TaxTMI 
TaxTMI 
2003 (9) TMI 56
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....arashtra Co-operative Societies Act, the object of which includes creation of funds to be advanced in the form of loans to other societies such as agricultural, co-operative and multipurpose co-operative societies. Section 194A of the Income-tax Act, 1961, deals with interest other than interest on securities. Sub-section (1) of section 194A mandates deduction of income-tax at source in respect of the income by way of interest whereas subsection (3) of section 194A engrafts an exception to the applicability of the provisions of sub-section (1). Section 194A(3)(v) grants an exemption from tax deducted at source to such income credited or paid by the co-operative society to a member thereof or to any other co-operative society. Clause (v) of sub-section (3) of section 194A is very lucid and clear in its terms which suggests that the provisions relating to tax deducted at source are inapplicable to the income credited or paid by the co-operative society to the member thereof. The word "member" used in this provision is without any words of limitation. The expression "member" is defined in section 2(19) of the Maharashtra Co-operative Societies Act, 1960. The said definition of membe....
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....cular (exhibit A) and the competency of the Central Board of Direct Taxes. Similar challenge to the said circular is also given by the petitioner in Writ Petition No. 2261 of 2003. The petitioner therein is an income-tax consultant of Jalgaon. In response to the notice, one S.Y. Jawale, Income-tax Officer, Ward 2(3), Jalgaon, has filed affidavit in reply on behalf of the respondents. It is stated in the affidavit that the definition of "member" does not include nominal member. It is denied that the Central Board of Direct Taxes has no authority to issue circular under challenge. It is further stated in the affidavit in reply that the Central Board of Direct Taxes, while issuing the impugned circular, has acted within its ambit by virtue of section 119 of the Income-tax Act, 1961. It is stated in the affidavit in reply that the interim stay granted by the Gujarat High Court to the impugned circular has been subsequently vacated on January 13, 2003, and, therefore, the petition filed by the petitioner is liable to be dismissed with costs. We heard Shri P.M. Shah, learned senior counsel for the petitioner, in Writ Petition No. 563 of 2003, Shri A.G. Talhar, learned counsel for the ....
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.... Paris v. CIT [1999] 237 ITR 518 (Bom); (2) K.K. Adhikari v. T.G. Kulkarni [1980] CTJ 241; (3) CIT v. Varangaon Co-operative Fruit and Agricultural Produce Sale Society Ltd. (Income-tax Application No. 20 of 1987 decided on 26th July 1990); and (4) U.P. Co-operative Cane Union Federation Ltd. v. CIT [1999] 237 ITR 574 (SC). Learned additional standing counsel, Shri Sonwane, for the Union of India has argued that the Central Board of Direct Taxes, by virtue of section 119 of the Income-tax Act, 1961, can certainly clarify by circular who are the beneficiaries under section 194A(3)(v) of the Income-tax Act, 1961. He submitted that the nominal member of a co-operative society has no right to vote and he cannot even participate in a general body meeting. According to him the nominal member does not get rights and privileges of a duly qualified member. For this purpose, he mainly relied upon sub-section (2) of section 24 of the Maharashtra Co-operative Societies Act, 1960. He finally submits that the challenge to the impugned circular issued by the Central Board of Direct Taxes is devoid of any force and, therefore, both the writ petitions are liable to be rejected. We gave anxious....
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....tra Co-operative Societies Act, 1960, includes a nominal member. It is further held by the Division Bench that there is nothing in section 80P(2)(iii) of the Income-tax Act to the contrary. The reliance on sub-section (2) of section 24 of the Maharashtra Co-operative Societies Act, 1960, by Shri Sonwane, learned additional standing counsel for the Union of India, is misconceived. The question for consideration is not with regard to what are the rights and privileges of a duly registered member and a nominal, associate or sympathizer member. The question that falls for consideration is as to whether the exemption granted to the co-operative societies in the matter of tax deducted at source can be taken away by making distinction between a duly registered member and a nominal member. Section 194A(3)(v) of the Income-tax Act, 1961, does not contemplate such a distinction. The rights and privileges of a duly registered member under the Maharashtra Co-operative Societies Act, 1960, and the rights and privileges of a cooperative society under section 194A(3)(v) of the Income-tax Act, 1961, are two distinct things. We are not called upon to decide what are the rights and privileges of a....