Kashipur Urban Co-operative Bank Ltd., Kashipur V. ITO, Kashipur

ITA 5329/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 82102 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 02-07-2014
• Assessment Year: 2012-2013
• Appeal Filed On: 27-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S C AGARWAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D : NEW DELHI BEFORE SHRI T.S. KAPOOR, ACCOUNTANT MEMBER AND SHRI A.T. VARKEY, JUDICIAL MEMBER ITA NO . 5329 /DEL/ 2013 ASSESSMENT YEAR : 2012 - 13 KASHIPUR URBAN COOPERATIVE BANK LTD., VS. ITO, BAZPUR ROAD, DISTT. UDHAM SINGH NAGAR, KASHIPUR. KASHIPUR. AAAJK0203F (APPELLANT) (RESPONDENT) APPELLANT BY: SH. S.C. AGARWAL, CA RESPONDENT BY: SH. VIVEK NANGIA, SR. DR ORDER PER A.T. VARKEY, J.M. THIS IS AN APPEAL ARISING FROM AN ORDER OF LD. CIT(A) - II, DEHRADUN DATED 29 TH JULY, 2013 FOR A.Y. 2012 - 2013. 2. THE SOLITARY GROUNDS RAISED BY THE ASSESSEE READS AS UNDER: THE COMMISSIONER (APPEAL) HAS ERRED IN FACTS AND IN LAW, IN CONFIRMING THE ASSESS EE IN DEFAULT FOR NOT DEDUCTING T.D.S. U/S 194A OF THE INCOME TAX ACT ON INTEREST DUE ON TIME DEPOSIT RECEIVED FROM MEMBERS AND WHO HAD SUBSCRIBED AND FULLY PAID UP SHARES AND ENTITLED TO VOTE IN GENERAL MEETING, WHICH IS EXEMPTED U/S 194A(3)(V) OF THE INC OME TAX ACT, AS THE APPELLANT IS A CO - OPERATIVE SOCIETY AND THE INTEREST HAS BEEN PAID TO ITS MEMBERS. 3. IN THE INSTANT CASE, THE ITO(TDS) HELD THAT ASSESSEE, COOPERATIVE SOCIETY WAS LIABLE TO DEDUCT TDS ON INTEREST PAID ON TIME DEPOSIT UNDER SEC. 194A OF THE ACT, IN AN ORDER U/S 201(1)/201(1A) OF THE ACT. AND AS SUCH DIRECTED THE ASSESSEE TO PAY TOTAL TAX LIABILITY OF RS. 69,950/ - ON INTEREST PAID OF RS. 6,24,564/ - ON TIME DEPOSIT. 4. THE CIT(A) HAS CONFIRMED THE ACTION OF THE ITO(TDS) BY HOLDING AS U NDER: ITA NO. 5329 /D/ 2013 KASHIPUR URBAN COOPERATIVE BANK LTD. 2 3.1 THE FACTS OF THE CASE, AVERMENTS OF LD. AR AND FINDINGS OF LD. AO HAVE BEEN CONSIDERED. RIGHT AT THE OUTSET IT NEEDS TO BE MENTIONED THAT THE CIRCULAR 9 (SUPRA) IS NO LONGER A GOOD AND POTENT BINDING FORCE ON DEPARTMENTAL OFFICIALS SINCE IT HAS BEEN QUASHED BY THE HONBLE BOMBAY HIGH COURT THROUGH THE JALGAON DISTRICT CENTRAL COOPERATIVE BANK LTD. REPORTED IN 265 ITR 423. COGNIZANCE OF THIS QUASHING HAS ALSO BEEN TAKEN BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF GUJARAT URBAN COOPERATIVE B ANK FEDERATION REPORTED IN 209 TAXMAN 340 (GUJ.) AT PARA 6. IT IS THUS CLEAR THAT THE SAID CIRCULAR CEASES TO EXIST AND CANNOT BE A GUIDE FOR CONSIDERING THE ISSUE AT HAND IN ITS LIGHT. REGARDING THE CASE OF VISHKHAPATNAM COOPERATIVE BANK LTD. REPORTED I N 47 SOT 295 (VISH) THE FINDINGS WOULD HAVE HAD CONSIDERABLE PERSUASIVE VALUE IF THE IMPORTANCE OF THE QUASHING OF CIRCULAR 9 (SUPRA) HAD BEEN CONSIDERED AS A VALID INPUT IN DECIDING WHETHER THE SAID PAYMENT WAS HIT BY THE RELEVANT PROVISIONS OF TDS OR NOT . SINCE THIS FACT HAS NOT BEEN DISCUSSED IT IS RESPECTFULLY SUBMITTED THAT THIS DECISION DESERVES TO BE DIFFERED WITH SINCE BLINDLY FOLLOWING THE SECTION 194A(3)(V) WOULD RENDER SECTION 194A(3)(VIIA) OF THE ACT OTIOSE SINCE IT SPECIFICALLY CALLS FOR DEDUC TION OF TAX AT SOURCE ON PAYMENTS REGARDING DEPOSITS WITH, AMONG OTHER, COOPERATIVE BANKS AND THE CIRCULAR ATTEMPTING TO CLARIFY THIS MATTER HAS BEEN QUASHED. THUS A COMBINED READING OF BOTH SECTIONS 194A(3)(V) AND 194A(3)(VIIA) WOULD INDICATE DEDUCTION O F TAX AT SOURCE ON TIME DEPOSITS. HERE IS ALSO NEEDS TO BE MENTIONED THAT THE EXPLANATORY MEMORANDUM ON THE INSERTION OF SECTION 194A THROUGH THE FINANCE ACT, 1991 STATES THAT THE INTENTION WAS TO BRING WITHIN THE TAX NET INCOMES ARISING FROM TIME DEPOSIT S WITH BANKING COMPANIES AND COOPERATIVE SOCIETIES. THUS, THE INTERPRETATION FOLLOWED BY THE LD. AO DESERVES TO BE SUPPORTED AND THIS GROUND IS DISMISSED. 5. ON CAREFUL CONSIDERATION OF THE FACTS, WE FIND THAT AN IDENTICAL ISSUE HAD COME UP IN THE CASE OF VISHAKAPATNAM CO - OPERATIVE BANK VS. DIT, ITA NO. 5/2011 & 19/2011, VIZAG BENCH OF ITAT, WHEREIN IT WAS HELD AS UNDER: WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF THE ASSESSEE AND ALSO THE DECISION RENDERED BY LD. CIT(A). SECTION 194A( 3) OF THE ACT PRESCRIBES THE MONETARY LIMITS AND ALSO A LIST OF PAYMENTS WHICH ARE EXEMPT FROM THE REQUIREMENT OF COMPLYING WITH THE PROVISIONS OF TDS PRESCRIBED UNDER SUB - SECTION (1) OF ITA NO. 5329 /D/ 2013 KASHIPUR URBAN COOPERATIVE BANK LTD. 3 THAT SECTION. CLAUSE (V) OF SECTION 194A(3), ON WHICH RELIANCE WAS P LACED BY THE ASSESSEE, READS AS UNDER: T O SUCH INCOME CREDITED OR PAID BY A COOPERATIVE SOCIETY TO A MEMBER THEREOF OR TO ANY OTHER COOPERATIVE SOCIETY. ON A PLAIN READING OF THE SECTION 194A(3)(V), WE NOTICE THAT THE SAID SECTION PROVIDES BLANKET EXEMPT ION TO THE INTEREST PAID BY ANY COOPERATIVE SOCIETY TO ITS MEMBERS. THE TERM COOPERATIVE SOCIETY HAS BEEN DEFINED U/S 2(19) OF THE ACT AS UNDER: COOPERATIVE SOCIETY MEANS A COOPERATIVE SOCIETY REGISTERED UNDER THE COOPERATIVE SOCIETIES ACT, 1912 (2 O F 1912), OR UNDER ANY OTHER LAW FOR THE TIME BEING IN FORCE IN ANY STATE FOR THE REGISTRATION OF COOPERATIVE SOCIETIES. IT CAN BE SEEN THAT NEITHER SEC. 2(19) NOR SEC. 194A(3) MAKES ANY DISCRIMINATION BETWEEN THE COOPERATIVE SOCIETIES CARRYING ON BANKING BUSINESS AND OTHER COOPERATIVE SOCIETIES. HOWEVER, AS PER SEC. 194A(3), THE SAID EXEMPTION IS AVAILABLE ONLY TO THE INTEREST PAYMENTS MADE TO ITS MEMBERS OR TO ANY OTHER COOPERATIVE SOCIETY. IN THE INSTANT CASE, IT IS THE CLAIM OF THE ASSESSEE THAT ALL T HE INTEREST PAYMENTS HAVE BEEN MADE ONLY TO ITS MEMBERS. IN THAT CASE, THE ASSESSEE IS SQUARELY COVERED BY THE EXEMPTION PROVIDED U/S 194A(3)(V) OF THE ACT. ACCORDINGLY WE FIND NO REASON WITH THE DECISION OF LD. CIT(A) ON THIS ISSUE. 6. APPLYING THE AFORESAID RATIO, WE HOLD THAT ASSESSEE WAS NOT OBLIGED TO DEDUCT TDS ON THE INTEREST PAID TO ITS MEMBERS ON TIME DEPOSITS U/S 194(A) OF THE ACT. ACCORDINGLY THE ORDER OF THE LD. CIT(A) IS SET ASIDE AND THE DEMAND RAISED IS DELETED. 7. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14.11.2014. - SD/ - - SD/ - ( T.S. KAPOOR ) (A.T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 14.11.2014 *KAVITA, P.S. ITA NO. 5329 /D/ 2013 KASHIPUR URBAN COOPERATIVE BANK LTD. 4 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI TRUE COPY BY ORDER ASSISTANT REGISTRAR