The Assistant Commissioner of Income Tax, Circle-1 (1), Panaji., Panaji V. M/s The Goa State Co-op. Bank Ltd., Panaji

MA 10/PAN/2016

• Counselvise Citation: [2016] 124 COUNSELVISE.COM (IT) 4369 (ITAT-PANAJI)
• Duration Of Justice: 28 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 27-04-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 30-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MEHBOOB ALI KHAN
• Assessee Lawyers: VENKATESH J SHENAI

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI N.S. SAINI , HONBLE ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, HONBLE JUDICIAL MEMBER M.A.NO. 10/PAN/2016 ( ITA NO. 374 /P A N/201 5 ) (ASST. YEAR : 20 12 - 1 3 ) ACIT, CIRCLE - 1(1), PANAJI GOA. VS. M/S. THE GOA STATE CO - OPERATIVE BANK LTD., DAYANAND SMRUTI BLDG. , DR. A.B. ROAD, PANAJI GOA. PAN NO. AAAAT 3364 R (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VENKATESH J. SHENAI C A DEPARTMENT BY : SHRI MEHBOOB ALI KHAN - D R DATE OF HEARING : 27 / 0 4 /201 6 . DATE OF PRONOUNCEMENT : 2 7 / 0 4 /201 6 . O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER THIS IS A MISC. PETITION FILED BY THE REVENUE AGAINST THE ORDER OF THE TRIBUNAL, DATED 2 0 /0 1 /201 6 PASSED IN ITA NO. 374/PAN/2015 . 2. THE GRIEVANCE OF THE REVENUE IN THIS MISC. PETITION IS THAT THE TRIBUNAL HAS ERRED IN HOLDING TH A T THE PROVISIONS OF TDS ARE NOT APPLICABLE AS THE ASSESSEE IS A COOPERATIVE SOCIETY AND NOT A BANK WITHOUT APPRECIATING THAT THE ASSESSEE DID NOT DISPUTE THAT IT IS A CO - OPERATIVE BANK. 3 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE PAID INTEREST OF 27,09,30,388/ - WITHOUT DEDUCTING TDS ON THE SAME . ACCORDING TO THE ASSESSING OFFICER, THE ASSESSEE WAS A COOPERATIVE CREDIT BANK ENGAGED 2 M A NO. 10 /P A N/201 6 IN CARRYING ON THE BUSINESS OF BANKING AND, THEREFORE, WAS LIABLE TO DEDUCT TDS ON INTEREST PAID TO MEMBERS EXCEEDING 10,000/ - . SINCE, THE ASSESSEE HAS NOT DONE SO, THEREFORE, HE DISALLOWED THE ENTIRE INTEREST EXPENDITURE CLAIMED BY THE ASSESSEE BY INVOKING THE PROVISIONS OF SEC.40(A)(IA) OF THE ACT. 4 . BEING AGGRIEVED BY THE SAID ORDER, THE ASSESSEE FILED APPEAL BEFORE THE CO MMISSIONER OF INCOME TAX (APPEALS), WHO VACATED THE DISALLOWANCE BY FOLLOWING THE DECISION OF THIS BENCH OF THE TRIBUNAL IN THE CASE OF ASSESSEE ITSELF BY OBSERVING AS UNDER: - 7. I HAVE GONE THROUGH THE ASSESSMENT ORDER AND THE JUDGEMENT OF T HE HONBLE ITAT, PANAJI BENCH, PANAJI ON THIS ISSUE. THE HONBLE ITAT, PANAJI BENCH, PANAJI HAS DECIDED THE ISSUE IN FAVOUR OF THE A PPELLANT WITH FOLLOWING REMARKS : AT THE VERY OUTSET, IT WAS BROUGHT TO THE NOTICE OF THE RIVAL THAT AN IDENTICAL ISSUE HAS B EEN CONSIDERED AND DECIDED BY THIS VERY BENCH IN THE CASE OF BELGAUM DISTRICT CENTRAL COOPERATIVE BANK LTD. VS. ITO, TDS WARD, BELGAUM IN I.T.A. NOS. 312 TO 315/PNJ/2014, WHEREIN THE BENCH HAS CONSIDERED THE PROVISIONS OF THE FINANCE ACT, 2015. THE RELEVAN T PORTION OF WHICH AS UNDER: SECTION 194(A) READ WITH SECTION 1 94A(3)(I) OF THE ACT, PROVIDE FOR DEDUCTION OF TAX ON INTEREST (OTHER THAN INTEREST ON SECURITIES) OVER A SPECIFIED THRESHOLD, I.E., RS.10,000 FOR INTEREST PAYMENT BY BANKS, CO - OPERATIVE SOCIETY ENGAGED IN BANKING BUSINESS (COOPERATIVE BANK) AND POST OFFICE AND RS. 5,000 FOR PAYMENT OF INTEREST BY OTHER PERSONS. FURTHER, SUB - SECTION (3) OF SECTION 1 94A, INTER ALIA, ALSO PROVIDES FOR EXEMPTION FROM DEDUCTION OF TAX IN RESPECT OF FOLLOWING INTEREST PAYMENTS BY CO - OPERATIVE SOCIETY: (I) INTEREST PAYMENT BY A CO - OPERATIVE SOCIETY TO Q MEMBER THEREOF OR ANY OTHER CO - OPERATIVE SOCIETY. (SECTION 1 94A (3)(V) OF THE ACT] (II) INTEREST PAYMENTS ON DEPOSITS BY A PRIMARY AGRICULTURAL CREDIT SOCIETY OR PRIMARY CREDIT SOCIETY OR CO - OPERATIVE LAND MORTGAGE BANK OR CO - OPERATIVE LAND DEVELOPMENT BANK. [SECTION 194A(3)(VIIA)(A) OF THE ACT] (III) INTEREST PAYMENT ON DEPOSITS OTHER THAN TIME DEPOSIT BY A CO - OPERATIVE SOCIETY ENGAGED IN THE BUSINESS OF BANKING OTHER TH AN THOSE MENTIONED IN SECTION 1 94A (3)(VIIA)(A) OF THE ACT. [SECTION 194A(3)(VIIA)(B) OF THE ACT] THEREFORE, AS PER THE PROVISIONS OF SECTION 1 94A(1) READ WITH PROVISI ONS OF SECTION 1 94A(3)(I)(B) AND 194A(3)(VIIA)(B), COOPERATIVE BANK IS 3 M A NO. 10 /P A N/201 6 REQUIRED TO DEDUCT TAX FROM INTEREST PAYMENT ON TIME DEPOSITS IF THE AMOUNT OF SUCH PAYMENT EXCEEDS SPECIFIED THRESHOLD OF RS. 10,000/ - . HOWEVER, AS THE PROVISIONS OF SECTION 194A(3)(Y) OF THE ACT PROVIDE A GENERAL EXEMPTION FROM MAKING TAX DEDUCTION FROM PAYMENT OF INTEREST BY ALL CO - OPERATIVE SOCIETIES TO ITS MEMBERS, THE CO - OPERATIVE BANKS TRIED TO AVAIL THIS EXEMPTION BY MAKING THEIR DEPOSITORS AS MEMBERS OF DIFFERENT CATEGORIES. THI S HAS LED TO DISPUTE AS TO WHETHER THE CO - OPERATIVE BANKS, FOR WHICH THE SPECIFIC PRO - VISIONS OF TAX DEDUCTION EXIST IN THE FORM OF SECTION 194A(1), SECTION (C) 4A(3)(I)(B) AND 194A(3)(VIIA)(B) OF THE ACT CAN TAKE THE BENEFIT OF GENERAL EXEMPT ION PROVIDED TO ALL CO - OPERATIVE SOCIETIES FROM DEDUCTION OF TAX ON PAYMENT OF INTEREST TO MEMBERS. THE MATTER HAS BEEN TO JUDICIAL FORUMS AND IN SOME CASES A VIEW HAS BEEN TAKEN T HAT THE PROVISIONS OF SECTION 1 94A(3)(VIIA)(B) OF THE ACT MAKES NO DISTINCTION BETWEEN ME MBERS AND NON - MEMBERS OF COOPERATIVE BANKS FOR THE PURPOSES OF DEDUCTION OF TAX, HENCE, THE CO - OPERATIVE BANKS ARE REQUIRED TO DEDUCT TAX ON PAYMENT OF INTEREST ON TIME DEPOSIT AND CANNOT AVOID THE SAME BY TAKING THE PLEA OF THE GENERAL EXEMPTION PROVIDED UNDE R SECTION 1 94A(3)(V) OF THE ACT. THIS IS BECAUSE THE SPECIFIC PROVISION OF TAX DEDUCTION PROVIDED UNDER SECTION 194A(3)(I)(B) AND 194A(3)(VIIA)(B) OF THE ACT FOR CO - OPERATIVE BANKS OVERRIDE THE GENERAL EXEMPTION PROVIDED TO ALL CO - OPERATIVE SOCIETIES F OR NON - DEDUCTION OF TAX FROM INTEREST PAY MENT TO MEMBERS UNDER SECTION 1 94A(3)(V)OF THE ACT. AS THERE IS NO DIFFERENCE IN THE FUNCTIONING OF THE CO - OPERATIVE BANKS AND OTHER COMMERCIAL BANKS, THE FINANCE ACT, 2006 AND FINANCE ACT, 2007, AMENDED THE PROVIS IONS OF THE ACT TO PROVIDE FOR CO - OPERATIVE BANKS A TAXATION REGIME WHICH IS SIMILAR TO THAT FOR THE OTHER COMMERCIAL BANKS. THEREFORE, THERE IS NO RATIONALE FOR TREATING THE CO - OPERATIVE BANKS DIFFERENTLY FROM OTHER COMMERCIAL BANKS IN THE MATTER OF DEDUC TION OF TAX AND ALLOWING THEM TO AVAIL THE EXEMPTION MEANT FOR SMALLER CREDIT CO - OPERATIVE SOCIETIES FORMED FOR THE BENEFIT OF SMALL NUMBER OF MEMBERS. HOWEVER, AS MENTIONED EARLIER, A DOUBT HAS BEEN CREATED REGARDING THE APPLICABILITY OF THE SPECIFIC PROV ISIONS MANDATING DEDUCTION OF TAX FROM THE PAYMENT OF INTEREST ON TIME DEPOSITS BY THE CO - OPERATIVE BANKS TO ITS MEMBERS BY CLAIMING THAT GENERAL EXEMPTION PROVIDED IS ALSO APPLICABLE FOR PAYMENT OF INTEREST TO MEMBER DEPOSITORS. IN VIEW OF THIS, IT IS PR OPOSED TO AMEND THE PROVISIONS OF THE SECTION 1 94A OF THE ACT TO EXPRESSLY PROVIDE FROM THE PROSPECTIVE DATE OF 1 ST JUNE, 2015 THAT THE EXEMPTION PROVIDED FROM DEDUCTION OF TAX FROM PAYMENT OF INTEREST TO MEMBERS BY A CO - O PERATIVE SOCIETY UNDER SECTION 1 94 A(3)(V) OF THE ACT SHALL NOT APPLY TO THE PAYMENT OF INTEREST ON TIME DEPOSITS BY THE COOPERATIVE BANKS TO ITS MEMBERS. 3.1. IT WAS OBSERVED THAT WITH THIS AMENDMENT, THE IMPUGNED PROVISION WAS NOT APPLICABLE DURING THE YEARS UNDER APPEAL AND IT IS CLEAR THAT THE PROVISIONS ARE APPLICABLE W.E.F. 01/06/2015. THE BENCH HAS ALSO CONSIDERED CIRCULAR NO.09/2002 OF THE CBDT AND STATED THAT THE BOARD HAS CLARIFIED THAT THE PROVISIONS OF TDS ARE NOT ENFORCEABLE IN RESPECT OF INTEREST PAID BY THE COOPERATIVE SOCIE TY/BANK TO ITS MEM BERS, BUT TAX HAS TO BE DEDUCTED FROM THE INTEREST PAID TO THE )N - MEMBERS. 4 M A NO. 10 /P A N/201 6 3.2. THE BENCH HAS ALSO CONSIDERED THE FACT THAT THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF JALGAON DISTRICT CO - OP BANK LTD. & ANO. VS. UNION BANK OF INDIA (265 ITR 423) HAS HELD THAT THE SAID CIRCULAR IS NOT GOOD. AFTER CONSIDERING ALL THESE FACTS, THE TRIBUNAL HELD AS UNDER: 1 1. FIRSTLY, THE ASSESSING OFFICER AND THE LD. CIT(A) HAVE HEAVILY RELIED UPON THE DECISION OF THE TRIBUNAL PANAJI BENCH IN THE CASE OF BAILHONGAL URBAN CO. BANK LTD. (SUPRA), WHEREIN THE TRIBUNAL HAS HELD THAT CIRCULAR NO.9 OF 2002 DATED 11/09/2002 ISSUED BY THE CBDT HAS BEEN QUASHED AND SET ASIDE BY THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF JALGAON DISTRICT CO. BANK (SUPRA). TH EREFORE, ASSESSEES RELIANCE ON THE SAID CASE AND THE CIRCULAR IS FOUND TO BE ILL - FOUNDED. THE TRIBUNAL DECIDED THE APPEAL IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. WITH DUE RESPECT TO THE SAID DECISION OF THE TRIBUNAL, WE HAVE TO SAY THE OBSERVA TIONS MADE BY THE TRIBUNAL ARE ILL - FOUNDED BECAUSE SUBSEQUENT TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF JALGAON DISTRICT CO. BANK (SUPRA) AN INFORMATION WAS REQUIRED FROM THE CBDT UNDER THE RIGHT TO INFORMATION ACT, 2005. THE INFORMAT ION REQUIRED AND THE REPLY OF THE BOARD READS AS UNDER: RTI MATTER BY SPEED POST F.ND.385/4/2014 - IT(B) GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE CENTRAL BOARD OF DIRECT T AXES. ***** NEW DELHI, THE 24TH APRIL, 2014 TO, SHRI. PRAVEEN KUMAR HIREMATH, ADVOCATE, BHARAT PLAZA, GROUND FLOOR 44/1, A & B, FAIRFIELD LAYOUT, RACE COURSE ROAD BANGALORE - 56000 1 SU BJECT: - INFORMATION SOUGHT UNDER RTI ACT, 2005 - REG. KINDLY REFER TO YOUR APPLICATION DATED 08.04.2014 RECEIVED IN THIS SECTION ON 21. 04.2014 FROM RTI - CELL VIDE THEIR FTS NQ.66452/2014 - RTJ - CELI DATED 15.04.2014. THE REQUIRED INFORMATION IS FURNISHED BELOW: INFORMATION REQUIRED REPLY WHETHER THE INSTRUCTION OF THE BOARD CONTAINED IN CIRCULAR NO.9 OF 2002 DATED 11/02/2009 (257 ITR (ST) (36), HAVE BEEN WITHDRAWN OR NOT. THE INSTRUCTION OF THE BOARD CONTAINED IN THE SAID CIRCULAR HAD NOT BEEN WITHDRAWN. 5 M A NO. 10 /P A N/201 6 IF YOU ARE NOT SATISFIED WITH THE REPLY, YOU MAY FILE AN APPEAL WITH THE FIRST APPELLATE AUTHORITY I.E. DIRECTOR (BUDGET) CBDT, DEPAR TMENT OF REVENUE NORTH BLOCK NEW DELHI, WITHIN THE PRESCRIBED TIME. YOURS FAITHFULLY, (SANDEEP SINGH) CPIO/US - IT (BUDGET) THUS, WITH THIS CLARIFICATION, IT IS CLEAR THAT THE CIRCULAR HAS NOT BEEN WITHDRAWN. MOREOVER, A PERUSAL OF THE DECISION OF THE HON BLE HIGH COURT OF BOMBAY IN THE CASE OF JALGAON DISTRICT CO. BANK (SUPRA) SHOWS THAT THE HONBLE HIGH COURT HAS HELD THAT THE IMPUGNED NOTIFICATION ISSUED BY THE CBDT WHICH IS IN THE FORM OF A CLARIFICATION WITH REGARD TO THE RIGHTS AND PRIVILEGES OF A DU LY REGISTERED MEMBER AND NOMINAL MEMBER IS OUTSIDE THE SCOPE OF SEC. 119 OF THE ACT. THE HONBLE HIGH C O URT FURTHER HELD THAT THE CBDT CANNOT ISSUE A CIRCULAR. U/S. 119 OF THE ACT WHICH WOULD OVERRIDE OR RETRACT FROM THE PROVISIONS OF INCOME - TAX ACT, 1961. THUS, THE OBSERVATIONS OF THE HONBLE HIGH COURT WERE MORE TOWARDS THE CLARIFICATION REGARDING MEMBER AND NOMINAL MEMBER. CONSIDERING ALL THE FACTS IN TOTALITY IN THE LIGHT OF THE MEMORANDUM EXPLAINING THE PROVISIONS IN THE FINANCE BILL 2015 (SUPRA) AND THE CLARIFICATION BY THE BOARD THAT THE CIRCULAR HAS NOT BEEN WITHDRAWN, MAKES IT AMPLE CLEAR THAT THE IMPUGNED PROVISIONS RELATING TO THE LIABILITY OF TDS WOULD COME WITH EFFECT 01/06/2015, WE, THEREFORE, SET ASIDE THE FINDINGS OF THE LD. CIT(A) AND DIREC T THE ASSESSING OFFICER TO DELETE THE IMPUGNED ADDITIONS MADE IN THE ORDER U/S.201(1) & 201(1A) OF THE ACT. 3.3. RESPECTFULLY FOLLOWING OUR OWN DECISION IN THE CASE OF BELGAUM DISTRICT CENTRAL COOPERATIVE BANK LTD. (SUPRA), ALL THE APPEALS FILED BY THE ASSESSEE ARE ALLOWED. 4. SINCE THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE JURISDICTIONAL ITAT, PANAJI, BENCH, THE APPEAL ALLOWED IN FAVOUR OF THE APPELLANT. 5. BEING AGGRIEVED BY THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), REVENUE FILED APPEAL BEFORE THE TRIBUNAL, WHO CONFIRMED THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). 6 . DURING THE COURSE OF HEARING OF MISC. PETITION, IT WAS POINTED TO THE DEPARTMENTAL REPRESENTATIVE THAT TH E GROUND NO.3 OF THE GROUNDS OF APPEAL TAKEN BEFORE THE TRIBUNAL , WHICH READS AS UNDER: - 6 M A NO. 10 /P A N/201 6 3. THE CIT(A) ERRED IN RELYING UPON THE DECISION OF HONBLE ITAT IN THE CASE OF THE GOA STATE CO - OP . BANK AND VARIOUS BRANCHES VS. ITO(TDS), WARD - 1, PANAJI, WHICH WAS NOT ACCEPTED BY THE REVENUE AND A FURTHER APPEAL HAVE BEEN PREFERRED BEFORE HONBLE HIGH COURT. IN VIEW OF THE ABOVE GROUND OF APPEAL, THE GRIEVANCE IS THAT SINCE THE ORDER OF THE TRIBUNAL HAS BEEN APPEALED AGAINST TO THE HIGH C OURT, THEREFORE, COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN FOLLOWING THE ORDER OF THE TRIBUNAL IN THE CASE OF ASSESSEE ITSELF IN EARLIER YEAR AND DELETING THE DISALLOWANCE OF INTEREST EXPENDITURE . WE HAVE SPECIFICALLY ASKED WHETHER THE ORDER OF THE TRIBUNAL IN THE CASE OF ASSESSEE FOR THE EARLIER YEAR HAS BEEN REVERSED BY THE HONBLE HIGH COURT OR OPERATION OF THE SAME STAYED BY THE HONBLE HIGH COURT, THE DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE HIGH COURT NOT YET DECIDED THE SAME . 7. IN VIEW OF THE ABOVE SUBMISSION S OF THE DEPARTMENTAL REPRESENTATIVE, IN OUR CONSIDERED VIEW, THERE IS NO MISTAKE IN THE ORDER OF THE TRIBUNAL IN DISMISSING THE APPEAL OF THE REVENUE, WHEREIN THE COMMISSIONER OF INCOME TAX (APPEALS) HAS VACATED THE D ISALLOWANCE OF INTEREST EXPENDITURE BY FOLLOWING THE ORDER OF THIS TRIBUNAL IN THE CASE OF ASSESSEE ITSELF. HENCE, THE MISC. PETITION FILED BY THE REVENUE IS DISMISSED. 8 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT AT THE CLOSE OF THE HEARING ON WEDNESDAY , THE 2 7 TH DAY OF APRIL , 201 6 AT GOA . SD/ - SD/ - (GEORGE MATHAN) (N.S.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 2 7 TH APRIL, 201 6 . 7 M A NO. 10 /P A N/201 6 VR/ - COPY TO: 1 . THE ASSESSEE. 2 . THE REVENUE. 3 . THE CIT 4 . THE CIT(A) 5 . THE D.R . 6 . GUARD FILE. BY ORDER ASSISTANT REGISTRAR I.T.A.T., PANAJI .