Chennai Central Co-operative Bank Limited, CHENNAI V. DCIT, CHENNAI

ITA 804/CHNY/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4550 (ITAT-CHENNAI)
• Duration Of Justice: 1 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-05-2017
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 17-05-2017
• Assessment Year: 2013-2014
• Appeal Filed On: 03-04-2017
• Court: TRIBUNAL
• Department Lawyers: JAYA KUMAR
• Assessee Lawyers: A S SRIRAMAN

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL BENCH B, CHENNAI , ! ' . #$ , % &' ) BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ITA NOS.802 TO 804/MDS/2017 % * +* / ASSESSMENT YEARS : 2009-10, 2010-11 & 2013-14 & / S.P. NOS. 154 & 155/MDS/2017 (IN I.T.A. NOS.802 & 803/MDS/2017) % * +* / ASSESSMENT YEARS : 2009-10 & 2010-11 CHENNAI CENTRAL CO-OPERATIVE BANK LTD., C/O. RAMESH AND RAMACHANDRAN, CHARTERED ACCOUNTANTS, NEW NO.39, OLD NO.29/3, VISWANATHAPURAM MAIN ROAD, KODAMBAKKAM, CHENNAI 600 024. [PAN: AAAC 0892C] VS. DY. COMMISSIONER OF INCOME TAX, NON CORPORATE CIRCLE-11, CHENNAI. ( /APPELLANT ) ( / RESPONDENT ) ,- . / / APPELLANT BY : SHRI A.S. SRIRAMAN, ADVOCATE 01,- . / / RESPONDENT BY : SHRI JAYAKUMAR, CIT . 2 / DATE OF HEARING : 17.05.2017 3+ . 2 / DATE OF PRONOUNCEMENT : 19.05.2017 /O R D E R PER SANJAY ARORA, AM : THIS IS A SET OF THREE APPEALS AND CORRESPONDING ST AY PETITIONS BY THE ASSESSEE, A CO-OPERATIVE SOCIETY IN THE BUSINESS OF BANKING, CONTESTING ITS 2 ITA NOS.802-803/MDS /2017 & SP NOS.802 & 803/MDS/2017 CHENNAI CENTRAL CO-OPERATIVE BANK LT D. V. DY. CIT ASSESSMENTS FOR ASSESSMENT YEARS (AYS.) 2009-10, 20 10-11 & 2013-14, IN-AS- MUCH AS THE SAME STAND CONFIRMED BY THE COMMISSIONE R OF INCOME TAX (APPEALS)-13, CHENNAI (CIT(A) FOR SHORT) VIDE A C OMMON ORDER UNDER SECTION 250(6) OF THE INCOME TAX ACT, 1961 (THE ACT HEREI NAFTER) DATED 24.03.2017. 2. THE BONE OF CONTENTION BETWEEN THE ASSESSEE, I.E ., A COOPERATIVE SOCIETY IN THE BUSINESS OF BANKING, AND THE REVENUE FOR THE RE LEVANT YEARS IS IF THE ASSESSEE IS LIABLE TO DEDUCT TAX AT SOURCE ON THE INTEREST A LLOWED ON THE TIME DEPOSITS OF ITS MEMBERS, WHERE IN EXCESS OF MONETARY THRESHOLD LIMI T OF . 10,000/- (REFER S. 194A (1)), DEPOSITING THE SAME TO THE CREDIT OF THE CENTRAL GOVERNMENT, WHICH HAS ADMITTEDLY NOT BEEN AND, THUS, LIABLE FOR DISAL LOWANCE OF THE SAID INTEREST (IN THE COMPUTATION OF ITS TAXABLE INCOME) U/S. 40(A)(I A) OF THE ACT WHICH PROVIDES FOR DEFERRING THE DEDUCTIBILITY IN SUCH A CASE TO T HE YEAR/S IN WHICH THE TAX LIABLE TO BE DEDUCTED IS ACTUALLY DEDUCTED AND, AS ALSO WH ERE ALREADY DEDUCTED, PAID TO THE CREDIT OF THE CENTRAL GOVERNMENT. WHILE THE REV ENUE DENIES THE ASSESSEES CLAIM FOR DEDUCTION (OF THE IMPUGNED INTEREST) IN V IEW OF S. 194A(1) ON THE GROUND THAT THE ASSESSEE IS A CO-OPERATIVE BANK, TH E ASSESSEE RELIES ON THE AMENDMENT TO S. 194A(3)(V) BY FINANCE ACT, 2015 W.E .F. 01.06.2015, WHICH AMPLY CLARIFIES THE EXCLUSION OF A CO-OPERATIVE SOC IETY, OTHER THAN A CO-OPERATIVE BANK, FROM THE AMBIT OF S. 194A(1) PRESCRIBING DEDU CTION OF TAX AT SOURCE WHERE THE INTEREST IS PAID BY A CO-OPERATIVE SOCIETY IN T HE BUSINESS OF BANKING. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. SECTION 194A, IN ITS RELEVANT PART, READS AS UNDER : INTEREST OTHER THAN INTEREST ON SECURITIES. 194A. (1) ANY PERSON, NOT BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, WHO IS RESPONSIBLE FOR PAYING TO A RESIDENT ANY INC OME BY WAY OF INTEREST OTHER THAN INCOME BY WAY OF INTEREST ON SECURITIES, SHALL, AT THE TIME OF CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE O R 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 3 ITA NOS.802-803/MDS /2017 & SP NOS.802 & 803/MDS/2017 CHENNAI CENTRAL CO-OPERATIVE BANK LT D. V. DY. CIT (3) THE PROVISIONS OF SUB-SECTION (1) SHALL NOT APP LY ( I ) WHERE THE AMOUNT OF SUCH INCOME OR, AS THE CASE M AY BE, THE AGGREGATE OF THE AMOUNTS OF SUCH INCOME CREDITED OR PAID OR L IKELY TO BE CREDITED OR PAID DURING THE FINANCIAL YEAR BY THE PERSON REF ERRED TO IN SUB-SECTION (1) TO THE ACCOUNT OF, OR TO, THE PAYEE, DOES NOT E XCEED A) B ) TEN THOUSAND RUPEES, WHERE THE PAYER IS A CO-OPERAT IVE SOCIETY ENGAGED IN CARRYING ON THE BUSINESS OF BANKING; C) TO (D).. (II) TO (IV) ( V ) TO SUCH INCOME CREDITED OR PAID BY A CO-OPERATIVE SOCIETY TO A MEMBER THEREOF OR TO ANY OTHER CO-OPERATIVE SOCIETY; THE AMENDED SECTION 194A(3)(V) READS AS UNDER : ( V ) TO SUCH INCOME CREDITED OR PAID BY A CO-OPERATIVE SOCIETY (OTHER THAN A COOPERATIVE BANK) TO A MEMBER THEREOF OR TO ANY OTH ER CO-OPERATIVE SOCIETY; (EMPHASIS, OURS) THE AMENDMENT EXCLUDING A CO-OPERATIVE BANK, I.E., THE INTEREST ALLOWED BY A CO- OPERATIVE BANK TO ITS MEMBER, FROM THE SAVING OF S. 194A(3), IS PROSPECTIVE IN NATURE, EVEN AS HELD BY THE HON'BLE JURISDICTIONAL HIGH COURT IN COIMBATORE DISTRICT CENTRAL CO-OPERATIVE BANK LTD. V. ITO [2016] 65 TAXMANN.COM 1 (MAD), SO THAT IT WOULD APPLY QUA INTEREST PAID OR CREDITED BY IT ON OR AFTER 01/06/2015. THAT APART, IT IS CLEAR THAT EVEN PRIOR THERETO A CO-OPERATIVE SOCIETY IS EXEMPT FROM DEDUCTION OF TAX AT SOURCE ON INTEREST ALLOWED TO ITS MEMBERS, IRRESPECTIVE OF THE AMOUNT. IT WOULD MATTER LITTLE THAT THE CO-OPERATIVE SOCIETY IS IN THE BUSINESS OF BANKING, FOR WHICH CLASS OF CO-O PERATIVE SOCIETIES THERE IS NO EXCLUSION U/S. 194A(3)(V) PRIOR TO THE AMENDMENT. A CO-OPERATIVE SOCIETY IN THE BUSINESS OF BANKING DOES NOT CEASE TO BE A CO-OPERA TIVE SOCIETY. IN FACT, THE AMENDMENT IS EXPLAINED BY THE BOARD PER THE EXPLANA TORY NOTES TO THE FINANCE ACT, 2005 (VIDE CIRCULAR NO.19/2015 DATED 27/11/201 5 / COPY ON RECORD) WHEREIN, VIDE PARA 42.5, IT STANDS CLARIFIED THAT A CO-OPERATIVE BANK IS NOT REQUIRED TO DEDUCT TAX AT SOURCE ON INTEREST ON TIM E DEPOSITS OF ITS MEMBERS PAID OR CREDITED BEFORE 01/6/2015. A CO-OPERATIVE BANK I S, THEREFORE, IRRESPECTIVE OF AMOUNT, NOT LIABLE TO DEDUCT TAX AT SOURCE ON INTER EST ALLOWED TO ITS MEMBERS, ON 4 ITA NOS.802-803/MDS /2017 & SP NOS.802 & 803/MDS/2017 CHENNAI CENTRAL CO-OPERATIVE BANK LT D. V. DY. CIT TIME DEPOSITS OR OTHERWISE, BEFORE JUNE 1, 2015. TH ERE IS THUS NO SCOPE FOR APPLICATION OF S. 40(A)(IA) QUA THE SAID INTEREST FOR THE RELEVANT YEARS. WE MAKE IT CLEAR THAT THE AMENDMENT AND, IN ANY CASE, THE EXCL USION U/S. 194A(3)(V) IS ONLY IN RESPECT OF INTEREST ALLOWED BY THE ASSESSEE, A C O-OPERATIVE BANK, TO ITS MEMBERS. INTEREST TO NON MEMBERS SHALL CONTINUE TO BE GOVERNED BY THE PROVISIONS OF S. 194A(1). WE DECIDE ACCORDINGLY, DI RECTING THE DELETION OF THE DISALLOWANCE/S TO THE EXTENT IT RELATES TO INTEREST ALLOWED TO MEMBERS. FURTHER, WE HAVING DECIDED THE APPEALS, THE STAY PETITIONS B ECOME IN-FRUCTUOUS. 4. IN THE RESULT, THE ASSESSEES APPEALS ARE ALLOWE D ON THE AFORESAID TERMS, AND THE STAY PETITIONS DISMISSED AS IN-FRUCTUOUS. ORDER PRONOUNCED ON MAY 19, 2017 AT CHENNAI . SD/- SD/- ( ! ' . #$ ) (DUVVURU RL REDDY) % /JUDICIAL MEMBER ( ) (SANJAY ARORA) /ACCOUNTANT MEMBER /CHENNAI, 4 /DATED, MAY 19, 2017. EDN 5 . 0%267 87+2 /COPY TO: 1. ,- /APPELLANT 2. 01,- /RESPONDENT 3. 92 ( )/CIT(A) 4. 92 /CIT 5. 7:; 0%2% /DR 6. ;$* < /GF