Asst.C.I.T., Hassan V. The Chikmagalur District Co-Operative Central Bank Limited, Chickmagalur

ITA 88/BANG/2015

• Counselvise Citation: 8821114 RSA 2015
• Duration Of Justice: 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 30-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N BALAKRISHNAN JT
• Keywords: Non-deduction of tax
• Section: 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ , ACCOUNTANT MEMBER ITA NO.88/BANG/2015 ASSESSMENT YEAR : 2007-08 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1, HASSAN. VS. THE CHIKMAGALUR DISTRICT CO-OPERATIVE CENTRAL BANK LTD., RATNAGIRI ROAD, CHIKMAGALUR. PAN: AAATC 4078J APPELLANT RESPONDENT APPELLANT BY : SHRI N. BALAKRISHNAN, JT. CIT(DR) RESPONDENT BY : NONE DATE OF HEARING : 25.05.2015 DATE OF PRONOUNCEMENT : 29.05.2015 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER DA TED 16.10.2014 OF THE CIT(APPEALS), MYSORE RELATING TO ASSESSMENT YEA R 2007-08. 2. THE ISSUE THAT ARISES FOR CONSIDERATION IN THIS APPEAL IS AS TO WHETHER THE DISALLOWANCE OF INTEREST FOR NON-DEDUCTION OF T AX AT SOURCE U/S. 40(A)(IA) OF THE ACT CAN BE SUSTAINED. ITA NO.88/BANG/2015 PAGE 2 OF 6 DISALLOWANCE OF INTEREST PAID ON DEPOSITS FOR NON-D EDUCTION OF TDS RS.5,18,83,290 SL. NO. PARTICULARS AMOUNT PAID BY THE BANK (IN RS.) SUB-SECTION UNDER WHICH EXEMPTED FROM DEDUCTION OF TDS 1 INTEREST PAID ON SB (INCLUDING SHG DEPOSIT) 1,54,14,512 194A(3)(VIIA)(B) 2 INTEREST PAID ON NRD 5,03,683 194A(3)(VIIA)(B) 3 INTEREST PAID ON PIGMY ACCOUNTS 7,43,466 194A(3)(VIIA)(B) 4 INTEREST PAID ON KALPATHARU CASH CERTIFICATES (KCC): INSTITUTIONS (OTHERS) 1,23,206 194A(3)(I)(B) 5 INTEREST PAID ON KCC : SOCIETIES (MEMBERS/SHAREHOLDERS) 12,61,625 194A(3)(V) 6 INTEREST PAID ON FIXED DEPOSITS TO CJMSB (SHAREHOLDER) 7,18,604 194A(3)(V) 7 INTEREST PAID ON FIXED DEPOSITS TO CPSB (SHAREHOLDER) 1,86,205 194A(3)(V) 8 INTEREST PAID ON FIXED DEPOSITS TO INSTITUTIONS 1,54,250 194A(3)(I)(B) 9 INTEREST PAID ON FIXED DEPOSITS TO SOCIETIES (SHAREHOLDERS) 73,53,924 194A(3)(V) 10 INTEREST PAID ON FIXED DEPOSITS AMOUNT LESS THAN RS 1 LAKH 2,30,56,813 194A(3)(I)(B) 11 INTEREST PAID ON FIXED DEPOSITS AMOUNT MORE THAN RS.1 LAKH 14,67,002 194A(3)(V) TOTAL 5,18,83,290 3. THE ASSESSEE IS A CO-OPERATIVE BANK CARRYING ON THE BUSINESS OF BANKING. IN THE COURSE OF ASSESSMENT PROCEEDINGS U /S.143(3) OF THE INCOME TAX ACT, 1961 (THE ACT) FOR AY 09-10, THE AO NOTICED THAT THE ASSESSEE HAD PAID INTEREST OF RS.1,29,19,176 ON DEP OSITS FROM MEMBERS AND NON-MEMBERS AND PAYMENT TO EACH OF THE DEPOSITO RS EXCEEDED A SUM OF RS.10,000/-. THE AO WAS OF THE VIEW THAT AS PER THE PROVISIONS OF SEC.194A(1) OF THE ACT, THE ASSESSEE WHO IS RESPONS IBLE FOR PAYING TO A RESIDENT ANY INCOME BY WAY OF INTEREST OTHER THAN I NCOME BY WAY OF INTEREST ITA NO.88/BANG/2015 PAGE 3 OF 6 ON SECURITIES, OUGHT TO HAVE AT THE TIME OF CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE OR AT THE TIME OF PAYMENT THER EOF IN CASH OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVE R IS EARLIER, DEDUCTED INCOME-TAX THEREON AT THE RATES IN FORCE. ADMITTED LY THE ASSESSEE DID NOT DEDUCT TAX AT SOURCE ON THE PAYMENT OF INTEREST ON THE DEPOSITS TO MEMBERS AND NON-MEMBERS. SECTION 40 (A)(IA) OF THE INCOME TAX ACT, 1961 (THE ACT) PROVIDES AS FOLLOWS:- SEC.40.AMOUNTS NOT DEDUCTIBLE: NOTWITHSTANDING A NYTHING TO THE CONTRARY IN SECTIONS 30 TO 38, THE FOLLOWIN G AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTING THE INCOME CHARG EABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PR OFESSION', (A) (IA) ANY INTEREST, COMMISSION OR BROKERAGE, FEES FO R PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICE S PAYABLE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONTRACTOR OR S UB- CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WO RK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WO RK), ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVI I-B AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION, HAS NOT BEEN PAID, (A) IN A CASE WHERE THE TAX WAS DEDUCTIBLE AND WAS SO DEDUCTED DURING THE LAST MONTH OF THE PREVIOUS YEAR , ON OR BEFORE THE DUE DATE SPECIFIED IN SUB-SECTION (1) OF SECTION 139 ; OR (B) IN ANY OTHER CASE, ON OR BEFORE THE LAST DAY OF THE PREVIOUS YEAR. PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TAX HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR, OR HAS BEEN DEDUCT ED ITA NO.88/BANG/2015 PAGE 4 OF 6 (A) DURING THE LAST MONTH OF THE PREVIOUS YEAR BUT PAID AFTER THE SAID DUE DATE ; OR (B) DURING ANY OTHER MONTH OF THE PREVIOUS YEAR BUT PAID AFTER THE END OF THE SAID PREVIOUS YEAR, SUCH SUM SHALL BE ALLOWED AS A DEDUCTION IN COMPUTI NG THE INCOME OF THE PREVIOUS YEAR IN WHICH SUCH TAX HAS B EEN PAID. 4. AS CAN BE SEEN FROM THE ABOVE PROVISIONS, THE AS SESSEE, IN THE EVENT OF FAILURE TO DEDUCT TAX AT SOURCE ON PAYMENT S MADE TO A RESIDENT ON ACCOUNT OF INTEREST, CANNOT CLAIM THE SAME AS EXPEN DITURE WHILE COMPUTING INCOME FROM BUSINESS. THE PROVISIONS OF SEC.40(A)( IA) WILL APPLY ONLY IF THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE UNDER C HAPTER XVII-B OF THE ACT. ACCORDING TO THE AO THE ASSESSEE WAS UNDER AN OBLIGATION TO DEDUCT TAX AT SOURCE U/S.194A (1) OF THE ACT ON PAYMENT OF INTEREST TO DEPOSITORS WHO WERE MEMBERS AND NON-MEMBERS AND THE PAYMENT TO EACH OF SUCH DEPOSITORS EXCEEDED RS.10,000. SINCE THE ASSESSEE FAILED TO DEDUCT TAX AT SOURCE, THE AO WAS OF THE VIEW THAT THE AFORESAI D SUM CLAIMED AS DEDUCTION WHILE COMPUTING INCOME FROM BUSINESS CANN OT BE ALLOWED. THE AO ACCORDINGLY PROPOSED TO ADD THE SUM OF RS. 5,18, 83,290 TO THE TOTAL INCOME DECLARED BY THE ASSESSEE IN THE RETURN OF IN COME. THE AO DID NOT ACCEPT THE CLAIM OF THE ASSESSEE THAT THE PROVISION S OF SECTION 194A(3)(V) ARE NOT APPLICABLE TO THE ASSESSEE. ITA NO.88/BANG/2015 PAGE 5 OF 6 5. ON APPEAL BY THE ASSESSEE, THE CIT(APPEALS), FOL LOWING THE DECISION OF THE HONBLE ITAT BANGALORE BENCH IN THE CASE OF BAGALKOT DISTRICT CENTRAL CO-OPERATIVE BANK LTD. V. JT. CIT, ITA NO.1 572/BANG/2013 DATED 30.5.2014 WHEREIN IT HAS BEEN HELD THAT THE ASSESSEE WHICH IS A CO- OPERATIVE SOCIETY CARRYING ON BANKING BUSINESS, WHE N IT PAYS INTEREST INCOME TO A MEMBER BOTH ON TIME DEPOSITS AND ON DEP OSITS OTHER THAN TIME DEPOSITS, WITH SUCH CO-OPERATIVE SOCIETY, NEED NOT DEDUCT TAX AT SOURCE U/S 194A BY VIRTUE OF EXEMPTION GRANTED VIDE CLAUSE (V) OF SUB-SECTION(3) OF THE SAID SECTION, ALLOWED THE CLAIM OF THE ASSESSEE. AGGRIEVED BY TH E ORDER OF CIT(APPEALS), THE REVENUE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 6. AT THE TIME OF HEARING OF THE APPEAL, THE LD. DR SUBMITTED THAT THE DECISION RENDERED BY THE ITAT BANGALORE BENCH IN TH E CASE OF BAGALKOT DISTRICT CENTRAL CO-OPERATIVE BANK LTD. (SUPRA) HAS NOT BEEN ACCEPTED BY THE REVENUE AND FURTHER APPEAL HAS BEEN PREFERRE D. 7. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. DR AND ARE OF THE VIEW THAT THE SAME IS WITHOUT ANY MERIT. PENDENCY OF AN APPEAL BY THE REVENUE BEFORE HIGHER FORUM CANNOT BE THE BASIS NOT TO FOLLOW THE DECISION RENDERED BY THIS TRIBUNAL. IN THE LIGHT OF THE AFO RESAID DECISION, WE ARE OF THE VIEW THAT THE CIT(APPEALS) RIGHTLY DELETED THE DISALLOWANCE MADE BY THE AO. THE ORDER OF CIT(APPEALS) IS ACCORDINGLY UPHEL D AND THE APPEAL BY THE REVENUE IS DISMISSED. ITA NO.88/BANG/2015 PAGE 6 OF 6 8. IN THE RESULT, THE APPEAL BY THE REVENUE IS DISM ISSED. PRONOUNCED IN THE OPEN COURT ON THIS 29 TH DAY OF MAY , 2015 . SD/- SD/- ( JASON P. BOAZ ) ( N.V. VASUDEVA N ) ACCOUNTANT MEMBER JUDICIAL MEMBE R BANGALORE, DATED, THE 29 TH MAY , 2015 . /D S/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR/ SENIOR PRIVATE SECRETARY ITAT, BANGALORE.