THE ITO (TDS), WARD - 3(3), Guntur V. The Tenali Co-Operative Urban Bank Ltd., Tenali

ITA 251/VIZ/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1993 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 23-03-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 19-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: A ARUNA
• Section: 133A; 201(1)

Judgement Text

ITA NO.251/VIZAG/2014 THE TENALI CO-OPERATIVE URBAN BANK LTD., TENALI 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NO.251/VIZAG/2014 ( / ASSESSMENT YEAR: 2011-12) ITO (TDS) , WARD - 3(3) , GUNTUR VS. THE TENALI CO - OPERATIVE URBAN BANK LTD., TENALI [PAN: HYDTO2599C ] ( / APPELLANT) ( / RESPONDENT) / APPELLANT BY : SHRI M.N. MURTHY NAIK, DR / RESPONDENT BY : SMT. A. ARUNA, AR / DATE OF HEARING : 23.03.2016 / DATE OF PRONOUNCEMENT : 31.03.2016 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF CIT(A), VIJAYAWADA DATED 28.2.2014 AND IT PERTAINS TO THE ASSESSMENT YEAR 2011-12. ITA NO.251/VIZAG/2014 THE TENALI CO-OPERATIVE URBAN BANK LTD., TENALI 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A REGISTERED CO- OPERATIVE SOCIETY UNDER ANDHRA PRADESH CO-OPERATIVE SOCIETIES ACT, 1964 AND ENGAGED IN THE BUSINESS OF BANKING UNDER THE LI CENSE OF RESERVE BANK OF INDIA. A SURVEY OPERATION U/S 133A OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS 'THE ACT') WAS CONDUCTE D IN THE BUSINESS PREMISES OF THE ASSESSEE ON 27.10.2011 TO VERIFY TH E ASSESSEES COMPLIANCE TO THE TDS PROVISIONS AS PER CHAPTER 17B OF THE ACT. DURING THE COURSE OF SURVEY PROCEEDINGS, IT WAS NOTICED TH AT THE ASSESSEE HAS NOT DEDUCTED TDS ON THE INTEREST ON DEPOSITS PAID T O MEMBERS AND NON MEMBERS AND ALSO SALARIES TO ITS STAFF. HOWEVER, I T HAS COMPLIED WITH THE TDS PROVISIONS, IN RESPECT OF PAYMENTS OF PROFE SSIONAL SERVICES AND COMMISSION. THEREAFTER, CONSEQUENT TO THE SURVEY PR OCEEDINGS, THE A.O. HAS TAKEN UP THE CASE AND ISSUED A SHOW CAUSE NOTIC E AND ASKED TO EXPLAIN, WHY ASSESSEE SHALL NOT BE HOLD AS THE ASSE SSEE IN DEFAULT U/S 201(1) AND 201(1A) OF THE ACT, FOR NON-DEDUCTION OF TDS ON INTEREST PAYMENT ON DEPOSITS. IN RESPONSE TO SHOW CAUSE NOT ICE, THE ASSESSEE FILED ITS WRITTEN SUBMISSION VIDE LETTER DATED 9.3. 2012 AND SUBMITTED THAT IT HAS COMPLIED WITH THE TDS PROVISIONS IN RESPECT OF INTEREST PAYMENT TO NON MEMBERS, WHEREVER INTEREST AMOUNT EXCEEDS ` 10,000/-. BUT, STATED THAT IN RESPECT OF INTEREST PAYMENTS TO MEMB ERS, AS PER THE PROVISIONS OF SECTION 194A(1)(3)(V) OF THE ACT, TDS IS NOT APPLICABLE ON ITA NO.251/VIZAG/2014 THE TENALI CO-OPERATIVE URBAN BANK LTD., TENALI 3 INTEREST PAYMENTS TO MEMBERS. THE ASSESSEE FURTHER SUBMITTED THAT WHEREVER INTEREST PAYMENT EXCEEDS ` 10,000/-, IT HAS ACCEPTED FORM NO.15G/15H FROM THE DEPOSITORS, WHERE THEY HAVE DEC LARED THAT THE TAXABLE INCOME IS LESS THAN TAXABLE LIMIT. THEREFOR E, THERE IS NO DEFAULTS IN TDS COMPLIANCES AND HENCE, IT CANNOT BE CONSIDER ED AS ASSESSEE IN DEFAULT UNDER SEC. 201(1) OF THE ACT. THE A.O., AFT ER CONSIDERING THE DETAILS FURNISHED BY THE ASSESSEE, HELD THAT THE AS SESSEE HAS FAILED TO DEDUCT TDS IN RESPECT OF INTEREST PAYMENTS ON TERM DEPOSITS TO ITS MEMBERS AND NON MEMBERS AND ALSO FAILED TO DEDUCT T DS ON SALARY TO ITS STAFF. THEREFORE, HELD THAT THE ASSESSEE IS DEE MED TO BE THE ASSESSEE IN DEFAULT U/S 201(1) & 201(1A) OF THE ACT AND QUAN TIFIED THE TDS AND INTEREST U/S 201(1) & 201(1A) OF THE ACT. 3. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE A SSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE A.O. THE ASSESSEE FURTHER SUBMITTED THAT IT HAS COMPLIED WITH THE TDS PROVISIONS IN RES PECT OF INTEREST ON TERM DEPOSITS, WHERE THE INTEREST AMOUNT EXCEEDS ` 10,000/-, IN CASE OF NON MEMBERS. HOWEVER, AS PER SECTION 194A(1)(3)(V) OF THE ACT, ANY INTEREST PAYMENT TO A MEMBER IS EXEMPT FROM DEDUCTI ON OF TDS, THEREFORE, NOT DEDUCTED TDS ON INTEREST PAYMENT TO ITS MEMBERS. THE ITA NO.251/VIZAG/2014 THE TENALI CO-OPERATIVE URBAN BANK LTD., TENALI 4 ASSESSEE FURTHER SUBMITTED THAT IN CASES, WHERE INT EREST INCOME EXCEEDS ` 10,000/-, THE DEPOSITORS HAVE FURNISHED DECLARATIO N IN FORM NO.15G/15H, THEREFORE, IT HAS NOT DEDUCTED TDS IN S UCH CASES. THE CIT(A) DURING THE COURSE OF APPELLATE PROCEEDINGS, FORWARDED THE SUBMISSIONS OF THE ASSESSEE ALONG WITH FORM NO.15G/ 15H TO THE ASSESSING OFFICER FOR HIS COMMENTS. THE ASSESSING OFFICER VIDE HIS LETTER DATED 29.1.2014 SUBMITTED THAT IN VIEW OF THE DECIS ION OF BHAGANI NIVEDITA SAHAKARI BANK LTD. IN ITA NO.85/PNJ/2013 O F ITAT, PANAJI BENCH, THE ASSESSEE IS LIABLE FOR TDS U/S 194A OF T HE ACT. THE A.O. FURTHER HELD THAT THE TERM CO-OPERATIVE SOCIETY AND CO-OPERATIVE BANK IN CLAUSE (V) TO SUB SECTION (3) OF SECTION 194A OF TH E ACT IS NOT DEFINED. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND ALSO TAKING INTO ACCOUNT THE REMAND REPORT OF THE ASSESS ING OFFICER, DELETED THE ADDITIONS MADE BY THE A.O. THE CIT(A) HELD THAT AS PER THE PROVISIONS OF SECTION 194A(1)(3)(V) OF THE ACT, NO TDS IS DEDUCTIBLE FOR INTEREST PAYMENTS TO MEMBER OF A CO-OPERATIVE SOCIE TY. WITH THESE OBSERVATIONS, THE CIT(A) DELETED THE ADDITIONS MADE BY THE A.O. AGGRIEVED BY THE CIT(A) ORDER, THE REVENUE IS IN AP PEAL BEFORE US. 4. THE LD. D.R. SUBMITTED THAT THE CIT(A) WAS ERRED IN DELETING THE ADDITIONS MADE BY THE A.O. TOWARDS TDS AND INTEREST U/S 201(1) & ITA NO.251/VIZAG/2014 THE TENALI CO-OPERATIVE URBAN BANK LTD., TENALI 5 201(1A) OF THE ACT. THE LD. D.R. FURTHER SUBMITTED THAT THE CIT(A) WAS ERRED IN HOLDING THAT THE INTEREST PAYMENTS MADE TO MEMBERS OF THE CO- OPERATIVE SOCIETY IS EXEMPT FROM TAX UNDER CLAUSE ( V) OF SUB SECTION (3) OF SECTION 194A OF THE ACT. THE LD. D.R. ARGUED THA T THE CIT(A) SHOULD HAVE APPRECIATED ASSESSING OFFICERS STAND, IN VIEW OF THE DECISION OF THE HONBLE HIGH COURT IN THE CASE OF MOOLAMATTOIS ELEC TRICITY BOARD EMPLOYEES CO-OPERATIVE BANK LTD., REPORTED IN 238 I TR 63 AND ALSO IN VIEW OF THE ITAT, PANAJI BENCH DECISION, IN THE CAS E OF BHAGANI NIVEDITA SAHAKARI BANK LTD. (SUPRA), WHERE IT HAS BEEN CLEAR LY HELD THAT SECTION 194A(3)(VII)(A)(B) OF THE ACT MAKES NO DISTINCTION BETWEEN MEMBERS AND NON MEMBERS OF CO-OPERATIVE BANK FOR THE PURPOS E OF DEDUCTION OF TAX AT SOURCE ON INTEREST ON DEPOSITS PAID/CREDITED AND THEREFORE, CO- OPERATIVE BANK IS LIABLE TO DEDUCT TAX AT SOURCE ON INTEREST PAYMENT U/S 194A(1) OF THE ACT. THE LD. A.R. OF THE ASSESSEE, O N THE OTHER HAND, STRONGLY SUPPORTED THE ORDER OF CIT(A) AND ARGUED T HAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF ITAT, VISAKHAPA TNAM BENCH DECISION, IN THE CASE OF ACIT VS. VISAKHAPATNAM CO- OPERATIVE BANK LTD. IN ITA NO.5/VIZAG/2011. THEREFORE, REQUESTED TO UPH ELD THE CIT(A) ORDER. ITA NO.251/VIZAG/2014 THE TENALI CO-OPERATIVE URBAN BANK LTD., TENALI 6 5. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE FACTUAL MATRIX OF THE CASE IS THAT THE ASSESSEE IS A CO-OPERATIVE SOCIETY ENGAGED IN THE BUSINESS OF BANKING. A SURVEY OPERA TION U/S 133A OF THE ACT IS CONDUCTED IN THE BUSINESS PREMISES OF THE AS SESSEE. DURING THE COURSE OF SURVEY PROCEEDINGS, IT WAS NOTICED THAT T HE ASSESSEE HAS NOT DEDUCTED TDS ON INTEREST PAYMENT ON DEPOSITS IN RES PECT OF MEMBERS AND NON MEMBERS. THE A.O. WAS OF THE OPINION THAT T HE ASSESSEE HAS FAILED TO DEDUCT TDS AS PER SECTION 194A(1) OF THE ACT AND THEREFORE, HELD THAT ASSESSEE AS AN ASSESSEE IN DEFAULT U/S 20 1(1) & 201(1A) OF THE ACT. IT WAS THE CONTENTION OF THE ASSESSEE THAT IT HAS COMPLIED WITH THE TDS PROVISIONS, WHERE THE INTEREST PAYMENT TO A NON MEMBER EXCEEDS ` 10,000/-. FURTHER, IN CASE OF MEMBERS, AS PER THE P ROVISIONS OF SECTION 194(1)(3)(V) OF THE ACT, INTEREST PAYMENT TO A MEMB ER IS EXEMPT FROM DEDUCTION OF TAX AT SOURCE. THE ASSESSEE FURTHER SU BMITTED THAT IN RESPECT OF NON MEMBERS, WHERE INTEREST PAYMENT EXCE EDS ` 10,000/-, THE DEPOSITORS HAVE FURNISHED DECLARATION IN FORM N O.15G/15H, THEREFORE, IT HAS NOT DEDUCTED TDS. WE FIND FORCE IN THE ARGUMENT OF THE ASSESSEE, FOR THE REASON THAT CLAUSE (V) OF SUB SECTION (3) OF SECTION 194(1) OF THE ACT PROVIDES FOR EXEMPTION IN RESPECT OF INTEREST ON DEPOSITS PAID TO A MEMBER OF A CO-OPERATIVE SOCIETY INCLUDING CO- ITA NO.251/VIZAG/2014 THE TENALI CO-OPERATIVE URBAN BANK LTD., TENALI 7 OPERATIVE BANK. PRIOR TO THE AMENDMENT OF SECTION 194(1)(3)(V) OF THE ACT W.E.F. 1.6.2015, THERE WAS NO DISTINCTION BETWE EN A MEMBER OF A CO- OPERATIVE SOCIETY AND MEMBER OF A CO-OPERATIVE BANK . THEREFORE, WE ARE OF THE OPINION THAT THE ASSESSEE IS NOT LIABLE TO DEDUCT TDS ON INTEREST PAYMENT TO ITS MEMBERS. WE FURTHER NOTICED THAT IN CASE OF NON MEMBERS, THE ASSESSEE STATED THAT IT HAS COMPLIED W ITH THE TDS PROVISIONS, WHERE THE INTEREST PAYMENT EXCEEDS ` 10,000/. IN FEW CASES, WHERE INTEREST EXCEEDS RS. 10,000/-, THE DEPOSITORS HAVE FURNISHED DECLARATION IN FORM NO.15G/15H, THEREFORE, NO TDS I S DEDUCTED. THE CIT(A) DURING THE COURSE OF APPELLATE PROCEEDINGS, AFTER EXAMINING THE DECLARATION FORM FURNISHED BY THE ASSESSEE HAS ACCE PTED THE CLAIM OF ASSESSEE AND DELETED THE ADDITIONS. THEREFORE, WE A RE OF THE OPINION THAT THE CIT(A) HAS RIGHTLY DELETED THE ADDITIONS. THERE IS NO ERROR OR INFIRMITY IN THE ORDER OF CIT(A). HENCE, WE INCLIN ED TO UPHOLD THE ORDER OF THE CIT(A) AND REJECTED THE GROUND RAISED BY THE REVENUE. 6. DURING THE COURSE OF HEARING, THE A.R. OF THE AS SESSEE SUBMITTED THAT THE ISSUE INVOLVED IN THIS APPEAL IS SQUARELY COVERED BY THE DECISION OF ITAT, VISAKHAPATNAM BENCH, IN THE CASE OF ACIT V S. VISAKHAPATNAM CO-OPERATIVE BANK LTD. IN ITA NO.5/VIZAG/2011. WE H AVE GONE THROUGH THE CASE LAW RELIED UPON BY THE ASSESSEE, IN THE LI GHT OF THE FACTS OF THE ITA NO.251/VIZAG/2014 THE TENALI CO-OPERATIVE URBAN BANK LTD., TENALI 8 PRESENT CASE. THE COORDINATE BENCH OF THIS TRIBUNAL , UNDER SIMILAR CIRCUMSTANCES HELD THAT INTEREST ON DEPOSITS PAID T O MEMBERS OF CO- OPERATIVE SOCIETY IS EXEMPT FROM TDS PROVISIONS U/S 194A(1) OF THE ACT. THE RELEVANT PORTION IS REPRODUCED HEREUNDER: IT CAN BE SEEN THAT NEITHER SEC.2(19) NOR SEC. 194 A(3) MAKES ANY DISCRIMINATION BETWEEN THE CO-OPERATIVE SOCIETIES C ARRYING ON BANKING BUSINESS AND OTHER CO-OPERATIVE SOCIETIES. HOWEVER , AS PER SEC. 194A(3), THE SAID EXEMPTION IS AVAILABLE ONLY TO THE INTERES T PAYMENTS MADE TO ITS MEMBERS OR TO ANY OTHER CO-OPERATIVE SOCIETY. IN T HE INSTANT CASE, IT IS THE CLAIM OF THE ASSESSEE THAT ALL THE INTEREST PAY MENTS HAVE BEEN MADE ONLY TO ITS MEMBERS. IN THAT CASE, THE ASSESSEE IS SQUARELY COVERED BY THE EXEMPTION PROVIDED UNDER SECTION OF LEARNED CIT (A) ON THIS ISSUE. 7. THE LD. D.R. RELIED UPON THE DECISION OF ITAT, P ANAJI BENCH DECISION IN THE CASE OF BHAGANI NIVEDITA SAHAKARI B ANK LTD. IN ITA NO.85/PNJ/2013 AND ARGUED THAT AS PER SECTION 194A( 3)(VII)(A)(B) OF THE ACT, THERE IS NO DISTINCTION BETWEEN MEMBERS AN D NON MEMBERS OF A CO-OPERATIVE BANK FOR THE PURPOSE OF DEDUCTION OF TAX AT SOURCE ON INTEREST ON DEPOSITS. WE HAVE GONE THROUGH THE C ASE LAW RELIED UPON BY THE ASSESSEE, IN THE LIGHT OF THE FACTS OF THE PRESENT CASE AND FIND THAT THE CASE LAW RELIED UPON BY THE D.R. IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. THE CASE BEFORE THE CO-ORDINATE BENCH WAS, IN RESPECT OF SECTION 194A(1)(3)(VII)(A)(B) OF THE ACT, WHICH DEALS WITH DEPOSITS BY A CO-OPERATIVE SOCIETY WITH ANOTHER CO- OPERATIVE SOCIETY. WHEREAS, SECTION 194(1)(3)(V) OF THE ACT IS ITA NO.251/VIZAG/2014 THE TENALI CO-OPERATIVE URBAN BANK LTD., TENALI 9 SPECIFICALLY DEALS WITH INTEREST PAYMENT TO MEMBERS . THEREFORE, THE CASE LAW RELIED UPON BY THE D.R. IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. 8. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE C ASE, WE ARE OF THE OPINION THAT AS PER SECTION 194(1)(3)(V) OF THE ACT, TDS IS NOT APPLICABLE ON PAYMENT OF INTEREST TO A MEMBER BY A CO-OPERATIVE SOCIETY INCLUDING CO-OPERATIVE BANK. THE CIT(A) AF TER CONSIDERING THE RELEVANT FACTS DELETED THE ADDITIONS MADE BY THE A. O. THERE IS NO ERROR OR INFIRMITY IN THE ORDER OF CIT(A). THEREFO RE, WE INCLINED TO UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THE APPE AL FILED BY THE REVENUE. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 31 ST MAR16. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 31.03.2016 VG/SPS ITA NO.251/VIZAG/2014 THE TENALI CO-OPERATIVE URBAN BANK LTD., TENALI 10 )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE ITO (TDS), WARD-3(3), GUNTUR 2. / THE RESPONDENT THE TENALI CO-OPERATIVE URBAN B ANK LTD., T.B. ROAD, KOTHAPET, TENALI. 3. + / THE CIT-II, HYDERABAD 4. + / THE CIT(TDS), VIJAYAWADA 5. + ( ) / THE CIT (A), VIJAYAWADA 6. # . , . , # / DR, ITAT, VISAKHAPATNAM 7 . / GUARD FILE / BY ORDER // TRUE COPY // 12 . (SR.PRIVATE SECRETARY) . , # / ITAT, VISAKHAPATNAM