Tribunal rules cooperative society exempt from TDS under Income Tax Act

The Tribunal upheld the decision in favor of the cooperative society engaged in banking, ruling that it was exempt from deducting TDS under Section 194(3)(v) of the Income Tax Act. The Tribunal also found the demand for short deduction of TDS and interest unjustified, as the forms were submitted to the Income Tax Department, even though not directly to the CIT. The appeals filed by the Revenue were dismissed, affirming the Ld. CIT(A)'s orders in favor of the appellant on both issues.

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Issues:
- Whether a cooperative society engaged in banking business is exempt from deducting TDS under Section 194(3)(v) of the Income Tax Act, 1961.
- Whether the demand raised on account of short deduction of TDS and interest thereon is justified.
- Whether the submission of Form No. 15G/15H to the CIT(TDS) within the stipulated time frame is necessary to avoid TDS deduction.

Analysis:

Issue 1: Exemption of Cooperative Society from TDS
The Department contended that the appellant, a cooperative society engaged in banking, was not exempt from deducting TDS under Section 194(3)(v) of the IT Act. However, the Ld. CIT(A) ruled in favor of the appellant, citing a precedent from the ITAT Delhi that provided a blanket exemption to interest paid by any cooperative society to its members without discrimination based on the nature of the cooperative society. The Tribunal upheld the decision, stating that the provisions did not differentiate between cooperative societies engaged in banking and others, leading to the rejection of the Department's argument.

Issue 2: Demand on Short Deduction of TDS
Regarding the demand raised for short deduction of TDS and interest, the AO had raised the demand due to the failure of the assessee to provide documentary evidence of submitting Form 15G/15H to the concerned CIT. The Ld. CIT(A) noted that the forms were indeed obtained by the assessee and sent to the Income Tax Department, even though they were not specifically sent to the CIT. The Tribunal found this to be a technical breach, as the forms were sent to the relevant department, and the assessee was not required to deduct TDS on the interest paid. Consequently, the demand raised by the AO was deemed unjustified and was deleted by the Ld. CIT(A), a decision upheld by the Tribunal.

Conclusion:
The Tribunal dismissed both appeals filed by the Revenue, upholding the Ld. CIT(A)'s orders in favor of the appellant on both issues. The judgment was pronounced on 27/09/2017, settling the disputes related to the exemption of a cooperative society engaged in banking from TDS and the validity of the demand raised on short deduction of TDS and interest.

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