Asst.Commissioner of Income Tax, Circle-14(1), Hyderabad V. M/s APSRTC Employees Thrift & Credit Society Limited, Hyderabad

ITA 1689/HYD/2013

• Counselvise Citation: 168922514 RSA 2013
• Duration Of Justice: 1 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 30-07-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 05-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 133A; 201(1); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NOS. 1689 /HYD/2013 ASSESSMENT YEAR: 2011-12 ASST. COMMISSIONER OF INCOME- TAX, CIRCLE 14(1), HYDERABAD. VS. M/S APSRTC EMPLOYEES THRIFT & CREDIT SOCIETY LTD., HYDERABAD. PAN AAATA3057F (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SOLGY JOSE T. KOTTARAM REVENUE BY : SHRI A. SRINIVAS DATE OF HEARING 30-07-2015 DATE OF PRONOUNCEMENT 12-08-2015 O R D E R PER SAKTIJIT DEY, J.M.: THIS APPEAL OF THE DEPARTMENT IS DIRECTED AGAINST T HE ORDER DATED 10/09/2013 PASSED BY LD. CIT(A) - II, HYDERAB AD FOR THE AY 2011-12. 2. BRIEFLY THE FACTS ARE, ASSESSEE A SOCIETY IS REG ISTERED UNDER THE AP STATE COOPERATIVE SOCIETIES ACT, 1964. FOR V ERIFYING ASSESSEES COMPLIANCE TO TDS PROVISIONS, A SURVEY U /S 133A OF THE ACT WAS CONDUCTED ON THE ASSESSEE ON 03/11/2011. IN COURSE OF SURVEY, IT WAS FOUND THAT THE SOCIETY WAS PAYING IN TEREST ON DEPOSITS KEPT WITH IT TO DIFFERENT CATEGORIES OF MEMBERS SUC H AS REGULAR MEMBERS, ASSOCIATE MEMBERS AND NOMINAL MEMBERS. HOW EVER, WHILE MAKING SUCH INTEREST PAYMENTS, ASSESSEE SOCI ETY HAS NOT DEDUCTED TAX AT SOURCE. WHEN ASSESSEE WAS CALLED UP ON TO EXPLAIN THE REASON FOR NOT DEDUCTING TAX ON INTEREST PAYMEN TS, IT WAS SUBMITTED BY ASSESSEE ON THE PRINCIPLE OF MUTUALITY , TDS PROVISIONS ITA NO.1689/HYD/2013 M/S. APS RTC EMPLOYEES THRIFT & CREDIT SOCIETY LTD . 2 ON INTEREST PAYMENTS TO MEMBERS WOULD NOT APPLY IN VIEW OF PROVISION CONTAINED U/S 194A(3)(V) OF THE ACT. AO A FTER EXAMINING THE SUBMISSIONS OF ASSESSEE, FOUND THAT DURING THE RELEVANT YEAR, ASSESSEE HAD 851 REGULAR MEMBERS, 4880 ASSOCIATE ME MBERS AND 47 NOMINAL MEMBERS. HE FURTHER NOTICED THAT WHILE A SSESSEE PAYS INTEREST @ 10% ON THE DEPOSITS RECEIVED FROM REGULA R MEMBERS, IT PAYS 9.5% INTEREST ON THE DEPOSITS RECEIVED FROM AS SOCIATE MEMBERS AND 10% INTEREST ON THE DEPOSITS RECEIVED F ROM NOMINAL MEMBERS. ON GOING THROUGH THE BYE-LAWS OF THE SOCIE TY, AO ALSO FOUND DIFFERENCE IN RIGHTS AND PRIVILEGES BETWEEN R EGULAR MEMBERS ON ONE SIDE AND ASSOCIATE/NOMINAL MEMBERS ON THE OT HER. HE, THEREFORE, OPINED THAT EXEMPTION AS CONTEMPLATED U/ S 194A(3)(V) WOULD APPLY ONLY TO A REGULAR MEMBER AND NOT ASSOCI ATE/NOMINAL MEMBERS. THOUGH, ASSESSEE OBJECTED TO SUCH PROPOSIT ION OF THE AO AND CONTENDED THAT AS THE PROVISION CONTAINED U/S 1 94A(3)(V) ONLY SPEAKS OF MEMBER WITHOUT ANY DIFFERENTIATION, AO CA NNOT MAKE A DIFFERENCE BETWEEN REGULAR MEMBER AND ASSOCIATE/NOM INAL MEMBER WHILE GRANTING EXEMPTION U/S 194A(3)(V) OF THE ACT. ASSESSEE IN SUPPORT OF SUCH CONTENTION, RELIED UPON A DECISION OF THE HONBLE BOMBAY HIGH COURT IN CASE OF JALGAON DISTRICT COOPE RATIVE SOCIETY BANK VS. UNION OF INDIA (265 ITR 423). AO, HOWEVER, DID NOT FIND MERIT IN THE CONTENTIONS OF ASSESSEE. HE OBSERVED THAT MEMBER AS ENVISAGED U/S 194A(3)(V) ONLY REFERS TO A REGULAR M EMBER AND NOT ALL THE MEMBERS OF THE SOCIETY. AS FAR AS CBDT CIR CULAR NO. 9 IS CONCERNED, AO HELD THAT THOUGH IT MAY BE A FACT THA T THE SAID CIRCULAR HAS BEEN QUASHED BY THE HONBLE BOMBAY HIG H COURT, BUT, SINCE THE BOARD HAS NOT WITHDRAWN OR REPEALED THE S AID CIRCULAR, IT IS BINDING ON BOTH ASSESSEE AND REVENUE. HOLDING AS AFORESAID, AO PROCEEDED TO COMPUTE DEMAND U/S 201(1) AND 201(1A), AS UNDER: MEMBER FY 2010-11 INTEREST PAID TAX U/S 201(1) INTEREST U/S 201(1A) ASSOCIATE MEMBER 14,89,26,397 1,48,92,640 35,74,233 NOMINAL MEMBER 14,80,706 1,48,070 35,536 TOTAL 15,04,07,103 1,50,40,710 36,09,769 ITA NO.1689/HYD/2013 M/S. APS RTC EMPLOYEES THRIFT & CREDIT SOCIETY LTD . 3 THUS, AO PASSED THE ORDER ACCORDINGLY ON 30/03/2013 RAISING HE TOTAL DEMAND OF RS. 1,86,50,479. BEING AGGRIEVED OF THE ASSESSMENT ORDER SO PASSED, ASSESSEE PREFERRED APPE AL BEFORE LD. CIT(A). 3. BEFORE THE LD. CIT(A) ASSESSEE REITERATED WHAT W AS STATED BEFORE AO. LD. CIT(A) AFTER CONSIDERING THE SUBMISS IONS OF ASSESSEE AND FOLLOWING THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN CASE OF JAGAON DISTRICT COOPERATIVE SOCIET Y LTD.,(SUPRA) HELD AS UNDER: 7.1 THE HONBLE MUMBAI HIGH COURT HAD CLEARLY STATE D THAT THE RIGHTS AND PRIVILEGES OF MEMBERS HAVE GOT NOTHI NG TO DO WITH THE EXEMPTION GRANTED TO MEMBERS U/S 194A(3)(V ) OF THE ACT. THEREAFTER, THE HONBLE COURT HAS QUASHED THE CIRCULAR NO. 9 OF 2002 DATED 11/09/2002. SINCE THE SLP FILED BY THE DEPARTMENT HAS NOT BEEN ADMITTED AND THE HONBLE SU PREME COURT HAS DISPOSED THE SLP (12601-12602 OF 2004) ON 07/07/2004, THE ORDER OF THE MUMBAI HIGH COURT IN T HE CASE OF JALGAON DISTRICT COOPERATIVE BANK LTD. VS. UNION OF INDIA STANDS GOOD AS ON DATE AS PRECEDENT ON THIS ISSUE T HAT NO TDS IS TO BE DEDUCTED ON INTEREST PAYMENTS MADE BY COOPERATIVE SOCIETY TO ITS ASSOCIATE/NOMINAL MEMBER S AND THEY ARE ENTITLED TO THE BENEFIT OF SECTION 194A(3) (V) OF THE ACT. 4. BEING AGGRIEVED OF THE AFORESAID ORDER OF LD. CI T(A), DEPARTMENT IS BEFORE US. 5. LD. DR STRONGLY SUPPORTING THE REASONING OF AO S UBMITTED, ONLY REGULAR MEMBERS ARE EXEMPT UNDER THE PROVISION S OF SECTION 194A(3)(V) AND ASSOCIATE AND NOMINAL MEMBERS ARE NO T EXEMPT. HE, THEREFORE, SUBMITTED, ASSESSEE WAS LIABLE TO DEDUCT TAX AS FAR AS INTEREST PAYMENT TO ASSOCIATE/NOMINAL MEMBERS ARE C ONCERNED. 6. LD. AR, ON THE OTHER HAND, STRONGLY SUPPORTING T HE VIEW EXPRESSED BY LD. CIT(A) SUBMITTED A READING OF SECT ION 194A(3)(V) WOULD MAKE IT CLEAR THAT NO DIFFERENTIATION HAS BEE N MADE AS FAR AS CATEGORIES OF MEMBERS ARE CONCERNED. THEREFORE, AO WAS NOT JUSTIFIED IN HOLDING THAT EXEMPTION PROVIDED U/S 19 4A(3)(V) DOES NOT ITA NO.1689/HYD/2013 M/S. APS RTC EMPLOYEES THRIFT & CREDIT SOCIETY LTD . 4 APPLY TO ASSOCIATE/NOMINAL MEMBERS. LD. AR SUBMITTE D, THE HONBLE BOMBAY HIGH COURT IN CASE OF THE JALGAON DISTRICT C ENTRAL COOPERATIVE BANK LTD. & ANR. VS. UNION OF INDIA AND OTHERS, [2004] 265 ITR 423 HAS SETTLED THE ISSUE HOLDING THAT WHI LE APPLYING THE PROVISIONS OF SECTION 194A(3)(V), NO DISTINCTION CA N BE MADE BETWEEN DIFFERENT CATEGORIES OF MEMBERS OF A COOPER ATIVE SOCIETY. HE SUBMITTED, THE AFORESAID DECISION OF THE HONBLE BOMBAY HIGH COURT HAS BEEN AFFIRMED BY THE HONBLE SUPREME COUR T WHILE DISMISSING SLP FILED BY DEPARTMENT. LD. AR FURTHER SUBMITTED, WHEN LD. CIT IN EXERCISE OF POWER U/S 263, REVISED THE A SSESSMENT ORDER PASSED BY AO BY HOLDING THAT TDS PROVISIONS WILL AP PLY EVEN TO THE REGULAR MEMBERS, THE TRIBUNAL WHILE DECIDING APPEAL PREFERRED BY ASSESSEE IN ITA NO. 1070/HYD/2014 DATED 29/04/2015 HAS QUASHED THE ORDER PASSED BY LD. CIT U/S 263 OF THE ACT. THU S, IT WAS SUBMITTED BY LD. AR, THE ISSUE RELATING TO REQUIREM ENT OF ASSESSEE IN DEDUCTING TAX ON INTEREST PAYMENT TO DIFFERENT CATE GORIES OF MEMBERS STAND SETTLED IN FAVOUR OF ASSESSEE NOT ONL Y BY THE DECISION OF ITAT BUT ALSO BY THE DECISION OF HONBL E BOMBAY HIGH COURT (SUPRA). HE, THEREFORE, SUBMITTED, THERE IS N O REASON TO DISTURB THE FINDING OF LD. CIT(A). 7. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIE S AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL A S OTHER MATERIALS ON RECORD. AS FAR AS FACTUAL ASPECT IS CONCERNED, T HERE IS NO DISPUTE THAT ASSESSEE DURING THE RELEVANT PY HAS PAID INTER EST TO DIFFERENT CATEGORIES OF MEMBERS, VIZ., REGULAR MEMBERS, ASSOC IATE MEMBERS AND NOMINAL MEMBERS. AS COULD BE SEEN, AO WHILE ALL OWING ASSESSEES CLAIM OF EXEMPTION U/S 194A(3)(V) IN RES PECT OF INTEREST PAYMENT TO REGULAR MEMBERS, HE HELD THAT INTEREST P AYMENT TO ASSOCIATE/NOMINAL MEMBERS ARE NOT COVERED UNDER THE SAID PROVISION. HOWEVER, ON PERUSAL OF THE PROVISIONS CO NTAINED U/S 194A(3)(V), IT IS VERY MUCH CLEAR THAT THERE IS NO DISTINCTION MADE UNDER THE SAID PROVISION BETWEEN DIFFERENT CATEGORI ES OF MEMBERS. THE LANGUAGE USED U/S 194A(3)(V) IS MEMBER, THE HONBLE BOMBAY HIGH COURT IN CASE OF THE JALGAON DISTRICT CENTRAL COOPERATIVE BANK ITA NO.1689/HYD/2013 M/S. APS RTC EMPLOYEES THRIFT & CREDIT SOCIETY LTD . 5 LTD. & ANR. VS. UNION OF INDIA AND OTHERS (SUPRA), WHILE EXAMINING THE PROVISION CONTAINED U/S 194A(3)(V), HELD THAT E XEMPTION GRANTED TO A COOPERATIVE SOCIETY U/S 194A(3)(V) CANNOT BE T AKEN AWAY BY CREATING A DISTINCTION BETWEEN DULY REGISTERED MEMB ER AND NOMINAL MEMBER. THE AFORESAID DECISION OF THE HONBLE BOMB AY HIGH COURT HAS BEEN AFFIRMED BY THE HONBLE SUPREME COURT WHIL E DISMISSING SLP PREFERRED BY THE DEPARTMENT. IN VIEW OF THE TH E PRINCIPLE LAID DOWN IN THE JUDICIAL PRECEDENTS, AS NOTED ABOVE, T O THE EFFECT THAT NO DISTINCTION CAN BE MADE BETWEEN DIFFERENT CATEGO RIES OF MEMBERS WHILE APPLYING THE PROVISIONS OF SECTION 194A(3)(V) OF THE ACT, IN OUR VIEW DECISION OF LD. CIT(A) CANNOT BE INTERFERED WI TH. IT MAY BE WORTHWHILE TO NOTE HERE THAT THE IMPUGNED ASSESSMEN T ORDER WAS ALSO SUBJECT MATTER OF REVISION PROCEEDING U/S 263 OF THE ACT. LD. CIT WHILE REVISING THE ASSESSMENT ORDER U/S 263 OF THE ACT, HELD THAT AO SHOULD ALSO HAVE APPLIED TDS PROVISIONS TO REGISTERED/REGULAR MEMBERS. WHEN ASSESSEE CARRIED AN APPEAL, AGAINST THE AFORESAID ORDER OF LD. CIT PASSED U/S 2 63, ITAT IN AN ORDER PASSED IN ITA NO. 1070/HYD/14 DT. 29/04/2015, HELD AS UNDER: ON CAREFUL ANALYSIS OF THE SAID DECISION, IT IS V ERY MUCH CLEAR THAT HONBLE BOMBAY HIGH COURT WHILE QUASHI NG THE CBDT CIRCULAR NO. 09 OF 2002 DT. 11/09/2002 IN NO UNCERTAIN TERMS HELD THAT EXEMPTION GRANTED TO A COOPERATIVE SOCIETY U/S 194A(3)(V) CANNOT BE TAKEN AWAY BY CREATING A DIST INCTION BETWEEN DIFFERENT CATEGORIES OF MEMBERS. IT IS FUR THER EVIDENT, SLP FILED BY THE DEPARTMENT AGAINST THE AFORESAID JUDGMENT OF THE HONBLE BOMBAY HIGH COURT WAS ALSO DISMISSED B Y THE HONBLE SUPREME COURT. THUS, AS PER THE DECISION OF THE HONBLE BOMBAY HIGH COURT AS AFORESAID, WHICH WAS ALSO FOLLOWED BY LD. CIT(A), NO DIFFERENTIATION CAN BE MADE BETWEEN THE MEMBERS OF A COOPERATIVE SOCIETY WHILE APPLYING THE EXEMPTION PROVISION OF SECTION 194A(3)(V) OF T HE ACT. IN FACT, LD. CIT HIMSELF WHILE ISSUING NOTICE U/S 263 AS WELL AS IN MORE THAN ONE PLACE IN THE IMPUGNED ORDER HAS HELD THE ASSESSMENT ORDER PASSED TO BE ERRONEOUS AND PREJUD ICIAL TO THE INTERESTS OF REVENUE ON THE REASONING THAT NO DIFFERENTIATION BETWEEN MEMBERS CAN BE MADE WHILE APPLYING TDS PROVISION U/S 194A(3). THUS, APPLYING THE SAM E LOGIC, IT IS TO BE HELD THAT LD. CIT(A)S ORDER HOLDING THAT INTEREST PAYMENT TO ASSOCIATE/NOMINAL MEMBERS IS EXEMPT FRO M DEDUCTION OF TAX AT SOURCE IN VIEW OF SECTION 194A (3)(V) WOULD ALSO IMPLIEDLY APPLY TO THE REGULAR MEMBERS AS SHE CAME TO SUCH CONCLUSION ON THE PRINCIPLE THAT NO DIFFERENT IATION CAN BE MADE BETWEEN MEMBERS OF THE COOPERATIVE SOCIETY. T HAT ITA NO.1689/HYD/2013 M/S. APS RTC EMPLOYEES THRIFT & CREDIT SOCIETY LTD . 6 BEING THE CASE, ORDER PASSED BY LD. CIT(A) ALSO CO VERS THE ISSUE OF APPLICATION OF SECTION 194A(3)(V) TO REGU LAR MEMBERS ALSO. EXPLANATION C TO SECTION 263(1) CLEARLY S PELLS OUT THAT LD. CIT CAN EXERCISE HIS POWER U/S 263 TO AN ISSUE WHICH IS NOT CONTESTED AND DECIDED IN APPEAL PROCEEDING. TH EREFORE, AS IN THE PRESENT CASE, THE ISSUE IN DISPUTE IS CL EARLY THE SUBJECT MATTER OF APPEAL BEFORE LD. CIT(A) AND A D ECISION HAS ALREADY BEEN RENDERED BY LD. CIT(A) MUCH PRIOR TO THE EXERCISE OF POWER U/S 263 OF THE ACT, IN OUR VIEW, ASSESSMENT ORDER HAS MERGED WITH THE ORDER OF LD. CIT(A), HEN CE, COULD NOT HAVE BEEN REVISED BY INVOKING THE PROVISIONS O F SECTION 263. THEREFORE, THE EXERCISE OF POWER U/S 263 IS INVALID. IN VIEW OF THE AFORESAID, FINDING NO INFIRMITY IN T HE ORDER OF LD. CIT(A), WE UPHOLD THE SAME BY DISMISSING GROUNDS RA ISED BY REVENUE. 8. IN THE RESULT, APPEAL OF DEPARTMENT IS DISMISSED . PRONOUNCED IN THE OPEN COURT ON 12 TH AUGUST, 2015 SD/- SD/- (P.M. JAGTAP) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEM BER HYDERABAD, DATED: 12 TH AUGUST, 2015 KV COPY TO:- 1) ACIT, CIRCLE 14(1) (TDS), HYDERABAD 2) M/S APSRTC EMPLOYEES THRIFT & CREDIT SOCIETY LTD ., SATYANARAYANA REDDY MARG., AZAMBAD, HYDERABA D 500 020 3) CIT(A)-II, HYDERABAD 3) CIT(TDS), HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD.