Belgaum Districtt Central Co-op. Bank Ltd., Bangalore V. Income Tax Officer, TDS Ward, Belgaum., Belgaum

ITA 314/PAN/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93481 (ITAT-PANAJI)
• Duration Of Justice: 9 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 16-06-2015
• Assessment Year: 2012-2013
• Appeal Filed On: 10-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MEHBOB A LI KHAN
• Assessee Lawyers: ASHOK A KULKARNI
• Section: 201(1); 10; 2; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI GEORGE MATHAN , HONBLE JUDICIAL MEMBER AND SHRI N.K. BILLAIYA , HONBLE ACCOUNTANT MEMBER ITA NO S . 312 TO 315 /PNJ/2014 (ASST. YEAR S : 20 1 0 - 1 1 TO 2013 - 14 ) BELGAUM DISTRICT CENTRAL COOPERATIVE BANK LTD., NEAR CENTRAL BUS STAND, BELGAUM. VS. ITO , TDS WARD, BELGAUM . PAN NO. AAAAB 0839 M (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ASHOK A. KULKARNI - ADV . DEPARTMENT BY : SHRI MEHBOB A LI KHAN - D R DATE OF HEARING : 1 6 / 0 6 /2015 . DATE OF PRONOUNCEMENT : 16 / 0 6 /201 5 . O R D E R PER N.K. BILLAIYA TH ESE APPEAL S BY THE ASSESSEE AGAINST THE FOUR SEPARATE ORDER S OF L D. CIT (A), BELGAUM , EACH DATED 04/06/2014 PERTAINING TO A.Y S . 20 1 0 - 1 1 TO 2013 - 14 . ALL THESE APPEALS HAVE A COMMON GRIEVANCE AND, THEREFORE , THEY WERE HEARD TOGETHER AND DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. 2 ITA NO S . 312 - 315 /PNJ/2014 2. ALL THESE APPEAL ARE LATE BY 25 DAYS. THE ASSESSEE HAS FILED AN AFFIDAVIT STATING CAUSE FOR THE DELAY. 3. WE HAVE CAREFULLY PERUSED THE CONTENTS OF THE AFFIDAVIT. IN OUR CONSIDERED OPINION, THE ASSESSEE WAS PREVENTED BY REASONABLE AND SUFFICIENT CAUS E FOR NOT FILING THE APPEALS IN TIME. THE DELAY IS CONDONED FOR ALL THE YEARS. 4 . THE SUM AND SUBSTANCE OF THE GRIEVANCE OF THE ASSESSEE FOR ALL THE YEARS UNDER CONSIDERATION IS THAT THE LD. CIT(A) F A ILED 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 RESPECT 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 THE ASSESSEE CALLING FOR DETAILS OF INTEREST PAID ON DEPOSITS AND TAX DEDUCTED AT SOURCE THEREIN. THE DETA ILS WERE FILED. AFTER PERUSING THE DETAILS, THE ASSESSING OFFICER FOUND THAT THE DEFAULTS HAVE BEEN MADE BY THE ASSESSEE FOR NOT DEDUCTING TAX AT SOURCE O N 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 3 ITA NO S . 312 - 315 /PNJ/2014 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 B ENCH 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 R EFERRING TO ITS OWN ORDERS FOR THE A.Y. 2002 - 03 . I T 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 CENTRAL 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: - 6.3 NOW COMING TO THE CIRCULAR NO. 9 OF 2002 ISSUED BY THE CBDT RELIED UPON BY THE APPELLANT, 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 LTD & 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 4 ITA NO S . 312 - 315 /PNJ/2014 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 DECISIONS 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 - OPE RATIVE BANK FEDERATION DO NOT H ELP THE CASE OF THE APPELLANT AS IN BOTH THE CASES THE DECISION IS SAME AS DISCUSSED ABOVE. 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 R S. 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 - OPERATIVE 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 - OPERATIVE LAND MORTGAGE BANK OR CO - OPE RATIVE LAND 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] 5 ITA NO S . 312 - 315 /PNJ/2014 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 AMOUN T OF SUCH PAYMENT EXCEEDS SPECIFIED THRESHOLD OF RS. 10,000. HOWEVER, AS THE PRO VISIONS OF SECTION 194A(3)(Y) OF THE ACT PROVIDE A GENERAL EXEMPTION FROM MAKING TAX DEDUCTION FROM PAYMENT OF INTEREST BY ALL CO - OPERATIVE SOCIETIES TO ITS MEMBERS, THE C O - OP ERATIVE BANKS 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 1 94A(3)(VIIA) (B) OF THE ACT CAN TAKE THE BENEFIT OF GENERAL EXEMPTION PROVIDED TO ALL CO - OPERATIVE SOCIETIES FROM DEDUCTION O F TAX ON PAYMENT O F 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 PURPO SES OF DEDUCTION OF TAX, HENCE, THE CO - OPERATIVE BANKS ARE REQUIRED TO DEDUCT TAX ON PAYMENT OF 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 TH E 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 MEMBER S 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 T AXATION REGIME WHICH IS SIMILAR TO THAT FOR 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 SOCIETIES FORMED FO R THE BENEFIT OF SMALL NUMBER OF MEMBERS. HOWEVER, AS MENTIONED EARLIER, A DOUBT HAS BEEN CREATED REGARDING THE APPLICABILITY O F THE SPECIFIC PROVISIONS MANDATING DEDUCTION OF TAX FRO M THE PAY MENT OF INTEREST ON T IME DEPOSITS BY THE CO - OPERATIVE BANKS TO ITS MEMBERS BY 'CLAIMING THAT GENERAL EXEMPTION PROVIDED IS ALSO APPLICABLE FOR PAYMENT OF INTEREST TO MEMBER DEPOSITORS . IN VIEW OF TH I S , IT IS PROPOSED TO AMEND THE PROVISIONS OF THE SECTION 194A O F THE ACT TO EXPRESSLY PROVIDE FROM THE PROSPECTIVE DATE OF 1ST JUNE, 2015 THAT THE EXEMPTION PROVIDED FROM DEDUCTION OF TAX FROM PAYM ENT OF I N TEREST TO MEMBE R S BY A CO - OPERATIVE SOCIETY U NDER SECTION 194A(3)(V) OF THE ACT SHALL NOT APPLY TO THE PAYMENT OF INTEREST O N TIME DEPOSITS BY THE CO OPERATIVE 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 . 6 ITA NO S . 312 - 315 /PNJ/2014 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 POINTED OUT TH A T 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 NO TICE . 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 COURT OF BOMBAY IN 7 ITA NO S . 312 - 315 /PNJ/2014 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 RESPECT 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: - 8 ITA NO S . 312 - 315 /PNJ/2014 THUS, WITH THIS CLARIFICATION, IT IS CLEAR THAT THE CIRCULAR HAS NOT BEEN WITHDRAWN. MOR EO VER , A PERUSAL OF THE DECISION OF THE 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 OF 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 CBD T CANNOT ISSUE A CIRCUL AR U/S. 119 OF THE ACT WHICH WOULD OVERRI DE OR R ETRACT 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 FI N ANCE 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 , W E, T HEREFORE, SET ASIDE THE FINDINGS OF THE LD. CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUG NED ADDITIONS MADE IN THE ORDER U/S. 201(1) & 201(1A) OF THE ACT. 9 ITA NO S . 312 - 315 /PNJ/2014 12 IN THE RESULT, ALL THESE APPEAL S FILED BY THE ASSESSEE ARE ALLOWED. ( ORDER PRONOUNCED IN THE OPEN COURT ON 1 6 TH JUNE , 201 5 ). SD/ - SD/ - ( GEORGE MATHAN ) ( N.K. BILLA I YA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 17 TH JUNE , 201 5 . VR/ - COPY TO: 1 . THE APPELLANT 2 . THE RESPONDENT 3 . THE LD.CIT 4 . THE CIT(A) 5 . THE D.R 6 . GUARD FILE. BY ORDER 10 ITA NO S . 312 - 315 /PNJ/2014 DATE INITIAL ORIGINAL DICTATION PAD IS ENCLOSED IN THE FILE 1. DRAFT DICTATED ON 1 6 .06.2015 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 1 6 .06.2015 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 1 7 /06/2015 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 1 7 /06/2015 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 1 7 /06/2015 SR.PS 6. DATE OF PRONOUNCEMENT 1 6 /06/2015 SR.PS 7. FILE SENT TO THE BENCH CLERK 17 /06/2015 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER