEN TO THE ASSESSEE FOR THE SUBMISSION OF DO CUMENTARY EVIDENCE ABOUT THE SHARE HOLDING AND SHARE APPLICAT ION OF MEMBER AND NON-MEMBERS TO WHOM INTEREST PAID OF RS. 10,000/- AND ABOVE HAVE BEEN PAID TOTALLING OF RS. 1,47,84,9 15/- BUT TILL DATE THE ASSESSEE HAS NOT SUBMITTED THE SAME. HENCE I AM CONSTRAINT TO HOLD THAT RS. 14,47,84,915/- IS THE I NTEREST PAID TO NON MEMBERS IN CONTRAVENTION WITH THE PROVISIONS SECTIO N OF 194A OF THE I.T. ACT,1961, THEREFORE THE INTEREST PAID OF R S. 1,47,84,915/- WHICH IS DEBITED IN THE P & L AMOUNT OF THE ASSESSE E AS AT 31.03.2015 IS DISALLOWED U/S 40(A)(IA) OF THE I.T. ACT 1961 AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 5. BEFORE THE CIT(APPEALS), THE ASSESSEE GAVE DETAI LS WHERE PAYMENT MADE WAS LESS THAN RS.10,000/- TO EACH MEMBER. THE ASSESSEE SUBMITTED A LIST OF 158 MEMBERS TO WHOM INTEREST MORE THAN RS .10,000/- WAS PAID AND THE DETAILS SHOWED THAT A SUM OF RS.7,22,336/- WAS PAID TO REGULAR MEMBERS AND RS.93,33,928/- WAS PAID TO ASSOCIATE ME MBERS. 6. THE CIT(A) HELD THAT A SUM OF RS.93,36,928/- WHI CH WAS PAID TO ASSOCIATE MEMBERS WAS A PAYMENT MADE TO NON-MEMBERS AND THEREFORE TO ITA NO.1485/BANG/2019 PAGE 3 OF 5 THIS EXTENT THE ADDITION SHOULD BE UPHELD. THE FOLL OWING WERE THE RELEVANT OBSERVATIONS OF THE CIT(A) IN THIS REGARD:- 6. THEREFORE, AS DISCUSSED ABOVE, THE ASSESSEE H AS ADMITTEDLY FAILED TO DEDUCT TAX AT SOURCE ON THE PAYMENT OF IN TEREST, OF ABOVE RS.10,000/-, MADE TO NON-MEMBERS OF RS.93,36,928/-, AS REQUIRED BY THE PROVISIONS OF SECTION 194A OF THE I.T. ACT, 1961. THE ASSESSEE HAS ALSO FAILED TO SUBMIT ANY DETAILS, PRO OF, OR EVIDENCE, AS TO WHETHER FORM 15G/15H WERE SUBMITTED, OR IF TH E INCOME WAS DECLARED IN THEIR ITRS. I, THEREFORE, UPHOLD THE DISALLOWANCE MADE BY T HE AO U/S. 40(A)(IA) OF THE I.T. ACT,1961, OF THE EXPENDITURE ON INTEREST PAID/CREDITED TO NON-MEMBERS, TO THE EXTENT OF RS. 93,36,928/-, FOR FAILURE TO DEDUCT TAX AT SOURCE, AS REQUIRED BY SEC TION 194A OF THE I.T. ACT, 1961. 7. WITH REGARD TO THE REMAINING INTEREST PAYMENTS O UT OF A SUM OF RS.1,47,84,915/- THE CIT(A) GAVE FOLLOWING DIRECTIO NS TO THE AO:- 6.3 THE AO IS THEREFORE, ASKED TO EXAMINE AND VE RIFY THE CLAIMS OF THE ASSESSEE THAT TAX WAS NOT DEDUCTED AT SOURCE ON INTEREST PAID TO MEMBERS OF RS.7,22,336/- AND ON INTEREST PA ID OF RS. 47,25,651/-, CONSISTING OF PAYMENT OF INTEREST BELO W RS.10,000/-, TO MEMBERS/NON-MEMBERS, INCLUDING, INTEREST PAID ON, C UMULATIVE DEPOSITS, S.B. A/CS, SMALL SAVINGS DEPOSITS, STAFF FWF DEPOSITS, STAFF SERVICE SEC DEPOSIT, FIXED DEPOSIT & DJCC INT EREST. THE AO SHOULD ALLOW THE ASSESSEE ADEQUATE OPPORTUNITY TO M AKE ITS SUBMISSIONS AND OPPORTUNITY FOR REBUTTAL IN CASE OF ANY ADVERSE FINDINGS. AFTER DUE EXAMINATION AND VERIFICATION, T HE AO MAY ALLOW THE CLAIMS OF THE ASSESSEE PERTAINING TO EXPENDITUR E ON INTEREST, PAID WITHOUT DEDUCTION OF TAX AT SOURCE, ON PAYMENT S BELOW 10,000/-, AND PAYMENT TO MEMBERS. 8. THE AO HAS GIVEN EFFECT TO THE ORDER OF CIT(A) A ND ALLOWED RELIEF IN RESPECT OF INTEREST PAID TO MEMBERS OF RS. 7,22,336 /- AND INTEREST PAID OF RS.47,25,651/- BEING INTEREST PAYMENT BELOW RS.10,0 00/- TO MEMBERS/NON- MEMBERS INCLUDING INTEREST PAID ON CUMULATIVE DEPOS ITS, SB ACCOUNT, SMALL SAVING DEPOSITS, ETC. THE ASSESSEE IS AGGRIEVED BY THE ACTION OF CIT(A) IN UPHOLDING DISALLOWANCE U/S. 40(A)(IA) FOR FAILURE T O THE DEDUCT TAX AT SOURCE ITA NO.1485/BANG/2019 PAGE 4 OF 5 U/S. 194A OF THE ACT IN RESPECT OF PAYMENTS OF INTE REST TO THE EXTENT OF RS.93,36,928/-. 9. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT FOR AY 2015-16, THERE WAS NO OBLIGATION TO DEDUCT TAX AT SOURCE BY A CO-OPERATIVE SOCIETY ON PAYMENT FOR INTEREST TO ITS MEMBERS IN VIEW OF T HE PROVISIONS OF SEC.194A(3)(V) OF THE ACT. IN THIS REGARD HE DREW OUR ATTENTION TO A DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS KARNATAKA STATE APEX CO-OPERATIVE BANK LTD., IN ITA NO.526/20 15 , JUDGEMENT DATED 27.06.2016. 10. THE LD. DR, HOWEVER, RELIED ON THE ORDER OF CIT (A). 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FI ND THAT A SUM OF RS. 93,36,928/- IS INTEREST PAID TO ASSOCIATE MEMBE RS. THE CIT(A) HAS, HOWEVER, MADE A REFERENCE TO THE DECISION OF HONBL E SUPREME COURT IN THE CASE OF CITIZENS CO-OPERATIVE SOCIETY LTD., VS. ACIT IN APP EAL NO.10245 OF 2017 DT. 08.08.2017 WHICH WAS A DECISION REFERRED IN THE CONTEXT OF ALLOWING DEDUCTION U/S. 80P(2)(A)(I) OF THE ACT. 12. WE ARE OF THE VIEW THAT THE ANALOGY SO DRAWN BY THE CIT(A) IS ERRONEOUS. THE PROVISIONS OF SEC.194A WHICH ARE IN RELATION TO DEDUCTION OF TAX AT SOURCE CANNOT BE EQUATED WITH THE PROVISIONS OF SEC. 80P(2)(A)(I) OF THE ACT, WHICH DEALS WITH DEDUCTION WHILE COMPUTING TOTAL INCOME. THE ADMITTED POSITION IS THAT THE SUM OF RS.93,36,928/- HAS BEEN PAID TO ASSOCIATE MEMBERS AND CIT(A) HAS EQUATED IT AND NAM ED THEM AS NON- MEMBERS. IN OUR VIEW THIS APPROACH IS ERRONEOUS. 13. FOR THE AY 2015-16, THERE IS NO OBLIGATION TO D EDUCT TAX AT SOURCE BY A CO-OPERATIVE SOCIETY U/S.194A OF THE ACT AS LAID DOWN BY THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS KARNATAK A STATE APEX CO- ITA NO.1485/BANG/2019 PAGE 5 OF 5 OPERATIVE BANK LTD. ( SUPRA ). WE THEREFORE DELETE THE ADDITION SUSTAINED BY THE CIT(A). 14. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS AL LOWED. PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF DECEMBER, 2020. SD/- SD/- ( B.R. BASKARAN ) ( N V VASUDEVAN ) ACCOUNTANT MEMBER VICE PRESIDENT BANGALORE, DATED, THE 31 ST DECEMBER, 2020. / DESAI S MURTHY /DWK COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.