The Bagalkot District Central Co-op. Bank., Bagalkot V. Income Tax Officer, TDS Ward, Belgaum., Belgaum

ITA 369/PAN/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93503 (ITAT-PANAJI)
• Duration Of Justice: 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 17-06-2015
• Assessment Year: 2013-2014
• Appeal Filed On: 30-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MEHBOOB ALI KHAN
• Assessee Lawyers: S RAMASUBRAMANIAN
• 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 . 362 TO 369/PNJ/2014 (ASST. YEAR S : 20 1 0 - 1 1 TO 2013 - 14 ) THE BAGALKOT DISTRICT CENTRAL COOPERATIVE BANK LTD., SECTOR NO. 24, NAVANAGAR, BAGALKOT. VS. ITO , TDS WARD, BELGAUM . PAN NO. AAAAT 7937 N (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S. RAMASUBRAMANIAN C . A . DEPARTMENT BY : SHRI MEHBOOB ALI KHAN - D.R. DATE OF HEARING : 1 7 / 0 6 /2015 . DATE OF PRONOUNCEMENT : 17 / 0 6 /201 5 . O R D E R PER N.K. BILLAIYA TH E S E APPEAL S ARE BY THE ASSESSEE AGAINST THE SEPARATE ORDER S OF L D.CIT (A), BELGAUM DATED 0 2/0 7 /201 4 PERTAINING TO A.Y S . 20 1 0 - 1 1 TO 2013 - 14 . 2. THE COMMON GROUNDS IN THESE APPEALS ARE AS UNDER: - A) THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN HOLDING THAT THE APPELLANT IS LIABLE TO DEDUCT TAX AT SOURCE U/S. 201(1) OF THE ACT 2 ITA NO S . 362 - 369 /PNJ/2014 EVEN THOUGH THE APPELLANT IS NOT LIABLE TO DEDUCT TAX AT SOURCE U/S.194A OF THE ACT. B) THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN HOLDING THAT THE APPELLANT IS LIABLE TO DEDUCT TAX AT SOURCE U/S. 201(1)(A) OF THE ACT EVEN THOUGH THE APPELLANT IS NOT LIABLE TO DEDUCT TAX AT SOURCE U/S.194A OF THE ACT. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COOPERATIVE BANK ENGAGED IN THE BUSINESS OF BAN KING. A SURVEY WAS CONDUCTED AT THE BANK PREMISES TO VERIFY COMPLIANCE WITH THE TDS PROVISIONS. IT WAS NOTICED THAT THE ASSESSEE IS NOT DEDUCTING TAX AT SOURCE O N THE INTEREST PAYMENTS MADE ON THE TERM DEPOSITS OF THE MEMBERS OF THE BANK. ASSESSEE WAS A S K ED TO JUSTIFY ITS STAND. THE CLAIM OF THE ASSESSEE THAT , BEING A COOPERATIVE BANK, THE ASSESSEE IS NOT LIABLE FOR DEDUCTING TAX AT SOURCE ON INTEREST PAID TO ITS MEMBERS, WAS D I S M I S SED BY THE ASSESSING OFFICER, WHO PROCEEDED BY COMPUTING THE LIABILITY OF THE ASSESSEE BANK U/S. 201(1) & 201(1 A) OF THE ACT. 4 . AGGRIEVED BY THIS, ASSESSEE CARRIED THE MATTER B E F O R E THE LD. CIT(A) AND REITERATED ITS CLAIM. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS AND RELYING UPON THE DECISION OF TRIBUNAL PANAJI BENCH IN THE CASE OF BAILHONGAL URBAN CO. BANK LTD. VS. JCIT , BELGAUM IN I.T.A.NO. 85/PNJ/2013 DATED 28/08/2013 , LD. CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 3 ITA NO S . 362 - 369 /PNJ/2014 5. AGGRIEVED BY THIS, ASSESSEE IS BEFORE US. 6. AT THE VERY OUTSET , COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE DECISION OF THE TRIBUNAL BANGALORE BENCH IN ASSESSEES OWN CASE FOR A.Y. 2009 - 10 . IT IS THE SAY OF THE COUNSEL THAT THE TRIBUNAL HAS EXHAUSTIVELY CONSIDERED THE CIRCULAR OF THE BOARD A N D T HE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF JALGAON DISTRICT CENTRAL CO. BANK LTD. & ANR. VS. UNION OF INDIA (265 ITR 423) . T HE TRIBUNAL HAS ALSO CONSIDERED THE DECISIONS RELIED UPON BY THE ASSESSING OFFICER AND THE LD. CIT(A) AND DECIDED THE APPEAL IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 7. PER CONTRA , LEARNED DR COULD NOT BRING ANY DISTINGUISHING DECISION IN FAVOUR OF THE REVENUE. 8. WE HAVE HEARD RIVAL CONTENTIONS AND CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE BROUGHT TO OUR NOTICE. 9. FIRST , LET US CONSIDER THE RELEVANT PORTION OF THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2009 - 10 . IN THE CASE DECIDED BY ITAT PANAJI BENCH IN ITA NO.85/PN/2013 FOR AY 09 - 10 IN THE CASE OF THE BAILHONGAL URABAN CO - OP BANK LTD. VS. JCIT ORDER DATED 4 ITA NO S . 362 - 369 /PNJ/2014 28.8.2013, THE TRIBUNAL PROCEEDED ON THE FOOTING THAT THE AFORESAID CIRCULAR HAS BEEN QUASHED BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF THE JALGAON DISTRICT CENTRAL CO - OPERATIVE BANK LTD. VS. UNION OF INDIA 265 ITR 423 (BOM) AND THEREFORE CHOSE TO FOLLOW THE DECISION RENDERED BY PUNE ITAT SMC IN THE CASE OF BHAGANI NIVEDITA SAHAKARI BANK LTD. (SUPRA). IN OUR VIEW THE HON'BLE BOMBAY HIGH CO URT IN THE CASE OF JALGAON DISTRICT CENTRAL CO - OPERATIVE BANK LTD.'S CASE WAS DEALING WITH A CASE OF CHALLENGE TO PARA - 3 OF CBDT CIRCULAR NO.9 DATED 11.9.2002 WHICH TRIED TO INTERPRET THE WORD 'MEMBER' AS GIVEN IN SEC. 1 94A(3)(V) OF THE ACT. IT IS ONLY THAT PART OF THE QUASHED BY THE HON'BLE BOMBAY HIGH COURT AND THE CIRCULAR HAD NO CONNECTION WITH THE ISSUE BEFORE THE HON'BLE BOMBAY HIGH COURT. HOW COULD IT BE SAID THAT THE ENTIRE CIRCULAR HAS BEEN QUASHED BY THE HON'BLE BOMBAY HIGH COURT? IN OUR VIEW PARA - 2 OF THE CIRCULAR STILL HOLDS GOOD AND THE CONCLUSION OF THE ITAT PUNE BENCH IN THE CASE OF THE BAILHONGAL URABAN CO - OP BANK LTD.(SUPRA) ARE NOT FACTUALLY CORRECT. CONSEQUENTLY, THE CONCLUSION S DRAWN IN THE AFORESAID DECISION ALSO CONTRARY TO FACTS AND HENCE CANNOT BE CONSIDERED AS PRECEDENT . THE TRIBUNAL CONCLUDED BY HOLDING THAT : - FOR THE REASONS GIVEN ABOVE, WE HOLD THAT THE ASSESSEE WHICH IS A CO OPERATIVE SOCIETY CARRYING ON BANKING BUSINESS WHEN IT PAYS INTEREST INCOME TO A MEMBER BOTH ON TIME DEPOSITS AND ON DEPOSITS OTHER THAN TIME DEPOSITS WITH SUCH CO - O PERATIVE SOCIETY NEED NOT DEDUCT TAX AT SOURCE UNDER SECTION R94A BY VIRTUE OF THE EXEMPTION GRANTED VIDE CLAUSE (V) OF SUB - SECTION (3) OF THE SAID SECTION. 10. AN IDENTICAL ISSUE CAME UP FOR HEARING BEFORE THIS BENCH IN THE CASE OF BELGAUM DISTRICT CENTRAL COOPERATIVE BANK LTD. VS. ITO, TDS WARD, BELGAUM IN I.T.A.NOS. 312 TO 315/PNJ/2014 WHEREIN REFERRING TO THE CLARIF ICATION OF THE BOARD, WE HAVE H E LD AS UNDER: - 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 THE CASE OF JALGAON 5 ITA NO S . 362 - 369 /PNJ/2014 DISTRICT CO. BANK (SUPRA). THEREFORE, ASSESSEES RELIANCE ON THE SAID C ASE 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 - FOUND ED 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: - THUS, WITH THIS CLARIFICATION, IT IS CLEAR THAT THE CIRCULAR HAS NOT BEEN WITHDRAWN. MOREOVER, 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 T HE 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 THA T THE CBDT CANNOT ISSUE A CIRCULAR U/S. 119 OF THE ACT WHICH WOULD OVERRIDE OR RETRACT FROM THE PROVISIONS 6 ITA NO S . 362 - 369 /PNJ/2014 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 FINANCE 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, WE, THEREFORE, SET ASIDE THE FINDINGS OF THE LD. CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED ADDITIONS MADE IN THE ORDER U/S. 201(1) & 201(1A) OF THE ACT. RESPE CTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH BANGALORE AND OUR OWN DECISION IN THE CASE OF BELGAUM DISTRICT CENTRAL COOPERATIVE BANK LTD. (SUPRA) , WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED AD DITIONS MADE U/S. 201(1) & 201(1 A) OF THE ACT. 11. IN THE RESULT, ALL THE APPEAL S FILED BY THE ASSESSEE ARE ALLOWED . ( ORDER PRONOUNCED IN THE OPEN COURT ON 1 7 TH JUNE , 201 5 ). S D / - S D / - ( GEORGE MATHAN ) ( N.K. BILLA I YA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 1 8 T H JUNE , 201 5 . VR/ - 7 ITA NO S . 362 - 369 /PNJ/2014 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 ASSISTANT REGISTRAR I.T.A.T., PANAJI 8 ITA NO S . 362 - 369 /PNJ/2014 DATE INITIAL ORIGINAL DICTATION PAD IS ENCLOSED IN THE FILE 1. DRAFT DICTATED ON 1 7 .06.2015 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 1 8 .06.2015 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 1 8 /06/2015 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 1 8 /06/2015 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 1 8 /06/2015 SR.PS 6. DATE OF PRONOUNCEMENT 1 7 /06/2015 SR.PS 7. FILE SENT TO THE BENCH CLERK 1 8 /06/2015 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER