Tribunal allows appeal on interest payment disallowance, citing section 40(a)(ia) - Cooperative Bank case

The Tribunal partly allowed the appeal of a cooperative bank against the CIT (A) order, directing the AO to allow the disallowed expenditure of interest payment exceeding &8377; 10,000 to members without TDS deduction under section 40(a)(ia) of the Act for the year 2012-13. The Tribunal relied on judicial precedents and a government circular clarifying the TDS requirement for cooperative banks, overturning the CIT (A)'s decision. Ground no.4 was dismissed as not pressed. The judgment was pronounced on 1st June 2018.

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Issues:
Appeal against CIT (A) order regarding disallowance of interest payment exceeding &8377; 10,000 to members for non-deduction of TDS under section 40(a)(ia) of the Act.

Analysis:
The assessee, a cooperative bank, filed a return declaring income of &8377; 46,78,250 for the year 2012-13. During assessment u/s.143(3), the AO determined total income at &8377; 1,58,57,200, disallowing &8377; 1,09,16,354 paid as interest to members exceeding &8377; 10,000 without TDS deduction. The CIT (A) upheld the AO's decision. The assessee cited judicial precedents in its favor, including judgments by the jurisdictional High Court and a Tribunal bench. The Tribunal referred to a recent decision involving a cooperative bank and a circular by the Government of India, which clarified the requirement of TDS deduction by cooperative banks on interest payments to members. Relying on these, the Tribunal decided in favor of the assessee, directing the AO to allow the disallowed expenditure.

The Tribunal dismissed ground no.4 as not pressed. Consequently, the appeal of the assessee was partly allowed. The judgment was pronounced on 1st June 2018.

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