Income Tax Officer TDS Ward, Davangere V. M/s The Davangere Harihar Urbon Co-operative Bank Limited , Davangere

ITA 1534/BANG/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4086 (ITAT-BANGALORE)
• Duration Of Justice: 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 11-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T CHANDRASEKHAR
• Assessee Lawyers: V SRINIVASAN
• Keywords: Non-deduction of tax; Tax effect
• Section: 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER A ND SHRI LALIET KUMAR, JUDICIAL MEMBER APPEAL NO. APPELLANT ASSESSMENT YEAR RESPONDENT ITA NO. 1532/BANG/2018 THE INCOME TAX OFFICER, TDS WARD, DAVANGERE. 2012-13 M/S. THE DAVANGERE HARIHAR URBAN CO- OPERATIVE BANK LTD., KTJ NAGAR BRANCH, # 1632/1, NR.VIDHYARTHI BHAVAN, HADADI ROAD, DAVANGERE. TAN: BLRT02044A ITA NO. 1533/BANG/2018 M/S. THE DAVANGERE HARIHAR URBAN CO- OPERATIVE BANK LTD., MCC B BRANCH, SIDDESHWARA COMPLEX, OPP. BAPUJI HIGH SCHOOL, MCC B BLOCK, DAVANGERE. TAN: BLRT02038B ITA NO. 1534/BANG/2018 M/S. THE DAVANGERE HARIHAR URBAN CO- OPERATIVE BANK LTD., VINOBANAGAR BRANCH, # 932/9, SHREESHAILA BLDG., P.B. ROAD, VINOBANAGAR, DAVANGERE. T AN: BLRT02040D ITA NO. 1535/BANG/2018 M/S. THE DAVANGERE HARIHAR URBAN CO- OPERATIVE BANK LTD., COM BRANCH, #79/2, SILVER JUBILEE COMPLEX, P.B. ROAD, DAVANGERE. TAN: BLRT02043G ITA NO. 1536/BANG/2018 M/S. THE DAVANGERE HARIHAR URBAN CO- OPERATIVE BANK LTD., H.M. ROAD BRANCH, # 195/ABC, GVS COMPLEX, HARDEKAR MANJAPPA ROAD, DAVANGERE. TAN: BLRT02041E ITA NO. 1537/BANG/2018 M/S. THE DAVANGERE HARIHAR URBAN CO- OPERATIVE BANK LTD., HARIHAR MAIN BRANCH, # 1370/1315, SHOBHA TALKIES ROAD, NR. PO, VAGEESHNAGAR, HARIHAR 577 601. DAVANGERE. TAN: BLRT02990B ASSESSEE BY : SHRI V. SRINIVASAN, ADVOCATE REVENUE BY : SHRI T. CHANDRASEKHAR, ADDL. CIT (DR) DATE OF HEARING : 23 . 10 .2018 DATE OF PRONOUNCEMENT : 26 . 10 .2018 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER ALL THESE SIX APPEALS ARE FILED BY THE REVENUE WHIC H ARE DIRECTED AGAINST SIX SEPARATE ORDERS OF LD. CIT(A)-DAVANGERE ALL FOR ASS ESSMENT YEAR 2012-13 BUT IN ITA NOS. 1532 TO 1537/BANG/2018 PAGE 2 OF 6 RESPECT OF DIFFERENT BRANCHES OF THE SAME ASSESSEE I.E. M/S. THE DAVANGERE HARIHAR URBAN CO-OPERATIVE BANK LTD. ALL THESE APP EALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY WAY OF THIS COMMON ORD ER FOR THE SAKE OF CONVENIENCE. 2. AT THE VERY OUTSET, IT IS NOTED THAT OUT OF THES E SIX APPEALS, THE REVENUE HAS WITHDRAWN 5 APPEALS ON ACCOUNT OF LOW TAX EFFECT AS PER LETTER NO. F.NO.ITO/TDS/DVG/ITAT/2018-19 DATED 26.09.2018 SUBM ITTED BEFORE THE TRIBUNAL. IN THIS LETTER, THE ITA NOS. GIVEN ARE T HE ITA NOS. OF THE APPEALS OF THE ASSESSEE FILED BEFORE CIT (A) BUT THE CORRESPON DING ITA NOS. AS PER THE APPEALS OF THE REVENUE FILED BEFORE THE TRIBUNAL, I T IS SEEN THAT FIVE APPEALS HAVING ITA NOS. 1532 TO 1536/BANG/2018 ARE COVERED AND ACCORDINGLY, THESE FIVE APPEALS ARE DISMISSED AS WITHDRAWN BY TH E REVENUE ON ACCOUNT OF LOW TAX EFFECT. 3. REGARDING THE REMAINING 6 TH APPEAL I.E. ITA NO. 1537/BANG/2018, WE REPRODUCE THE GROUND RAISED BY THE REVENUE. THE GR OUNDS RAISED BY THE REVENUE ARE AS UNDER. 1. CIT(A) HAS ERRED IN ALLOWING RELIEF TO THE DEDUC TOR ON ISSUE OF NON-DEDUCTION OF TAX ON INTEREST PAYMENTS TO MEMBER S WITHOUT VERIFYING WHETHER THE INTEREST PAYMENTS IF ANY WERE MADE TO NOMINAL MEMBERS IN LIGHT OF SUPREME COURT DECISION IN THE C ASE OF CITIZEN CO- OPERATIVE SOCIETY LIMITED 397 ITR 1. 2. CIT (A) HAS IGNORED THE DECISION RENDERED BY ITA T 'B' BENCH, BANGALORE IN THE CASE OF M/S THE SARASWAT CO-OPERAT IVE BANK LTD IN ITA NOS-1246 TO 1249/BANG/2017 DATED 03-11-2017 ON SIMILAR ISSUE. 3. THE APPELLANT CARVERS TO ADD, AMEND, ALTER OR MO DIFY ANY GROUND OF APPEAL AT THE TIME OF HEARING OF THIS CASE. 4. THE LD. DR OF REVENUE SUPPORTED THE ORDER PASSED BY THE AO U/S. 201(1) AND 201(1A) OF IT ACT WHEREAS THE LD. AR OF ASSESSE E SUPPORTED THE ORDER OF CIT (A). HE ALSO PLACED RELIANCE ON A JUDGMENT OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF CIT AND ANOTHER VS. NATIONAL CO- OPERATIVE BANK LTD. AS REPORTED IN [2016] 387 ITR 7 02 (KARN) AND POINTED OUT THAT IT WAS HELD BY HON'BLE KARNATAKA HIGH COUR T IN THIS CASE THAT PRIOR TO 01.06.2015 BEING THE DATE FROM WHICH THE PROVISI ONS OF SECTION 194A WERE AMENDED, NO TDS WAS REQUIRED TO BE DEDUCTED BY CO-OPERATIVE SOCIETY/BANKS U/S. 194A FROM THE PAYMENT OF INTERES T ON TIME DEPOSITS BY ITA NOS. 1532 TO 1537/BANG/2018 PAGE 3 OF 6 CO-OPERATIVE BANKS TO THEIR MEMBERS. HE SUBMITTED THAT IN THE PRESENT CASE, THE ASSESSMENT YEAR INVOLVED IS ASSESSMENT YE AR 2012-13 AND THEREFORE, AS PER THIS JUDGEMENT OF HON'BLE KARNATA KA HIGH COURT, THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FI ND THAT THE ISSUE IN DISPUTE WAS DECIDED BY LD. CIT (A) AS PER PARA NOS. 8 TO 8F OF HIS ORDER AND FOR THE SAKE OF READY REFERENCE, THESE PARAS ARE REPRODUCED HEREINBELOW. 8. NON-DEDUCTION OF TDS ON INTEREST PAID TO MEMBERS ON TERM DEPOSITS: IN THIS REGARD, THE AR ARGUES THAT CIRCULAR NO.9 OF 2002 DATED 11/09/2002 HAS CLEARLY LAID DOWN THAT CO-OPERATIVE SOCIETIES CARRYING ON THE BUSINESS OF BANKING WHEN IT PAYS INTEREST ON DEPOSITS BY ITS MEMBERS NEED NOT DEDUCT TAX AT SOURCE. HE HAS RELIE D ON THE DECISION OF THE HON'BLE ITAT, A BENCH, BANGALORE IN THE CASE OF THE BAGALKOT DISTRICT CENTRAL CO-OPERATIVE BANK LIMITED VS JCIT, BIJAPUR. 8A. I HAVE CONSIDERED THE ARGUMENTS OF THE AR, THE DECISION OF THE HON'BLE ITAT, A BENCH, BANGALORE IN THE CASE OF THE BAGALKOT DISTRICT CENTRAL CO-OPERATIVE BANK LIMITED VS JCIT, BIJAPUR AND THE CBDT CIRCULAR NO.9/2002 DATED 11/09/2002 WHICH THE APPELLANT HAS RELIED IN SUPPORT OF ITS CLAIM ARE ALSO PERUSED. 8B. THE HON'BLE ITAT IN THE CASE OF THE BAGALKOT DI STRICT CENTRAL CO- OP. BANK VS. JCIT IN ITA NO.1572/BANG/2013 DATED 30 /05/2014 HAS HELD THAT 'THE ASSESSEE WHICH IS A CO-OPERATIVE SOC IETY CARRYING ON BANKING BUSINESS, WHEN IT PAYS INTEREST INCOME TO A MEMBER BOTH ON TIME DEPOSITS AND ON DEPOSITS OTHER THAN TIME DEPOS ITS, WITH SUCH CO- OPERATIVE SOCIETY, NEED NOT DEDUCT TAX AT SOURCE U/ S 194A BY VIRTUE OF EXEMPTION GRANTED VIDE CLAUSE (V) OF SUB-SECTION(3) OF THE SAID SECTION.' 8C. IN A SIMILAR ISSUE, THE HON'BLE ITAT, 'A' BENCH , BANGALORE IN THE CASE OF M/S THE RADDI SAHAKARA BANK NIYAMITHA VS. T HE INCOME TAX OFFICER, HUBLI SP NOS.51 & 52/BANG/2015 AND ITA NOS .368 & 369/BANG/2015 HAS DECIDED THE CASE IN FAVOUR OF THE ASSESSEE RELYING ON VARIOUS OTHER DECISIONS AND HELD AS UNDER. 'THE LEARNED COUNSEL FOR THE ASSESSEE HAS BROUGHT T O OUR NOTICE THAT THE ITAT VISHAKAPATNAM BENCH IN THE CASE OF TH E VISAKHAPATNAM CO-OPERATIVE BANK ITA NO.5 AND 19 OF 2011 ORDER DATED 29.8.2011 HAS HELD THAT CO-OPERATIVE SOCIETIE S CARRYING ON BANKING BUSINESS WHEN IT PAYS INTEREST TO ITS MEMBE RS ON DEPOSITS IT NEED NOT DEDUCT TAX AT SOURCE IN VIEW OF THE PROVIS IONS OF SEC.194A(3)(V) OF THE ACT. SIMILAR VIEW HAS ALSO BE EN EXPRESSED BY THE PUNE BENCH OF THE ITAT IN THE CASE OF OZER MERC HANT CO- OPERATIVE BANK ITA NO.1588/PN/2012 ORDER DATED 30.1 0.2013. WE ITA NOS. 1532 TO 1537/BANG/2018 PAGE 4 OF 6 MAY ADD THAT IN BOTH THESE DECISIONS THE DISCUSSION DID NOT TURN ON THE INTERPRETATION OF SEC.194A(3)(I)(B) OF THE ACT VIS-A-VIS SEC.194A(3)(V) OF THE ACT.IT IS THUS CLEAR THAT THE PREPONDERANCE OF JUDICIAL OPINION ON THIS ISSUE IS THAT COOPERATIVE SOCIETIES CARRYING ON BANKING BUSINESS WHEN IT PAYS INTEREST TO ITS ME MBERS ON DEPOSITS NEED NOT DEDUCT TAX AT SOURCE IN VIEW OF T HE PROVISIONS OF SEC.194A(3)(V) OF THE ACT. 21. FOR THE REASONS GIVEN ABOVE, WE HOLD THAT THE A SSESSEE WHICH IS A CO-OPERATIVE SOCIETY CARRYING ON BANKING BUSIN ESS WHEN IT PAYS INTEREST INCOME TO A MEMBER BOTH ON TIME DEPOSITS A ND ON DEPOSITS OTHER THAN TIME DEPOSITS WITH SUCHCO-OPERATIVE SOCI ETY NEED NOT DEDUCT TAX AT SOURCE UNDERSECTION 194A BY VIRTUE OF THE EXEMPTION GRANTED VIDE CLAUSE (V) OF SUB-SECTION (3) OF THE S AID SECTION.' 15. IN OUR VIEW, THE ABOVE DECISION RENDERED BY THE COORDINATE BENCH IS SQUARELY APPLICABLE TO THE FACTS OF THE PR ESENT CASE. RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDIN ATE BENCH REFERRED TO ABOVE, WE SET ASIDE THE ORDERS OF THE L OWER AUTHORITIES AND HOLD THAT TO THE EXTENT INTEREST IS PAID TO MEM BERS OF THE SOCIETY THERE IS NO OBLIGATION TO DEDUCT TAX AT SOU RCE.' 8D. THE CBDT VIDE CIRCULAR NO.9/2002 DATED 11/09/20 02 HAS CLARIFIED THE APPLICABILITY OF THE PROVISIONS IN RE SPECT OF INCOME PAID TO A MEMBER OF A CO-OPERATIVE BANK. RELEVANT PART O F THE INSTRUCTION IS REPRODUCED BELOW FOR THE SAKE OF CLARITY/REFERENCE. 2. REPRESENTATION HAVE BEEN RECEIVED IN THE BOARD SEEKING CLARIFICATION AS TO WHETHER A MEMBER OF A CO-OPERAT IVE BANK MAY RECEIVE WITHOUT TDS INTEREST ON TIME DEPOSIT MADE W ITH THE CO- OPERATIVE BANK ON OR AFTER 01/07/1995. THE BOARD HA S CONSIDERED THE MATTER AND IT IS CLARIFIED THAT A MEMBER OF A C O-OPERATIVE BANK SHALL RECEIVE INTEREST ON BOTH TIME DEPOSITS AND DE POSITS OTHER THAN TIME DEPOSITS WITH SUCH CO-OPERATIVE BANK WITHOUT T DS UNDER SECTION 194A BY VIRTUE OF THE EXEMPTION GRANTED VID E CLAUSE (V) OF SUB-SECTION (3) OF THE SAID SECTION. THE PROVISIONS OF CLAUSE (VIIA) OF THE SAID SUB-SECTION ARE APPLICABLE ONLY IN CASE OF A NON- MEMBER DEPOSITOR OF THE CO-OPERATIVE BANK, WHO SHAL L RECEIVE INTEREST ONLY ON DEPOSITS OTHER THAN TIME DEPOSITS MADE ON OR AFTER 01/07/1995 WITHOUT TDS UNDER SECTION 194A.' 8E. THE BOARD VIDE CIRCULAR NO.19/2015 DATED 27/11/ 2015 VIDE S1.NO.42.5 HAS FURTHER CLARIFIED AS UNDER : 'THE PROVISIONS OF THE SECTION 194A(3)(V) OF THE IN COME-TAX ACT HAVE BEEN AMENDED SO AS TO EXPRESSLY PROVIDE THAT T HE EXEMPTION PROVIDED FROM DEDUCTION OF TAX FROM PAYMENT OF INTE REST TO MEMBERS BY A CO-OPERATIVE SOCIETY UNDER SECTION 194 A(3)(V) OF THE INCOME-TAX ACT SHALL NOT APPLY TO THE PAYMENT OF IN TEREST ON TIME DEPOSITS BY THE CO-OPERATIVE BANKS TO ITS MEMBERS. AS THIS AMENDMENT IS EFFECTIVE FROM THE PROSPECTIVE DATE OF 1ST JUNE, 2015, ITA NOS. 1532 TO 1537/BANG/2018 PAGE 5 OF 6 THE CO-OPERATIVE BANK SHALL BE REQUIRED TO DEDUCT T AX FROM THE PAYMENT OF INTEREST ON TIME DEPOSITS OF ITS MEMBERS , ON OR AFTER THE 1ST JUNE, 2015. HENCE, A CO-OPERATIVE BANK WAS NOT REQUIRED TO DEDUCT TAX FROM THE PAYMENT OF INTEREST ON TIME DEP OSITS OF ITS MEMBERS PAID OR CREDITED BEFORE 1ST JUNE, 2015.' 8F. IN VIEW OF THE ABOVE DISCUSSIONS, I HOLD THAT T HE ISSUE REGARDING INTEREST PAID TO MEMBERS ON DEPOSITS HAVE TO BE DEC IDED IN FAVOUR OF THE ASSESSEE FOLLOWING THE JUDICIAL PRECEDENTS CITE D SUPRA AND THE BOARD'S CIRCULAR. THE APPELLANT GETS RELIEF OF RS.2 6,89,133/-BEING INTEREST PAID TO MEMBERS. THUS, THE GROUND SUCCEEDS . 6. FROM THE ABOVE PARAS REPRODUCED FROM THE ORDER O F CIT(A), IT IS SEEN THAT APART FROM REFERRING TO CBDT CIRCULAR NO. 9/2002 DA TED 11.09.2002 AND BOARD CIRCULAR NO. 19/2015 DATED 27.11.2015, THE CI T(A) HAS ALSO FOLLOWED THE TRIBUNAL ORDER RENDERED IN THE CASE OF BAGALKOT DISTRICT CENTRAL CO- OPERATIVE BANK LTD. VS. JCIT, BIJAPUR IN ITA NO. 15 72/BANG/2013 DATED 30.05.2014 AND DECIDED THE ISSUE IN FAVOUR OF THE A SSESSEE BY FOLLOWING THIS TRIBUNAL ORDER. THE JUDGEMENT OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF CIT AND ANOTHER VS. NATIONAL CO-OPERATI VE BANK LTD. (SUPRA) HAS APPROVED THIS TRIBUNAL ORDER FOLLOWED BY CIT(A) . HENCE WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) ON THIS ISSUE. TH IS APPEAL OF THE REVENUE IS ALSO DISMISSED. 7. IN THE RESULT, ALL THE SIX APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- SD/- (LALIET KUMAR) (ARUN KUMAR GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 26 TH OCTOBER, 2018. /MS/ ITA NOS. 1532 TO 1537/BANG/2018 PAGE 6 OF 6 COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.