THE COMMISSIONER OF INCOME TAX V. SHRI BASAVESHWARA SAHAKARI BANK NIYAMITH

ITA/100130/2014

AI Insights

The case involves an appeal by the Commissioner of Income Tax and the Assistant Commissioner of Income Tax against M/s. Basaveshwara Sahakari Bank Niyamith concerning the applicability of section 194A(3)(v) of the Income Tax Act, 1961 to cooperative banks and the treatment of accrued interest on loans classified as 'Non-performing Assets'. The Income Tax Appellate Tribunal had previously dismissed the revenue's appeal, leading to this appeal in the High Court of Karnataka. The court referenced a similar case (ITA No.471/2013) and a circular from the Ministry of Finance which clarified the tax deduction requirements for cooperative banks.

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 728784 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 16-12-2015
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax, Central Circle, Bangalore vs. Canfin Homes Limited
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: Y V RAVIRAJ
• Assessee Lawyers: Y V RAVIRAJ
• Keywords: Accrued interest; Co-operative Banks; Income Tax; Non-performing assets; Tax deduction at source
• Section: 260A; 43D; 194A(3)(v)

Judgement Text

"IN THE HIGH COURT OF KARNATAKA DHARWAD BENCH DATED THIS THE 16TH DAY OF DECEMBER, 2015 PRESENT THE HON’BLE MR.JUSTICE S. ABDUL NAZEER AND THE HON’BLE MR.JUSTICE P.S.DINESH KUMAR ITA No.100130 OF 2014 BETWEEN: 1. THE COMMISSIONER OF INCOME TAX, DR B.R.AMBEDKAR ROAD, BELGAUM. 2. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-I, VIJAYAPURA. ... APPELLANTS (BY SRI Y.V.RAVIRAJ, ADV.) AND M/S.BASAVESHWARA SAHAKARI BANK NIYAMITH, SECTOR NO.25, BASAVESHWARA CIRCLE, NAVANAGAR, BAGALKOT, PAN AAAAS 1703P. … RESPONDENT (BY SRI Y.V.RAVIRAJ, ADV.) 2 THIS ITA IS FILED UNDER SECTION 260A OF THE INCOME TAX ACT, 1961 AGAINST ORDER PASSED IN ITA NO.797/BANG/2013 DATED 27.06.2014 ON THE FILE OF THE INCOME TAX APPELLATE TRIBUNAL, ‘B’ BENCH, BANGALORE, DISMISSING THE APPEAL OF THE REVENUE. THIS ITA COMING ON FOR ORDERS THIS DAY, P.S.DINESH KUMAR, J., DELIVERED THE FOLLOWING: JUDGMENT In this appeal by Revenue, following two substantial questions of law are raised; 1. Whether the Tribunal is right in concluding that provisions of section 194A(3)(v) of the Income Tax Act, 1961 applies to all co-operative societies including co-operative society engaged in the business of banking? 2. Whether the Tribunal is right in law and on fact in deleting the additions on account of accrued interest on loans which are classified as “Non- performing Assets” relying on the Karnataka High Court decision in Canfin Homes Ltd., (2011) 5 Tax Corp (DT) 49593, ignoring the provisions of 3 section 43D of the I.T.Act, 1961 amended w.e.f. 01.04.2000?” 2. Sri A.Shankar, Learned counsel appearing for the Assessee submits that in ITA No.471/2013 disposed of on 30.06.2014, a Division Bench of this Court has answered the substantial questions of law in favour of the Assessee by following the earlier judgment in the case of Commissioner of Income Tax, Central Circle, Bangalore /vs./ Canfin Homes Limited ((2011) 201 TAXMAN 273/13 taxmann.Com 43(Karnataka). 3. Learned counsel for the appellants and respondent agree that the issue involved in this appeal and ITA No.471/2013 are one and the same. Accordingly, this appeal is disposed off in like terms. 4 4. In so far as the substantial question of law with regard to Section 194A, it is brought to the notice of this Court by the learned counsel appearing for the Assessee that vide Circular No.19/2015 in F.No.142/14/2015-TPL, the Ministry of Finance, Government of India, has clarified as under: “42.5 In view of this, the provisions of the 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 5 payment of interest on time deposits of its members paid or credited before 1st June, 2015.” Consequently, the finding of the Tribunal that the Co- operative banks were required to deduct tax at source is unsustainable. Accordingly, this appeal filed by the revenue stands dismissed. Sd/- JUDGE. Sd/- JUDGE. KLY/ "