Maratha Co-op. Bank Ltd., V. Income Tax Officer, TDS Ward, Belgaum., Belgaum

ITA 432/PAN/2014

• Counselvise Citation: 43224114 RSA 2014
• Duration Of Justice: 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 22-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B BALAKRISHNA
• Assessee Lawyers: SHREEHARI KUTSA
• Keywords: Non-deduction of tax
• Section: 201(1); 6; 154

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI P. K. BABNSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO. 432 /PNJ/201 4 (ASST. YEAR : 20 1 0 - 1 1 ) AND ITA NO. 36/PNJ/201 5 (ASST. YEAR : 20 1 0 - 11 ) MARATHA COOPERATIVE BANK LTD., 1477, BASAVAN GALLI, BELGAUM VS. ITO, TDS WARD, BELGAUM. PAN NO. AABAM 0730 B (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SHREEHARI KUTSA - CA DEPARTMENT BY : SHRI B. BALAKRISHNA - D.R. DATE OF HEARING : 09 / 0 2 /2015 . DATE OF PRONOUNCEMENT : 25 / 0 3 /201 5 . O R D E R PER D.T. GARASIA , J .M TH ESE TWO APPEAL S HAVE BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT (A), BELGAUM DATED 17 / 1 0/201 4 FOR THE A.Y. 20 1 0 - 1 1 . 2. IN ITA NO. 432/PNJ/2014, T HE ASSESSEE HAS RAISED 20 GROUN D S, BUT THE EFFECTIVE GROUND IS GROUND NO. 12 , WHICH READS AS UNDER: - 2 1 2 . THE ORDER PASSED U/S. 201(1) AND SEC . 201(1A) OF THE ACT ARE BARRED BY TIME IN ACCORDANCE WITH SEC. 201(3) AND ACCORDINGLY LIABLE TO CANCELLED ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COOPERATIVE SOCIETY ENGAGED IN CARRYING ON THE BUSINESS OF BANKING AND IS REGISTERED UNDER THE PROVISIONS OF SEC . 7 OF THE KARNATAKA COOPERATIVE SOCIETIES ACT , 1959 AND LICENSED BY THE RESERVE BANK OF INDIA VIDE SEC. 22(1) R.W.S. 56(O) OF THE BANKING REGULATION ACT, 1949 . THE ASSESSEE IS REGULATED UNDER THE PROVISIONS OF THE BANKING REGULATION ACT SUBJECT TO EXCEPTIONS P ROVIDED THEREIN. THE ASSE SSING OFFICER CONDUCTED A SURVEY IN THE PREMISES OF THE ASSESSEE ON 25/10/2013 . THE ASSESSEE WAS SERVED WITH A SHOW - CAUSE NOTICE DATED 06/01/2014 WHEREIN THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO SHOW - CAUSE WHY IT SHOULD NOT BE TREATED AS AN ASSESSEE IN DEFAULT UNDER THE PROVISIONS OF SEC. 201(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE 'ACT', FOR SHORT) ON ACCOUNT OF FAILURE TO DEDUCT TAX AT SOURCE UN DER SECTION 194A OF THE ACT ON INTEREST PAID TO ITS MEMBERS ON TIME DEPOSITS. THE ASSESSING OFFICER HAS PASSED THE ORDER U/S. 201(1) OF THE ACT HOLDING THE ASSESSEE AS IN DEFAULT AND LEVYING INTEREST U/S. 201(1A) OF THE ACT ON 30/01/2014 AS FOLLOWS: - INT EREST PAID TO MEMBERS RS. 1,05,31,895/ - 3 TAX U/S. 201(1) RS. 10,53,190 / - INTEREST U/S. 201(1A) RS . 4,84,426/ - ------------------- TOTAL DEMAND RS. 15,37,616 / - ------------------- 4 . THE MATTER WAS CARRIED TO THE LEARNED CIT(A) AND THE LEARNED CIT(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE BY OBSERVING AS UNDER: - 6. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, SUBMISSIONS MADE BY THE ASSESSEE AND ALSO PERUSED THE ORDER OF THE A SSESSING OFFICER. IT IS AN UNDISPUTED FACT THAT THE APPELLANT HAS PAID INTEREST ON TERM DEPOSITS TO THE TUNE OF R S. 1,05,31,895/ - TO DEPOSITORS WITHOUT DEDUCTING TAX AT SOURCE. THE APPELLANT CONTENDED THAT THE PROVISIONS OF TDS ARE NOT ATTRACTED IN VIEW OF CLAUSE - (V) OF SUB - SECTION (3) OF SECTION 194A AS THE INTEREST PAYMENTS TO THE EXTENT OF RS. 105,31 , 895/ - HAVE BEEN MADE TO THE MEMBERS OF THE BANK WHICH IS A COOPERATIVE SOCIETY IN THI S REGARD THE ITO IDS WARD BEIGAUM HAS INTERPRETED THE W ORD COOPERATIVE SOCIETY AS EMPLOYED IN SEC.194A(3)(V) TO MEAN CO - OPERATIVE SOCIETY OTHER THAN COOPERATIVE BANK AS DECIDED BY THE TAT, PUNE BENCH, IN BHAGANI NIVEDITA SAHAKARI B ANK LTD. V. ACIT 87 I TD 559 WHEREIN, THE HONBLE TAT HAS HELD THAT THE TERM CO - OPERATIVE SOCIETY MENTIONE D IN SECTION 191A(3 )(V) TO BE INTERPRETED AS CO - OPERAT I VE SOC IETY OTHER THAN CO - OPERAT IVE BANK . THUS, THE ITO PASSED AN ORDER U/S. 201(1)/(1A) AND CALCULATED THE AMOUNT PAYABLE AT RS. 15,37,616/ - ; RS. 10,53,190/ - U/S. 201(1) AND RS. 4,84,426/ - U/S. 201(1A) . 6.1 ON GOING THROUGH THE PROVISI ONS OF SECTION 1944(3), IT IS SE EN THAT THE ITO IS JUSTI F IED IN PASSING AN ORDER U/S 201(1)/(1A) AND CALCULATING THE AMOUNT PAYABLE AT RS.15.37,616/ - ; RS 10,53,190/ - U/S 201(1) AND RS. 4,84426/ - U/S. 201(14). THE SUBMISSIONS O F THE APPELL ANT ARE NOT ACCEPTABLE IN VIEW OF THE DECISION OF HONBLE PUNE TAT IN THE CASE OF BHA GANI NIVEDITA SAHAKARI BANK LTD CITED SUPRA WHEREIN, IT IS CLEARLY HELD THAT SECTION 194A(3)(VIIA)(BUSINESS) MAKES NO DISTINCTION BETWEEN MEMBERS AND NON - MEMBERS OF CO - OPERATIVE FOR PURPOSE OF DEDUCTION OF TAX AT SOURCE ON INTEREST ON TIME DEPOSITS PAID/CREDITED AND TH E RE FORE. CO - OPERATIVE BANK WOULD BE ABLE TO DEDUCT TAX AT SOURCE UNDER SECTION 4 194 A(1 ) ON INTEREST ON TIM E DEPOSITS PAID/CREDITED TO ITS DEPOSITORS, IF SUCH INTEREST AMOUNT EXCEEDED THE LIMIT PRESCRIBED IN PROVISO TO SECTION 194A(3) (I) . FURTHER, THE H ONBLE KE RALA HIGH COUR T IN THE CASE OF MOOLAMATTOM ELECTRICITY BOARD EMPLOYEES CO - OP BANK LTD 238 YR 630 HAS MADE A CLEAR DISTINCTION BETWEEN PRIMARY CREDIT SOCIETY AND A CO - OP SOCIETY ENGAGED IN BANKING BUSINESS. THUS, SECTION 1944 DEALS WITH CO - OP SOCIETIES ENGAGED IN THE BUSINESS O BANKING. AS HAS BEEN RIGHTLY HELD BY THE ITO THAT THE MOMENT THE AMOUNT PAID/C REDITED TO ANY DEPOSITOR DURING THE YEAR EXCEEDS RS 10,000 / - THE PROVISIONS OF SECTION 194A (1) SH ALL APPLY A ND THE COOPERATIVE SOCIETY ENGAGED IN THE BANKING BUSINESS SHALL HAVE TO DEDUCT TAX ON SUCH PAYME NTS FROM THE FACTS OF THE CASE, IT IS SEEN THAT THE ITO HAS CATEGORICALLY BROUGHT OUT THE MATERIAL ON RECORD TO PROVE THAT THE APPELLANT BANK IS COVERED BY THE PROVISIONS OF SUB - CLAUSE (B} OF CLAUSE (I) OF SEC194A(3) AS WELL AS THE PROVISIONS OF CLAUSE (VIIA) OF SEC.194A(3) WHICH ARE SPECIFIC NATURE AND THE APPELLANT CANNOT PUT FORTH ITS CLAIM UNDER SECTION 194(3)(V WHICH ARE GENERA L IN NATURE. AS THE APPELLANT IS CO - OPERATIVE SOCIETY ENGAGED IN THE BUSINESS OF BANKING IT IS COVERED UNDER THESE SPECIFIC CLAUSE S AND AS HAS BEEN HELD BY THE HONBLE ITAT , PUNE BENCH PUNE IN BHAGANI NIVEDITA SAHAKARI BANK LTD V. ACT (2003) 87 TTD 569 THAT THE TERM CO - OP SOCIETY IN SUB - CLAUSE (V) TO BE INTERPRETED AS CO - OP SOCIETY OTHER THAN CO - OPERATIVE BANK, THE APPELLANT IS LI ABLE FO R TDS PROVISIONS UNDER SECTION 194A. 6.2 THE APPELLANTS ARGUMENT THAT C L AUSE(V) T O SEC.194A(3) MAY BE TAKEN AS APPLYING TO MEMBERS AND OTHER CLAUSES TO THE SAID SECTION MAY BE TAKEN TO APPLY TO NON MEMBERS IS WITH OUT ANY BASIS IN AS MUCH AS CLAUSE S (I) AND (VITA) APPLY TO BOTH THE MEMBERS AS NON MEMBERS. WHERE EVER THE LEGISLATURE INTENDS TO APPLY A PARTICULAR PROVISIONS TO MEMBER OR TO A NON - MEMBER, IT HAS DONE SO EXPRESSLY . 6 . 3 NOW COMING TO THE CIRCULAR NO.9 OF 2002 ISSUED BY THE CBD T 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. FT WAS HELD BY THE BOMBAY HIGH COURT IN THE CASE OF JALGAON DISTRICT C ENTRAL CO - OP BANK LTD & ANR V. UNION OF INDIA 26S ITR 423 (BORN), 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 O F DIRECT TAXES TO ISSUE CIRCUL ARS U/S 119 WHICH WO ULD OVERRIDE OR DETRACT 5 FROM THE PROVISIONS OF THE INCOME TAX ACT. THE CIRCULAR NO.9 OF 2002 DATED 11 - 09 - 2002 ISSUED BY THE CBDT HAS BEEN HE L D AND SET ASIDE BY THE HONBLE 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 APPE LLANT S RELIANCE ON THE SAID CIRCULAR IS FOUND TO BE ILL FOUNDED. SIMILARLY, THE APPELL A NTS RELIAN CE 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 COOPERATIVE BANK FEDERATION DO NOT HELP THE CA S E OF THE APPELLANT AS IN BOTH THE CASES THE DECISION IS SAME AS D ISCUSSED ABOVE. 6.4 IN ORDER TO UNDERSTAND THE LEGISLATIVE INTENT IN THIS REGARD, T IS NECESSARY TO REFER TO THE EXPLANATORY NOTES TO FINANCE (NO.2) ACT, 1991 GIVEN IN THE CIRCULAR NO 621 DATED 19 - 12 - 1991 WH I CH AMONG OTHERS, PROVIDES THAT : - WITH A VIEW TO IMPROVING TAX COMPLIANCE, SEC. 1 94 A OF THE ACT HAS BEEN AMENDED TO SECURE DEDUCTION OF TAX AT SOURCE FROM INTEREST ON TIME DEPOSITS WITH THE AFORESAID BANKING COMPANIES AND CO - OPERATIVE SOCIETIES ENGAGED IN CURRYING ON THE BUSINESS OF BANKIN G THE CIRCULAR OF THE CBDT EXPLAINS IN NO UNCERTAIN TERMS THAT THE INTENTION OF THE LEGISLATURE IN AMENDMENT OF SEC. 194A, INTER ALIA WAS TO SECURE DEDUCTION OF TAX AT SOURCE FROM INTEREST ON TIME DEPOSITS WITH THE BANKING COMPANIES AND COOPERATIVE SOCIE TIES ENGAGED IN CARRYING ON THE BUSINESS OF BANKING. THE APPELLANT BEING A COOPERATIVE SOCIETY ENGAGED IN CARRYING ON THE BUSINESS OF BANKING IS LIABLE TO MAKE TDS U/S. 194A 6.5 IN A RECENTLY DE L IVERED JUDGMENT; THE HONB L E TAT PANA J I BENCH, PANAJI IN THE CASE OF THE BAI LHONGAL URBAN CO - OP. BANK LTD.. VS. JCIT RANGE I, BELGAU M IN ITA NO. 85/PNJ/2013 DATED 28/08/2013 HAS UPHELD THE DECISION OF THE ASSESSING OFFICER AND THE COMMISSIONER OF INCOME TAX (APPEALS) IN DISALLOWING U/S. 40(A ) (IA) OF THE I.T.ACT THE INTEREST AMOUNT PAID BY THE ASSESSEE CO - OPERA TI VE BANK ON TERM DEPOSIT IN EXCESS OF RS. 10,000/ - WITHOUT MAKING TDS U/S. 194A(3)(I) AND NOT ALLOWING ASSESSEES CONTENTION THAT IT WAS NOT LIABLE TO DEDUCT TAX AT SOURCE BY VIRTUE OF THE PROVISIONS OF SEC 194A(3)(V) OF THE I.T.ACT. 6. 6 THE APPELLANT HAS ALSO RELIED ON THE DECISION OF THE HONBLE ITAT, BANGALORE B ENCH A BANGAL ORE DECIDED IN FAVOUR OF THE APPELLAN T. 6 7. IN VIEW OF THE ABOVE DISCUSSION AND TAKING INTO CONSIDERATION THE VA RIOUS ARGUMENTS GIVEN BY THE I TO IN HIS ORDER, THE LEGISLATURES INTENT BEHIND THE INTRODUCTI ON RELEVANT PROVISIONS OF SECTION 194A AS EX PLAI NED IN THE EXPLANATORY NOTES TO FINANCE (N O.2) ACT, 1991, SUPRA AND RESPECTFULLY FOLLOWING THE DECISION OF HONBLE ITAT PANAJI BENCH IN CASE OF BHAILHONGAL CO - OP. BANK LTD., SUPRA, THE DECISION O F THE 110 IN PASSING ORDE R 201(1)/(IA) AND CALCULATING THE AMOUNT PAYABLE AT RS.15,37,616/ - ; RS.1O,5 3,190/ - U/S 20 AND RS. 4 , 84,426/ U/S. 201(1A) IS CONFIRMED. 8. IN THE RESULT, THE APPEAL FILED BY THE APPELLANT IS DISMISSED. 5. DURING THE COURSE OF HEARING, LEARNED AR HAS DRAWN ATTENTION TO SUB - SECTION (3) OF SEC. 201 OF THE ACT WHICH PRESCRIBES THE TIME LIMIT FOR PASSING THE ORDER U/S. 201(1) OF THE ACT. LEARNED AR SUBMITTED THAT IN THIS CASE THE ASSESSEE HAS BEEN HELD AS DEFAULTER TO DEDUCT A TAX AT SOURCE AFTER THE EXPIRY OF TWO YEARS FROM THE END OF FINANCIAL YEAR IN WHICH THE STAT EMENT U/S. 200 OF THE ACT HAS BEEN FILED. LEARNED AR SUBMITTED THAT THE ASSESSEE HAS FILED THE QUARTERLY RETURN S OF INCOME FOR A.Y. 2009 - 10 , ON 24/07/2009 FOR QUARTER NO.1 , ON 15/10/2009 FOR QUARTER NO.2 & ON 21/01/2010 FOR QUARTER NO.3 AND QUARTER NO.4 ON 07/05/2010 FOR THE A.Y. 2010 - 11 . LEARNED AR SUBMITTED THAT IN THIS YEAR, THE ORDER U/S. 201(1) OF THE ACT CAN BE PASSED WITHIN TWO YEARS FROM THE END OF FINANCIAL YEAR IN WHICH RETURN UNDER SECTION 20 0(3) OF THE ACT HAS BEEN FILED , THE IMPUGNED ORDERS ARE TIME BARRED AND WITHOUT JURISDICTION AND LIABLE TO BE CANCELLED . 6. LEARNED DR HAS RELIED UPON THE ORDER OF LEARNED CIT(A) . 7 7. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PARTIES AND LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE , IT IS APT TO QUOTE SEC. 201(1) OF THE ACT WHICH READS AS UNDER: - (3) NO ORDER SHALL BE MADE UNDER SUB - SECTION (1) DEEMING A PERSON TO BE AN ASSESSEE IN DEFAULT FOR FAILURE TO DEDUCT THE WHOLE OR ANY PART OF THE TAX FROM A PERSON RESIDENT IN INDIA, AT ANY TIME AFTER THE EXPIRY OF (I) TWO YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE STATEMENT IS FILED IN A CASE WHERE THE STATEMENT REFERRED TO IN SECTION 200 HAS BEEN FILED. (II) SIX YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH PAYMENT IS MADE OR CREDIT IS GIVEN, IN ANY OTHER CASE: PROVIDED THAT SUCH ORDER FOR A FINANCIAL YEAR COMMENCING ON OR BEFORE THE 1 ST DAY OF APRIL, 2007 MAY BE PASSED AT ANY TIME ON OR BEFORE THE 31 ST DAY OF MARCH, 2011 . FROM THE ABOVE PROPOSITION OF LAW, WE FIND THAT NO ORDER CAN BE PASSED U/S. 201 OF THE ACT AFTER EXPIRY OF TWO YEARS FROM THE END OF FINANCIAL YEAR , IN WHICH THE STATEMENT REFERRED TO SEC. 200 HAS BEEN FILED. THE ASSESSEE HAS FILED QUARTERLY RETURNS U/S. 200 OF THE ACT FOR THE F .Y. 2009 - 10 THE YEAR ENDED ON 31/03/2011 . T HE ASSESSING OFFICER HAS TO PASS THE ORDER BEFORE 31/03/201 3 . T HE ASSESSING OFFICER , IN THIS CASE , HAS PASSED THE ORDER IN THE MONTH OF JANUARY, 2014 . THEREFORE , WE ARE OF THE VIEW THAT FOR THE YEAR UNDER CONSIDERATION , THE ASSESSMENT ORDER PASSED U/S. 201 OF THE ACT I S BARRED BY LIMITATION . WE HAVE ALSO VERIFIED THE STATEMENTS FILED BEFORE US AND FROM THIS STATEMENT, WE ARE OF THE VIEW THAT THE ORDER PASSED FOR A.Y. 2010 - 11 IS BARRED BY LIMITATION. THEREFORE, WE ALLOW THIS APPEAL. 8 8 . THE ASSESSEE HAS ALSO FI LED THE APPEAL AGAINST THE ORDER PASSED UNDER SECTION 154 OF THE ACT BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS), BELGAUM THAT WAS DISMISSED . THEREFORE , THE ASSESSEE FILED THE APPEAL IN I.T.A.NO. 36/PNJ/2015 BEFORE THIS TRIBUNAL. IT IS CONSEQUENTIAL TO THE IMPUGNED ORDER U/S. 201(1) OF THE ACT. WE ORDER ACCORDINGLY. 9 . IN THE RESULT, APPEAL IN I.T.A.NO. 432/PNJ/2014 IS ALLOWED AND TH E APPEAL IN I.T.A.NO. 36/PNJ/2015 IS DISMISSED. ( ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH MARCH , 201 5 ). SD/ - SD/ - (P.K. BANSAL) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 25 TH MARCH , 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 ASSISTANT REGISTRAR I.T.A.T., PANAJI