DCIT, Bangalore V. M/s Citizen Co-Op Bank Ltd., Bangalore

ITA 861/BANG/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8714 (ITAT-BANGALORE)
• Duration Of Justice: 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 06-01-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 05-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MURALIKRISHNA

Judgement Text

ITA.861/BANG/2015 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'A', BANGALORE BEFORE SHRI. N. V. VASUDEVAN, JUDICIAL MEMBER AND SHRI. ABRAHAM P. GEORGE, ACCOUNTANT MEMBER I.T.A NO.861/BANG/2015 (ASSESSMENT YEAR : 2011-12) DEPUTY COMMISSIONER OF INCOME-TAX (TDS), CIRCLE -1(1), BANGALORE ..APPELLANT PAN : BLRT01604B V. M/S. THE CITIZEN CO-OP. BANK LTD, NO.65/1A, I MAIN ROAD, D- BLOCK, II STAGE, DR. RAJKUMAR ROAD, RAJAJINAGAR, BANGALORE 560 010 ..RESPONDENT ASSESSEE BY : SHRI. MURALIKRISHNA, CA REVENUE BY : SHRI. G. R. REDDY, CIT DR-I HEARD ON : 06.01.2016 PRONOUNCED ON : 08 .01.2016 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE REVENUE, ITS GRIEVANCE IS THAT CIT (A) HELD THE ASSESSEE NOT LIABLE TO DEDUCT TAX AT SOURCE ON INTEREST PAID ON DEPOSITS OF ITS MEMBERS. ITA.861/BANG/2015 PAGE - 2 02. AS PER THE REVENUE, CIT (A) HAD FOLLOWED THE DE CISION OF COORDINATE BENCH IN THE CASE OF THE BAGALKOT DISTRICT CENTRAL CO-OP. BANK V. JCIT [ITA NO.1512/BANG/2013, DT.30.05.2014], WHEN ANOTHE R DECISION OF PANAJI BENCH IN THE CASE OF THE BAILHONGAL URBAN CO-OP BAN K LTD. VS. JCIT [ITA NO.85/PN/2013 FOR AY 09-10, DATED 28.8.2013], WAS IN FAVOUR OF REVENUE. 03. WE HAVE HEARD THE RIVAL CONTENTIONS. QUESTION WHETHER A COOPERATIVE BANK IS REQUIRED TO DEDUCT TAX AT SOURC E ON INTEREST PAID DEPOSITS MADE BY ITS MEMBERS HAD COME UP BEFORE THE COORDINATE BENCH IN THE CASE OF THE BAGALKOT DISTRICT CENTRAL CO-OP BAN K (SUPRA), WHERE IT WAS HELD AS UNDER : 15. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO T HE RIVAL SUBMISSIONS. WE ARE OF THE VIEW THAT THE SUBMISSION S MADE BY THE LEARNED COUNSEL FOR THE ASSESSEE DESERVES TO BE ACC EPTED. AS RIGHTLY CONTENDED BY HIM SEC.194A(3)(I)(B) OF THE ACT IS A PROVISION WHICH MANDATES DEDUCTION OF TAX AT SOURCE BY A COOPERATIV E SOCIETY CARRYING ON THE BUSINESS OF BANKING, WHERE THE INCO ME IN THE FORM OF INTEREST WHICH IS PAID BY SUCH SOCIETY IS IN EXC ESS OF TEN THOUSAND RUPEES. SEC.194A(3)(V) OF THE ACT PROVIDES THAT TAX NEED NOT BE DEDUCTED AT SOURCE WHERE THE INCOME IN THE FORM OF INTEREST IS CREDITED OR PAID BY A COOPERATIVE SOCIETY TO A MEMB ER THEREOF OR TO ANY OTHER COOPERATIVE SOCIETY. THIS PROVISION THERE FORE APPLIES TO ALL COOPERATIVE SOCIETIES INCLUDING CO-OPERATIVE SOCIET Y ENGAGED IN THE BUSINESS OF BANKING. IT IS NOT POSSIBLE TO EXCLUDE CO-OPERATIVE SOCIETY ENGAGED IN THE BUSINESS OF BANKING FROM THE PROVISIONS OF SEC.194A(3)(V) OF THE ACT ON THE GROUND THAT THE SA ME IS COVERED BY THE PROVISIONS OF SEC.194A(3)(I)(B) OF THE ACT. SEC .194A(3)(V) OF THE ITA.861/BANG/2015 PAGE - 3 ACT REFERS TO PAYMENT BY A CO-OPERATIVE SOCIETY TO A MEMBER AND PAYMENT BY A CO-OPERATIVE SOCIETY TO NON-MEMBER WOU LD CONTINUE TO BE GOVERNED BY THE PROVISIONS OF SEC.194A(3)(I)(B) OF THE ACT. SIMILARLY U/S.194A(3)(VIIA)(B) INTEREST ON DEPOSITS OTHER THAN TIME DEPOSITS EVEN IF THE PAYMENT IS MADE TO A NON-MEMBE R BY A CO- OPERATIVE SOCIETY, THE CO- OPERATIVE SOCIETY NEED N OT DEDUCT TAX AT SOURCE. THUS THIS SECTION CARVES OUT ANOTHER EXCEPT ION TO SEC.194A(3)(I)(B) OF THE ACT. WE DO NOT THINK THAT ANY OF THE ABOVE PROVISIONS CAN BE CALLED A GENERAL PROVISION AND OT HER PROVISIONS CALLED SPECIFIC PROVISIONS. EACH PROVISION OVER-LAP AND IF READ IN THE MANNER AS INDICATED ABOVE, THERE IS PERFECT HAR MONY TO THE VARIOUS PROVISIONS. WE DO NOT AGREE WITH THE VIEW E XPRESSED BY THE PUNE ITAT SMC IN THE CASE OF BHAGANI NIVEDITA SAHAK ARI BANK LTD. (SUPRA) WHEN IT SAYS THAT CO-OPERATIVE SOCIETY AS M ENTIONED IN CL. (V) IS A GENERAL SPECIES, WHEREAS THE OTHER FIVE CA TEGORIES OF CO- OPERATIVE SOCIETIES WHICH ARE SPECIFICALLY REFERRED TO IN OTHER PROVISIONS ARE SPECIFIC CO-OPERATIVE SOCIETIES. THE FURTHER CONCLUSION IN THE SAID DECISION THAT THE TERM CO-O PERATIVE SOCIETY IN CL. (V) OF S. 194A(3) HAS TO BE INTERPRETED AS C O-OPERATIVE SOCIETY OTHER THAN CO-OPERATIVE BANK, IS AGAIN UNSUSTAINABL E. THE LAW IS WELL SETTLED THAT BY A PROCESS OF INTERPRETATION ON E CANNOT ADD ON WORDS THAT ARE NOT FOUND IN THE TEXT OF THE STATUTE . SUCH A COURSE IS PERMITTED ONLY WHEN THERE IS CAUSUS OMISUS. WE DO NOT THINK THAT THE PROVISIONS OF SEC.194A(3)(V) SUFFERS FROM ANY C AUSUS OMISUS AS HAS BEEN INTERPRETED BY THE ITAT PUNE BENCH SMC. 16. WE ARE ALSO OF THE VIEW THAT THE DECISION OF TH E HONBLE KERALA HIGH COURT IN THE CASE OF MOOLAMATTOM ELECTRICITY B OARD EMPLOYEES CO-OP BANK LTD. (SUPRA) SUPPORTS THE PLEA OF THE ASSESSEE BEFORE US. THE PETITIONERS IN THAT CASE WE RE PRIMARY CREDIT SOCIETIES REGISTERED UNDER THE KERALA CO-OPERATIVE SOCIETIES ACT. IN VIEW OF THE SPECIFIC PROVISIONS OF SEC.194A(3(VIIA) OF THE ACT, THEY CLAIMED THAT THEY NEED NOT DEDUCT TAX AT SOURCE ON INTEREST PAID. IT WAS SUBMITTED BY THE PETITIONER THAT SUBS.194A(3)(V ) DEALS WITH SUCH INCOME CREDITED OR PAID BY A COOPERATIVE SOCIETY TO A MEMBER WHEREAS SUB-S. (3)(VIIA)(A) PROVIDES A TOTAL EXEMPT ION TO DEPOSITS WITH THE PRIMARY CREDIT SOCIETY. THE HONBLE KERALA HIGH COURT ACCEPTED THEIR PLEA AND IN THEIR JUDGMENT HAVE OBSE RVED THAT SEC.194A (3)(I) EXEMPTION LIMIT OF RS. 10,000 TO IN TEREST PAID ON ITA.861/BANG/2015 PAGE - 4 TIME DEPOSITS WITH COOPERATIVE SOCIETIES ENGAGED IN CARRYING ON BUSINESS OF BANKING IS ALLOWED BUT THAT DOES NOT ME AN THAT ALL CO- OPERATIVE SOCIETIES WHO HAVE CREDITED OR PAID EXCEE DING RS. 10,000 ARE LIABLE TO DEDUCT TAX AT SOURCE. THE COURT HELD THAT CO-OPERATIVE SOCIETY ENGAGED IN CARRYING ON BUSINESS OF BANKING AND PRIMARY CREDIT SOCIETIES STAND ON DIFFERENT FOOTING AND BEL ONG TO DIFFERENT CLASS. THAT NOT MEAN THAT SEC.194A(3)(V) OF THE ACT IS APPLICABLE ONLY TO COOPERATIVE SOCIETIES OTHER THAN CO-OPERATI VE SOCIETIES CARRYING ON THE BUSINESS OF BANKING AS OBSERVED IN PARA-37 OF ITS JUDGMENT THE PUNE ITAT IN THE CASE OF BHAGANI NIVED ITA SAH BANK LTD. (SUPRA). IN FACT IN PARA-2 OF CIRCULAR NO.9 DA TED 11.9.2002, THE CBDT HAS VERY CLEARLY LAID DOWN THAT CO-OPERATIVE S OCIETIES CARRYING ON BANKING BUSINESS WHEN IT PAYS INTEREST ON DEPOSITS BY ITS MEMBERS NEED NOT DEDUCT TAX AT SOURCE IN VIEW OF TH E PROVISIONS OF SEC.194A(3)(V) OF THE ACT. 17. WE ALSO FIND THAT THE CBDT IN CIRCULAR NO.9 DAT ED 11.9.2002 CLARIFIED CERTAIN ASPECTS WHICH ARE RELEVANT TO THE PRESENT CASE. THE SAME READS THUS: CIRCULAR NO.9 OF 2002 SUB : TAX DEDUCTION AT SOURCE UNDER SECTION 194A O F THE INCOME- TAX ACT, 1961 APPLICABILITY OF THE PROVISIONS IN R ESPECT OF INCOME PAID OR CREDITED TO A MEMBER OF CO-OPERATIVE BANKR EG. 11/09/2002 TDS -194A - UNDER SECTION 194A OF THE INCOME-TAX AC T, 1961, TAX IS DEDUCTIBLE AT SOURCE FROM ANY PAYMENT OF INCOME BY WAY OF INTEREST OTHER THAN INCOME BY WAY OF INTEREST ON SECURITIES. CLAUSE (V) OF SUB-SECTION (3) OF SECTION 194A EXEMPTS SUCH INCOME CREDITED OR PAID BY A CO-OPERATIVE SOCIETY TO A MEMBER THEREOF FROM THE REQUIREMENT OF TDS. ON THE OTHER HAND, CLAUSE (VIIA ) OF SUB-SECTION (3) OF SECTION 194A EXEMPTS FROM THE REQUIREMENT OF TDS SUCH INCOME CREDITED OR PAID IN RESPECT OF DEPOSITS (OTH ER THAN TIME- DEPOSITS MADE ON OR AFTER 1ST JULY, 1995) WITH A CO -OPERATIVE SOCIETY ENGAGED IN CARRYING ON THE BUSINESS OF BANKING. 2. REPRESENTATIONS HAVE BEEN RECEIVED IN THE BOARD SEEKING CLARIFICATI ON AS TO WHETHER A MEMBER OF A COOPERATIVE BANK MAY RECEIVE WITHOUT TDS INTEREST ON TIME DEPOSIT MADE WITH THE CO-OPERATIVE BANK ON OR AFTER 1ST JULY, 1995. THE BOARD HAS CONSIDERED THE MATTER AND IT IS CLARIFIED ITA.861/BANG/2015 PAGE - 5 THAT A MEMBER OF A CO-OPERATIVE BANK SHALL RECEIVE INTEREST ON BOTH TIME DEPOSITS AND DEPOSITS OTHER THAN TIME DEPOSITS WITH SUCH CO- OPERATIVE WITHOUT TDS UNDER SECTION 194A BY VIRTUE OF THE EXEMPTION GRANTED VIDE CLAUSE (V) OF SUB-SECTION (3 ) OF THE SAID SECTION. THE PROVISIONS OF CLAUSE (VIIA) OF THE SAI D SUB-SECTION ARE APPLICABLE ONLY IN CASE OF A NONMEMBER DEPOSITOR OF THE CO- OPERATIVE BANK, WHO SHALL RECEIVE INTEREST ONLY ON DEPOSITS OTHER THAN TIME DEPOSITS MADE ON OR AFTER 1ST JULY, 1995 WITHOUT TDS UNDER SECTION 194A. 3. A QUESTION HAS ALSO BEEN RAI SED AS TO WHETHER NORMAL MEMBERS, ASSOCIATE MEMBERS AND SYMPA THIZER MEMBERS ARE ALSO COVERED BY THE EXEMPTION UNDER SEC TION 194A(3)(V). IT IS HEREBY CLARIFIED THAT THE EXEMPTI ON IS AVAILABLE ONLY TO SUCH MEMBERS WHO HAVE JOINED IN APPLICATION FOR THE REGISTRATION OF THE CO-OPERATIVE SOCIETY AND THOSE WHO ARE ADMITTED TO MEMBERSHIP AFTER REGISTRATION IN ACCORDANCE WITH THE BYE-LAWS AND RULES. A MEMBER ELIGIBLE FOR EXEMPTION UNDER SE CTION 194A(3)(V) MUST HAVE SUBSCRIBED TO AND FULLY PAID F OR AT LEAST ONE SHARE OF THE CO-OPERATIVE BANK, MUST BE ENTITLED TO PARTICIPATE AND VOTE IN THE GENERAL BODY MEETINGS AND/OR SPECIAL GE NERAL BODY MEETINGS OF THE COOPERATIVE BANK AND MUST BE ENTITL ED TO RECEIVE SHARE FROM THE PROFITS OF THE CO-OPERATIVE BANK. [F. NO. 275/106/2000-IT(B)] (2002) 177 CTR (ST) 1 18. IT CAN BE SEEN FROM PARA-2 OF THE CIRCULAR REFE RRED TO ABOVE THAT THE CBDT HAS VERY CLEARLY LAID DOWN THAT CO-OPERATI VE SOCIETIES CARRYING ON BANKING BUSINESS WHEN IT PAYS INTEREST ON DEPOSITS BY ITS MEMBERS NEED NOT DEDUCT TAX AT SOURCE. THE ABOVE IN TERPRETATION OF THE PROVISIONS BY THE CBDT WHICH IS IN FAVOUR OF TH E ASSESSEE, IN OUR VIEW IS BINDING ON THE TAX AUTHORITIES. 19. IN THE CASE DECIDED BY ITAT PANAJI BENCH IN ITA NO.85/PN/2013 FOR AY 09-10 IN THE CASE OF THE BAILH ONGAL URBAN CO-OP BANK LTD. VS. JCIT ORDER DATED 28.8.2013 , THE TRIBUNAL PROCEEDED ON THE FOOTING THAT THE AFORESAID CIRCULA R HAS BEEN QUASHED BY THE HONBLE BOMBAY HIGH COURT IN THE CAS E OF THE JALGAON DISTRICT CENTRAL CO-OPERATIVE BANK LTD. VS. UNION OF INDIA 265 ITR 423 (BOM) AND THEREFORE CHOSE TO FOLLOW THE DECISION RENDERED BY PUNE ITAT SMC IN THE CASE OF BHAGANI NI VEDITA SAHAKARI BANK LTD. (SUPRA). IN OUR VIEW THE HONBLE BOMBAY HIGH ITA.861/BANG/2015 PAGE - 6 COURT IN THE CASE OF JALGAON DISTRICT CENTRAL COOPE RATIVE BANK LTD.S CASE WAS DEALING WITH A CASE OF CHALLENGE TO PARA-3 OF CBDT CIRCULAR NO.9 DATED 11.9.2002 WHICH TRIED TO INTERP RET THE WORD MEMBER AS GIVEN IN SEC.194A(3)(V) OF THE ACT. IT IS ONLY THAT PART OF THE CIRCULAR THAT HAD BEEN QUASHED BY THE HONBL E BOMBAY HIGH COURT AND THE OTHER PARAGRAPHS OF THE CIRCULAR HAD NO CONNECTION WITH THE ISSUE BEFORE THE HONBLE BOMBAY HIGH COURT . HOW COULD IT BE SAID THAT THE ENTIRE CIRCULAR HAS BEEN QUASHED B Y THE HONBLE BOMBAY HIGH COURT? IN OUR VIEW PARA-2 OF THE CIRCUL AR STILL HOLDS GOOD AND THE CONCLUSION OF THE ITAT PUNE BENCH IN T HE CASE OF THE BAILHONGAL URBAN CO-OP BANK LTD.(SUPRA) ARE NOT FAC TUALLY CORRECT. CONSEQUENTLY, THE CONCLUSIONS DRAWN IN THE AFORESAI D DECISION ALSO CONTRARY TO FACTS AND HENCE CANNOT BE CONSIDERED AS PRECEDENT. 20. THE LEARNED COUNSEL FOR THE ASSESSEE HAS BROUGH T TO OUR NOTICE THAT THE ITAT VISHAKAPATNAM BENCH IN THE CASE OF TH E VISAKHAPATNAM CO-OPERATIVE BANK ITA NO.5 AND 19 OF 2011 ORDER DATED 29.8.2011 HAS HELD THAT CO-OPERATIVE SOCIETIE S CARRYING ON BANKING BUSINESS WHEN IT PAYS INTEREST TO ITS MEMBE RS ON DEPOSITS IT NEED NOT DEDUCT TAX AT SOURCE IN VIEW OF THE PROVIS IONS OF SEC.194A(3)(V) OF THE ACT. SIMILAR VIEW HAS ALSO BE EN EXPRESSED BY THE PUNE BENCH OF THE ITAT IN THE CASE OF OZER MERC HANT CO- OPERATIVE BANK ITA NO.1588/PN/2012 ORDER DATED 30.1 0.2013. WE MAY ADD THAT IN BOTH THESE DECISIONS THE DISCUSSION DID NOT TURN ON THE INTERPRETATION OF SEC.194A(3)(I)(B) OF THE ACT VIS-A-VIS SEC.194A(3)(V) OF THE ACT. IT IS THUS CLEAR THAT TH E PREPONDERANCE OF JUDICIAL OPINION ON THIS ISSUE IS THAT COOPERATIVE SOCIETIES CARRYING ON BANKING BUSINESS WHEN IT PAYS INTEREST TO ITS ME MBERS ON DEPOSITS NEED NOT DEDUCT TAX AT SOURCE IN VIEW OF THE PROVIS IONS OF SEC.194A(3)(V) OF THE ACT. 21. FOR THE REASONS GIVEN ABOVE, WE HOLD THAT THE A SSESSEE WHICH IS A CO-OPERATIVE SOCIETY CARRYING ON BANKING BUSINESS WHEN IT PAYS INTEREST INCOME TO A MEMBER BOTH ON TIME DEPOSITS A ND ON DEPOSITS OTHER THAN TIME DEPOSITS WITH SUCH CO-OPERATIVE SOC IETY NEED NOT DEDUCT TAX AT SOURCE UNDER SECTION 194A BY VIRTUE O F THE EXEMPTION GRANTED VIDE (V) OF SUB-SECTION (3) OF THE SAID SECTION. ITA.861/BANG/2015 PAGE - 7 04. READING OF THE ABOVE DECISION SHOW THAT COORDIN ATE BENCH DECISION WAS SUBSEQUENT TO THAT OF PANAJI BENCH IN BAILHONGA L URBAN CO-OPERATIVE BANK (SUPRA), AND THE LATTER DECISION WAS DULY CONS IDERED BY THE COORDINATE BENCH. WE, THEREFORE FIND NO REASON TO INTERFERE W ITH THE ORDER OF CIT (A). 05. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH DAY OF JANUARY, 2016. SD/- SD/- (N. V. VASUDEVAN) (ABRAHAM P GEO RGE) JUDICIAL MEMBER ACCOUNTANT MEMBER MCN COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER ASSISTANT REGISTRAR