M/S NOIDA COMMERCIAL COOPERATIVE BANK LTD. V. COMMISSIONER OF INCOME TAX

IAPL/237/2015

AI Insights

The case revolves around the appellant, M/S Noida Commercial Cooperative Bank Ltd., challenging the orders of the Income Tax Officer (TDS) and the Commissioner (Appeals) regarding the deduction of tax at source on interest payments made to its members. The appellant argued that such payments were exempt under section 194A(3)(v) of the Income Tax Act, 1961, which was supported by a judgment from the Bombay High Court and a circular from the Central Board of Direct Taxes (CBDT). However, the department contended that amendments and interpretations post the relevant financial year imposed such a liability. The court's decision favored the appellant, aligning with the earlier judicial interpretations and the CBDT circular effective before the amendment.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 765799 (HC-MISC)
• Appeal Type: Others
• Pronouncement Date: 19-08-2019
• Assessment Year: misc
• Other Referred Cases: Jalgaon District Central Cooperative Bank versus Union of India, Coimbatore District Central Co-operative Bank Ltd. versus Income Tax Officer
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: C S C IT; ASHOK KUMAR
• Assessee Lawyers: NIKHIL AGRAWAL; DHRUV AGRAWAL
• Keywords: Co-operative Society; Exemption; Interest payment; Tax liability; TDS Deduction
• Section: 201; 260A; 201(1A); 194A(3)(v)

Judgement Text

"Court No. - 35 Case :- INCOME TAX APPEAL No. - 237 of 2015 Appellant :- M/S Noida Commercial Cooperative Bank Ltd. Respondent :- Commissioner Of Income Tax Counsel for Appellant :- Nikhil Agrawal,Dhruv Agrawal Counsel for Respondent :- C.S.C. It,Ashok Kumar Hon'ble Bharati Sapru,J. Hon'ble Rohit Ranjan Agarwal,J. Heard learned counsel for the appellant Sri Nikhil Agrawal and learned counsel for the department Sri Ashish Agarwal. This appeal has been filed under section 260A of the Income Tax Act, 1961 by the appellant assessee for the assessment year 2013-14 against the order of the tribunal dated 31.7.2015. The questions of law sought to be answered are hereinbelow: \"(i)Whether the ITAT was legally justified in upholding the order of the Income Tax Officer (TDS) passed under section 201/201(1A) of the Income Tax Act and the order of the Commissioner (Appeals), even though there is no liability of TDS deduction on payment of interest to its members by a co-operative society on deposits made by its members, which is exempted in view of section 194A (3) (V) of the Act, in the case of the assessee? (ii)Whether the ITAT was legally justified in not following the judgment of Hon'ble Bombay High Court given in case of Jalgaon District Central Cooperative Bank versus Union of India reported in (2004) 265 ITR page 423 which interprets the provisions of section 194A(3) (V) of the Income Tax Act? (iii)Whether ITAT has failed to appreciate that even otherwise as per clarification mentioned in paragraph 2 of the Circular No.9/2002 dated 11.9.2002 issued by the Central Board of Direct Taxes, the appellant was not liable to deduct tax at source on payment of interest to its members on deposits made by them? (iv)Whether in view of the matter, the ITAT was legally justified in upholding the liability of deduction of tax at source under section 194A of the Act? (v) Whether the liability of payment of tax upon the appellant can be legally justified in absence of a finding by the authorities below that the recipient-members have not paid the tax on the amount of interest received by them?\" Subsequently the department has issued a circular no.19/2015 dated 27.11.2015 and paragraph 42.5 of the said circular reads as under: \"42.5 In view of this, the provisions of section 194A(3)(v) of the Income Tax Act have been amended so as to expressly provide that the exemption provided from deduction of tax from payment of interest to members by a co-operative society under section 194A(3)(v of the Income Tax Act, shall not apply to the payment of interest on time deposits by the co- operative banks to its members. As this amendment is effective from the prospective date of 1st June, 2015, the co-operative bank shall be required to deduct tax from the payment of interest on time deposits of its members, on or after the 1st June, 2015. Hence a cooperative bank was not required to deduct tax from the payment of interest on time deposits of its members paid or credited before 1st June, 2015.\" This particular circular has been interpreted by the Madras High Court in the case of Coimbatore District Central Co-operative Bank Ltd. versus Income Tax Officer, reported in (2016) 382 ITR 266 (Mad). In view of the above, the circular no.19/2015 dated 27.11.2015 as issued by the Government of India, Ministry of Finance, Department of Revenue, (CBDT), have application to the case of the appellant. The questions of law are, therefore, answered in favour of the appellant and against the department. The appeal is allowed as above. Order Date :- 19.8.2019 rk "