ITO (TDS)-2, Chandigarh V. The SAS Nagar Central Co-operative Bank Ltd., Mohali

ITA 647/CHANDI/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6580 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Next Hearing Date: 27-02-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 27-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Gift
• Section: 201(1)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCHB, CHANDIGARH BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND DR. B.R.R. KUMAR, ACCOUNTANT MEMBER ITA NO.647/CHD/2016 (ASSESSMENT YEAR : 2012-13) ITO (TDS)-2 VS. THE SAS NAGAR CENTRAL CO-OP BAN K LTD. CHANDIGARH VPO PAROL, THE KHARAR, MOHALI PAN: PTLT11900A (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE DEPARTMENT BY : SHRI. MANJIT SINGH DATE OF HEARING : 26.09.2017 DATE OF PRONOUNCEMENT : 23/11/2017 O R D E R PER DR.B.R.R.KUMAR, A.M . : THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-2, CHANDIGARH, DATED 01/03/2016. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE LD. CIT(A) ERRED IN LAW AND FACTS BY CONSID ERING THE APPELLANT IS CO- OPERATIVE SOCIETY AND NOT LIABLE TO DEDUCT TDS IN A CCORDANCE TO SECTION 194A(3)(V) OF THE INCOME TAX ACT, 1961. 2. THE LD. CIT(A) ERRED IN LAW AND FACTS BY IGNORIN G THE FACT THAT THOUGH APPELLANT IS CO-OPERATIVE SOCIETY BUT ENGAGED IN TH E BUSINESS OF BANKING AND THEREFORE NOT EXEMPT U/S 194A(3)(V) AND THUS TH E LD. CIT(A) IS ERRED IN DELETING THE DEMAND CREATED BY THE AO U/S 201(1) /201(1A) OF THE INCOME TAX ACT ,1961 RAISED ON ACCOUNT OF NON DEDUC TION OF TDS ON AMOUNT OF INTEREST PAID ON DEPOSITS. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A CENTRAL COOPERATIVE BANK AND HAS PAID INTEREST TO MEMBER SOCIETIES WHICH ARE ALSO COOPERATIVE SOCIETIES BUT HAS NOT DEDUCTED TAX ON THE PAYMENT OF INTEREST UNDER SECTION 194A(I) OF THE INCOME TAX ACT 1961. THE DETAILS OF THE INTERES T PAYMENTS ARE AS UNDER: I. THE MULLANPUR G DAS CASS RS. 90,46,095/- 2 II. THE PAROL MPCS - RS. 42,452/- THE ITO(TDS) HAS CHARGED INTEREST AS WELL AS 10% AS THE TDS TO BE DEDUCTED ON THESE AMOUNTS UNDER SECTION 194A(I). 4. BEFORE THE CIT(A) THE ASSESSEE SUBMITTED THAT TH E ASSESSEE WAS NOT LIABLE TO DEDUCT TDS AS THE AMOUNTS ARE BEING PAID TO THE MEMBERS OF THE COOPERATIVE SOCIETY AND SECTION 194A(III)(V) EXEMPT S SUCH PAYMENTS FROM DEDUCTION OF THE TAX. 5. IN THIS BACKGROUND THE PROVISIONS OF THE SECTION ARE EXAMINED WHICH ARE AS UNDER: 194A. INTEREST OTHER THAN INTEREST ON SECURITIES. - (1) ANY PERSON, NOT BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, WHO IS RESPONSIBLE FOR PAYING TO A RESIDENT A NY INCOME BY WAY OF INTEREST OTHER THAN INCOME BY WAY OF INTEREST ON SECURITIES , SHALL, AT THE TIME OF CREDIT OF SUCH INCOME TO TH E ACCOUNT OF THE PAYEE OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT INCOME-TAX THEREON AT THE RATES IN FORCE : PROVIDED THAT AN INDIVIDUAL OR A HINDU UNDIVIDED FA MILY, WHOSE TOTAL SALES, GROSS RECEIPTS OR TURNOVER FROM THE BUSINESS OR PROFESSION CARRIED ON BY HIM EXCEED THE MONETARY LIMITS SPECIFIED UNDER CLAUSE (A) OR CLAUSE (B) OF SECTION 44AB DURING THE FINANCIAL YEA R IMMEDIATELY PRECEDING THE FINANCIAL YEAR IN WHICH SUCH INTEREST IS CREDITED OR PAID, SHALL BE LIABLE TO DE DUCT INCOME-TAX UNDER THIS SECTION. EXPLANATION.FOR THE PURPOSES OF THIS SEC TION, WHERE ANY INCOME BY WAY OF INTEREST AS AFORES AID IS CREDITED TO ANY ACCOUNT, WHETHER CALLED INTEREST PAYABLE AC COUNT OR SUSPENSE ACCOUNT OR BY ANY OTHER NAME, IN THE BOOKS OF ACCOUNT OF THE PERSON LIABLE TO PAY SUCH INCOME, SUCH CREDITING SHALL B E DEEMED TO BE CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE A ND THE PROVISIONS OF THIS SECTION SHALL APPLY ACCORDINGLY. (2) [OMITTED BY THE FINANCE ACT, 1992, W.E.F. 1-6-1 992.] (3) THE PROVISIONS OF SUB-SECTION (1) SHALL NOT APPLY (I) WHERE THE AMOUN T OF SUCH INCOME OR, AS THE CASE MAY BE, THE AGGREG ATE OF THE AMOUNTS OF SUCH INCOME CREDITED OR PAID OR LIKELY TO BE CREDITED OR PAID DURING THE FINANCIAL YEAR BY THE PERSON REFER RED TO IN SUB-SECTION (1) TO THE ACCOUNT OF, OR TO, THE PA YEE, DOES NOT EXCEED (A) TEN THOUSAND RUPEES, WHERE THE PAYER IS A BANKI NG COMPANY TO WHICH THE BANKING REGULATION ACT, 1949 (10 OF 1949) APPLIES (INCLUDING ANY BANK OR BA NKING INSTITUTION, REFERRED TO IN SECTION 51 OF THA T ACT); (B) TEN THOUSAND RUPEES, WHERE THE PAYER IS A CO- OPERATIVE SOCIETY ENGAGED IN CARRYING ON THE BUSINE SS OF BANKING; (C) TEN THOUSAND RUPEES, ON ANY DEPOSIT WITH POST O FFICE UNDER ANY SCHEME FRAMED BY THE CENTRAL GOVERNMENT AND NOTIFIED BY IT IN THIS BEHALF; AND (D) FIVE THOUSAND RUPEES IN ANY OTHER CASE: PROVIDED THAT IN RESPECT OF THE INCOME CREDITED OR PAID IN RESPECT OF (A) TIME DEPOSITS WITH A BANKING COMPANY TO WHICH T HE BANKING REGULATION ACT, 1949 (10 OF 1949) APPLIE S (INCLUDING ANY BANK OR BANKING INSTITUTION REFERRED TO IN SECTION 51 OF THAT ACT); OR (B) TIME DEPOSITS WITH A CO-OPERATIVE SOCIETY ENGAG ED IN CARRYING ON THE BUSINESS OF BANKING; (C) DEPOSITS WITH A PUBLIC COMPANY WHICH IS FORMED AND REGISTERED IN INDIA WITH THE MAIN OBJECT OF CAR RYING ON THE BUSINESS OF PROVIDING LONG-TERM FI NANCE FOR CONSTRUCTION OR PURCHASE OF HOUSES IN IND IA FOR RESIDENTIAL PURPOSES AND WHICH IS ELIGIBLE FOR DEDUCTION UNDER CLAUSE (VIII) OF SUB-SECTION (1) OF SECTION 36 , THE AFORESAID AMOUNT SHALL BE COMPUTED WITH REFEREN CE TO THE INCOME CREDITED OR PAID B Y A BRANCH OF THE 3 BANKING COMPANY OR THE CO-OPERATIVE SOCIETY OR THE PUBLIC COMPANY, AS THE CASE MAY BE; (II) (III) TO SUCH INCOME CREDITED OR PAID TO (A) ANY BANKING COMPANY TO WHICH THE BANKING REGULA TION ACT, 1949 (10 OF 1949), APPLIES, OR ANY CO- OPERATIVE SOCIETY ENGAGED IN CARRYING ON THE BUSINE SS OF BANKING (INCLUDING A CO- OPERATIVE LAND MORTGAGE BANK), OR (B) ANY FINANCIAL CORPORATION ESTABLISHED BY OR UND ER A CENTRAL, STATE OR PROVINCIAL ACT, OR (C) THE LIFE INSURANCE CORPORATION OF INDIA ESTABLI SH ED UNDER THE LIFE INSURANCE CORPORATION ACT, 1956 ( 31 OF 1956), OR (D) THE UNIT TRUST OF INDIA ESTABLISHED UNDER THE U NIT TRUST OF INDIA ACT, 1963 (52 OF 1963), OR (E) ANY COMPANY OR CO-OPERATIVE SOCIETY CARRYING ON THE BUSINESS OF INSURANCE, OR (F) SUCH O THER INSTITUTION, ASSOCIATION OR BODY OR CLASS OF I NSTITUTIONS, ASSOCIATIONS OR BODIES WHICH THE CENTR AL GOVERNMENT MAY, FOR REASONS TO BE RECORDED IN WRITI NG, NOTIFY IN THIS BEHALF IN THE OFFICIAL GAZETTE; (IV) TO SUCH INCOME CREDITED OR PAID BY A FIRM TO A PARTNER OF THE FIRM; (V) TO SUCH INCOME CREDITED OR PAID BY A CO-OPERATI VE SOCIETY ( OTHER THAN A CO-OPERATIVE BANK) TO A MEMBER THEREOF OR TO SUCH INCOME CREDITED OR PAID BY A CO- OPERATIVE SOCIETY TO ASSESSMENT YEAR OTHER CO-OPERATIVE SOCIETY; EXPLANATION- FOR THE PURPOSES OF THIS CLAUSE, CO- OPERATIVE BANK SHALL HAVE THE SAME MEANING AS ASSIGNED TO IT IN PART V OF THE BANKING REGULATION ACT, 1949(1 0 OF 1949); (VI) TO SUCH INCOME CREDITED OR PAID IN RESPECT OF DEPOSITS UNDER ANY SCHEME FRAMED BY THE C ENTRAL GOVERNMENT AND NOTIFIED BY IT IN THIS BEHALF IN THE OFFICIAL GAZETTE; (VII) TO SUCH INCOME CREDITED OR PAID IN RESPECT OF DEPOSITS (OTHER THAN TIME DEPOSITS MADE ON OR AFTE R THE 1ST DAY OF JULY, 1995) WITH A BANKING COMPANY TO WH ICH THE BANKING REGU LATION ACT, 1949 (10 OF 1949) APPLIES (INCLUDING ANY BANK OR BANKING INSTITUTION REFERRED TO IN SECTION 51 OF THAT ACT); (VIIA) TO SUCH INCOME CREDITED OR PAID IN RESPECT O F, (A) DEPOSITS WITH A PRIMARY AGRICULTURAL CREDIT SOC IETY OR A PRIMARY CREDIT SOCIETY OR A CO- OPERATIVE LAND MORTGAGE BANK OR A CO-OPERATIVE LAND DEVELOPMENT BA NK; (B) DEPOSITS (OTHER THAN TIME DEPOSITS MADE ON OR A FTER THE 1ST DAY OF JULY, 1995) WITH A CO- OPERATIVE SOCIETY, OTHER THAN A CO -OPERATIVE SOCIETY OR BANK REFERRED TO IN SUB-C LAUSE (A), ENGAGED IN CARRYING ON THE BUSINESS OF BANKING; (VIII) TO SUCH INCOME CREDITED OR PAID BY THE CENTR AL GOVERNMENT UNDER ANY PROVISION OF THIS ACT OR TH E INDIAN INCOME-TAX ACT, 1922 (11 OF 1922), OR THE ES TATE DUTY ACT, 1953 (34 OF 1953), OR THE WEALTH- TAX ACT, 1957 (27 OF 1957), OR THE GIFT- TAX ACT, 1958 (18 OF 1958), OR THE SUPER PROFITS TA X ACT, 1963 (14 OF 1963), OR THE COMPANIES (PROFITS) SURTAX ACT, 1964 (7 OF 1964), O R THE INTEREST-TAX ACT, 1974 (45 OF 1974); (IX) TO SUCH INCOME CREDITED OR PAID BY WAY OF INTEREST ON THE COMPENSATION AMOUNT AWARDED BY THE MOTOR ACCIDENTS CLAIMS TRIBUNAL WHERE THE AMOUNT OF SUCH INCOME OR, AS THE CASE MAY BE, THE AGGREGATE OF THE AMOUNTS OF SUCH INCOME CREDITED OR PAID DURI NG THE FINANCIAL YEAR DOES NOT EXCEE D FIFTY THOUSAND RUPEES; (X) TO SUCH INCOME WHICH IS PAID OR PAYABLE BY AN I NFRASTRUCTURE CAPITAL COMPANY OR INFRASTRUCTURE CAP ITAL FUND OR A PUBLIC SECTOR COMPANY OR SCHEDULED BANK I N RELATION TO A ZERO COUPON BOND ISSUED ON OR AFTER THE 1ST DAY OF JUNE, 2005 BY SUCH COMPANY OR FUND O R PUBLIC SECTOR COMPANY OR SCHEDULED BANK. EXPLANATION 1. FOR THE PURPOSES OF CLAUSES (I), (VII) AND (VIIA), TIME DEPOSITS MEANS DEPOSITS (EXCLUDING RECURRING DEPOSITS) REPAYABLE ON THE EXPIRY OF FIXE D PERIODS. EXPLANATION 2. (4) THE PERSON RESPONSIBLE FOR MAKING THE PAYMENT R EFERRED TO IN SUB- SECTION (1) MAY, AT THE TIME OF MAKING ANY DEDUCTION, INCREASE OR REDUCE THE AMOUNT TO BE DEDUCTED UNDER THIS SECTION FOR THE PURPOSE OF ADJUSTING ANY EXCESS OR DEFICIENCY ARISING OUT OF ANY PREVIOUS DEDUCTION OR FAILURE TO DEDUCT DURI NG THE 4 FINANCIAL YEAR. EXPLANATION.[OMITTED BY THE FINANCE ACT, 1992, W.E .F. 1-6-1992.] FURTHER THE PROVISIONS RELATING TO DIRECT TAXES OF THE FINANCE BILL 2015 HAS BEEN EXAMINED PERTAINING TO RATIONAL ISATION OF PROVISIONS RELATING TO DEDUCTION OF TAX ON INTEREST (OTHER THAN INTEREST ON SECURITIES) WHE REIN IT IS CLEARLY MENTIONED AS UNDER: HOWEVER, THE EXISTING EXEMPTION PROVIDED UNDER SECT ION 194A(3)(VIIA)(A) OF THE ACT TO PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRI MARY CREDIT SOCIETY OR A CO- OPERATIVE LAND MORTGAGE BANK OR A CO-OPERATIVE LAND DEVELOPMENT BANK FROM DEDUCTION OF TAX IN RESPECT OF INTEREST PAID ON DEP OSIT SHALL CONTINUE TO APPLY. THEREFORE, THESE CO-OPERATIVE CREDIT SOCIETIES/BANK S REFERRED TO IN SAID CLAUSE (VIIA)(A) WOULD NOT BE REQUIRED TO DEDUCT TAX ON IN TEREST PAYMENT TO DEPOSITORS EVEN AFTER THE PROPOSED AMENDMENT. FURTHER, THE EXISTING EXEMPTION PROVIDED UNDER SECT ION 194A(3)(V) OF THE ACT FROM DEDUCTION OF TAX FROM INTEREST PAID BY A COOPE RATIVE SOCIETY TO ANOTHER CO- OPERATIVE SOCIETY SHALL CONTINUE TO APPLY TO THE CO -OPERATIVE BANK AND, THEREFORE, A CO-OPERATIVE BANK SHALL NOT BE REQUIRED TO DEDUCT TAX FROM THE PAYMENT OF INTEREST ON TIME DEPOSIT TO A DEPOSITOR, BEING A CO -OPERATIVE SOCIETY. 6. THUS KEEPING IN VIEW THE FACTUAL MATRIX THAT THE ASSESSEES ACTION OF PAYMENT OF INTEREST WITHOUT DEDUCTION OF TDS TO THE MEMBERS WHO ARE ALSO COOPERATIVE SOCIETIES IS IN CONSONANCE WITH THE PRO VISIONS OF SECTION 194A(3)(V) READ WITH THE MEMORANDUM OF FINANCE BILL 2015, UNDE R THE HEAD OF RATIONALISATION OF PROVISIONS RELATING TO DEDUCTION OF TAX ON INTEREST (OTHER THAN INTEREST ON SECURITIES) AND HENCE WE DESIST FROM IN TERFEREING IN THE ORDER OF THE LD. CIT(A). 7. THE APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (DIVA SINGH) (DR. B.R.R. KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 23/11/2017 AG COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR