Asst. Commissioner of Income Tax, Circle-2(1), Tirupati V. The Tirupati Co-operative Bank Limited, Tirupati

ITA 482/Hyd/2018

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 2457 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB-B
• Assessment Year: 2013-2014
• Appeal Filed On: 07-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARAYANA MURTHY NAIK
• Assessee Lawyers: S RAMA RAO
• Keywords: TDS
• Section: 40(a)(ia); 40a(ia)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD (THROUGH VIDEO CONFERENCE) BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER I.T.A. NOS. 482 & 483/HYD/2018 ASSESSMENT YEARS: 2013-14 & 2014-15 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2(1), TIRUPATI VS THE TIRUPATI CO-OPERATIVE BANK LTD., TIRUPATI [PAN: AAAAT9912D] (APPELLANT) (RESPONDENT) FOR REVENUE : SHRI NARAYANA MURTHY NAIK, CIT-DR FOR ASSESSEE : SHRI S.RAMA RAO, AR DATE OF HEARING : 11-05-2021 DATE OF PRONOUNCEMENT : 25-06-2021 O R D E R PER S.S.GODARA, J.M. : THESE TWO REVENUES APPEALS FOR AYS.2013-14 & 2014- 15 ARISE FROM THE CIT(A)-TIRUPATIS ORDER DATED 29-12-201 7 PASSED IN APPEAL NOS.10001 & 10075 / 16-17 / CIT(A) / TPT IN PROCEEDINGS U/S.143(3) OF THE INCOME TAX ACT, 1961 [I N SHORT, THE ACT]; RESPECTIVELY. HEARD BOTH PARTIES. CASE FILES PERUSED. 2. WE NOTICE AT THE OUTSET THAT THE REVENUES IDENTICAL SOL E SUBSTANTIVE GRIEVANCE PLEADED IN BOTH THESE APPEALS SE EK TO REVIVE SECTION 40(A)(IA) DISALLOWANCE OF RS.8,08,89 ,208/- AND RS.8,26,00,035/-; ASSESSMENT YEAR-WISE, RESPECTIVELY AS UNDER: ITA NOS. 482 & 483/HYD/2018 :- 2 -: 1.THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING THE DISALLOWANCE U/S.40(A) (IA) OF RS.8,08 ,89,208/- 2.THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONSIDERING THE ASSESSEE'S PLEA THAT TDS NEED NOT B E DEDUCTED ON INTEREST PAYMENTS MADE ABOVE RS.10,000/- BY REFERRI NG TO SECTION 194A3(V) OF THE IT ACT. 1961 WHICH IS A GENERAL PRO VISION DEALING WITH COOPERATIVE SOCIETY, WHEREAS THE DISALLOWANCE WAS M ADE U/S. 194A3(I)(B), WHICH IS A SPECIFIC SECTION DEALING WI TH THE COOPERATIVE SOCIETIES ENGAGED IN THE BUSINESS OF BANKING. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN IGNORING THE PROVISIONS OF SEC 194A(3)(I)(B) AND IN RELYING ON THE PROVISIONS OF SEC 194A(3)(V). 4. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME O F HEARING. 3. BOTH THE LEARNED REPRESENTATIVES NEXT TOOK US TO THE CIT(A)S IDENTICAL DETAILED DISCUSSION DELETING IMPU GNED DISALLOWANCE AS FOLLOWS: 5. THIS CONTENTION OF THE APPELLANT WAS THAT APPEL LANT, HAS PAID INTEREST TO ONLY MEMBERS AND IT IS NOT LIABLE FOR D EDUCTION OF TAX U/S 194A(3)(V) OF THE I.T.ACT. IN THE COURSE OF APPELLA TE PROCEEDINGS, AR OF THE APPELLANT FURNISHED LIST OF MEMBERS WITH MEMBER SHIP NUMBER TO WHOM INTEREST WAS PAID ABOVE RS.10,000/-. IT WAS SU BMITTED THAT A TOTAL OF 3858 NUMBER OF FIXED DEPOSITS ACCOUNTS ABO VE RS.10,000/- CARRYING A TOTAL INTEREST OF RS.7,97,64,271/- AND T OTAL OF 67 SAVINGS DEPOSITS INTEREST ABOVE RS.10,000/- CARRYING TOTAL INTEREST OF RS.11,24,937/- WAS PAID DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. IT WAS FURTHER SUBMITTED BY THE AR O F APPELLANT THAT ITS CASE IS COVERED U/S 194A(3)(V) OF THE I.T.ACT. EXEM PTING THE ASSESSEE FROM TDS LIABILITY ON PAYMENT OF INTEREST TO MEMBER S. IT WAS FURTHER CONTENDED BY THE AR OF THE APPELLANT THAT AMENDMENT TO SECTION 194A(3)(V) OF THE I.T.ACT, 1961 PROHIBITING FROM EX EMPTING TDS LIABILITY OF CO-OPERATIVE BANKS WAS CARRIED OUT BY THE FINANC E ACT, 2015 W.E.F. 01-06-2015 AND HENCE THE APPELLANT IS NOT LIABLE FO R TDS AS THE ENTIRE INTEREST IS PAID TO ITS MEMBERS ONLY. THE AR OF THE APPELLANT FURTHER RELIED ON THE DECISION OF MADRAS HIGH COURT IN CASE OF M/S COIMBATORE DISTRICT CENTRAL CO-OPERATIVE BANK LTD., (MADATHAKULAM BRANCH) VS ITO(TDS), WARD-1(5), COIMBATORE DECIDED IN TAX CASE (APPEAL) NO.588 TO 643, 647 TO 688, 744 TO 750, 942 TO 948, 969 TO 982 OF 2015 T.C.(A) NO.588 OF 2015 DATED 15-10-2015 IN SUPPORT OF ITS CLAIM. I HAVE CAREFULLY CONSIDERED' THE FACTS O F THE CASE AND ALSO THE CASE LAW RELIED UPON BY THE APPELLANT. AS I STA TED EARLIER, THE APPELLANT HAS PAID INTEREST TO ITS MEMBERS ONLY. TH IS FACT WAS NOT DISPUTED BY THE AG. THE HON'BLE MADRAS HIGH COURT I N THE CASE CITED ITA NOS. 482 & 483/HYD/2018 :- 3 -: SUPRA CATEGORICALLY HELD THAT AMENDMENT TO SECTION 194A(3)(V) OF THE I.T.ACT, 1961 PROHIBITING FROM EXEMPTING TDS LIABIL ITY OF CO-OPERATIVE BANKS WAS CARRIED OUT BY THE FINANCE ACT, 2015 W.E. F. 01-06-2015 AND SUCH AMENDMENT WAS INTENDED TO HAVE PROSPECTIVE EFFECT FROM 01-06-2015. RESPECTFULLY FOLLOWING THE RATIO OF THE DECISION OF HON'BLE MADRAS HIGH COURT. I DIRECT AO TO DELETE THE DISALL OWANCE OF INTEREST MADE U/S 40A(IA) OF THE I.T.ACT. 4. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RIVAL PLEADINGS AGAINST AND IN SUPPORT OF THE IMPUGNED SECT ION 40(A)(IA) DISALLOWANCE PERTAINING TO THE ASSESSEE A C O-OPERATIVE BANK HAVING NOT DEDUCTED TDS WHILST MAKING INTEREST PAYMENTS EXCEEDING RS.10,000/- EACH TO ITS MEMBERS. T HE REVENUES CASE IN LIGHT OF ITS PLEADINGS IS THAT THE CI T(A) HAS ERRED IN LAW AND ON FACTS IN MAKING THE ASSESSEES AC T OF NON- DEDUCTION OF TDS AS COVERED U/S.194A(3)(V) THAN U/S.194A(3)(I)(B) FOR THE REASON THAT THE SAME ARE GEN ERAL AND SPECIFIC PROVISIONS; RESPECTIVELY WHEREIN THE LATTER P REVAILS OVER THE FORMER GENERALIA SPECIALIBUS NON DEROGANT. WE FIND NO MERIT IN REVENUES FOREGOING ARGUMENTS. THIS IS FOR THE REASON THAT ALTHOUGH SECTION 194A3(I)(B) PRESCRIBES THE THRE SHOLD LIMIT OF TDS DEDUCTION AS RS.10,000/- IN THE IMPUGNED ASSE SSMENT YEAR(S), SECTION ALSO CONTAINS SUB CLAUSE-(V) THAT THIS MECHANISM DOES NOT COME INTO PLAY IN CASE OF PAYMENTS MADE BY A CO-OPERATIVE SOCIETY TO ITS MEMBERS. WE MAKE IT CL EAR THAT WE ARE DEALING WITH AYS.2013-14 AND 2014-15 WHEREAS THE LEGISLATURE HAS EXCLUDED A CO-OPERATIVE BANK VIDE FIN ANCE ACT, 2015 W.E.F.01-06-2015 ONLY. IT FURTHER TRANSPIRES THAT THE HON'BLE PRESIDENT OF THE TRIBUNAL HAD ALSO CONSTITUTED A SPECIAL BENCH IN ITA NOS.2055 & 2056/CHNY/2014 IN T HE VIRUDHUNAGAR DISTRICT CENTRAL CO-OPERATIVE BANK LTD. VS . ITO U/S.255(4) OF THE ACT TO THIS EFFECT. THE SAID LEARNED SPECIAL ITA NOS. 482 & 483/HYD/2018 :- 4 -: BENCHS ORDER DT.09-10-2018 HAS DECIDED THE VERY ISSU E IN ASSESSEES FAVOUR AND AGAINST THE DEPARTMENT BY FOLLOW ING HON'BLE MADRAS HIGH COURTS JUDGEMENT (SUPRA) MUTATIS MUTANDIS . THEIR LORDSHIPS HAVE ALSO CONSIDERED THE EXPLANATORY MEMORANDUM TO THE FINANCE BILL 2015 TO HOL D THAT THE FOREGOING AMENDMENT IN SECTION 194A(3)(I)(V) OF THE ACT EXCLUDING A CO-OPERATIVE BANK FROM A CO-OPERATIVE SOCIETY; APPLIES WITH PROSPECTIVE EFFECT ONLY. IT HAS BEEN FUR THER EMPHASIZED IN PARA 53 OF THE SAID HON'BLE HIGH COURT S DETAILED DISCUSSION THAT IF A TAXING STATUTE AND AN EXCLUSION C LAUSE CONTAINED IN A TAXING STATUTE ARE TO BE CONSTRUED STRICTLY, THE PROVISIONS THEMSELVES SHOULD MAKE IT CLEAR AS TO WHO ARE TO BE CHARGED OR EXEMPTED AND WHAT ARE THE CIRCUMSTANCES UND ER WHICH THEY ARE CHARGED OR EXCLUDED. WE ADOPT THE VER Y ANALOGY HEREIN AS WELL TO HOLD THAT THE EXCLUSION CLA USE HEREIN IS SECTION 194A(3)(V) OF THE ACT. WE REJECT REVENUES SUBSTANTIVE GROUNDS RAISED IN THE INSTANT APPEAL IN LIG HT THEREOF. THE CIT(A)S IDENTICAL ACTION DELETING SECTIO N 40(A)(IA) DISALLOWANCE IN BOTH THESE YEARS STANDS UPHELD. 5. THESE TWO REVENUES APPEALS ARE DISMISSED IN ABO VE TERMS. A COPY OF THIS COMMON ORDER BE PLACED IN THE R ESPECTIVE CASE FILES. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH JUNE, 2021 SD/- SD/- (LAXMI PRASAD SAHU) (S.S.G ODARA) ACCOUNTANT MEMBER JUDICIAL MEM BER HYDERABAD, DATED: 25-06-2021 TNMM ITA NOS. 482 & 483/HYD/2018 :- 5 -: COPY TO : 1.THE ASST.COMMISSIONER OF INCOME TAX, CIRCLE-2(1), TIRUPATI. 2.THE TIRUPATI CO-OPERATIVE BANK LTD., NO.23,G.CAR STREET, TIRUPATI. 3.CIT(APPEALS)-TIRUPATI. 4.PR.CIT-TIRUPATI. 5.D.R. ITAT, HYDERABAD. 6.GUARD FILE.