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2015 (1) TMI 1407
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....he Karnataka High Court decision in Canfin Home Ltd. (2011) 5 TaxCorp (DT) 49593, ignoring the provisions of sec. 43D of the I.T. Act, 1961. 2. On the facts and in law the CIT(A) erred in holding that income accrued to the assessee cannot be taken as income in the year ignoring the amended provisions of sec 43D of the I.T. Act, 1961, which provides certain benefit to the certain class of assessee‟s but do not provide such benefit to the assessee bank and as such, the provisions of sec 43D amended w.e.f. 1.4.2000 overruled the Court decisions/ Circulars." The grounds raised in I.T.A.No. 329/PNJ/2013 are as follows:- "a) The learned Commissioner of Income Tax (Appeals), Belgaum has erred in confirming the disallowances made U)s 40(1)(ia) when the facts of the case does not warrant such additions. b) Both the appellate authority as well as assessing authority have erred in facts of the case that the assessee is a Co-operative Society and has paid interest to its memberswhich is rightly covered by the provisions of section 194A(3)(v) of the Income Tax Act, 1961. c) The assessing authority as well as the appellate authority both have erred in....
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.... accepted the view of the Assessee in the subsequent assessment year and has allowed the interest paid to members. And has not applied the provisions of section 40(A)(ia) of the Income Tax Act, 1961. Therefore the view of the assessing authority itself is contradictory and in dual mind. Therefore the claim of the assessee be allowed. i) The assessee craves to add, to alter, to amend, to delete or modify any of the grounds of appeal at the time of hearing of the appeal." In C.O.No. 31/PNJ/2013, the following grounds have been raised: "1. The additions deleted by the CIT(A), Belgaum amounting to Rs. 31,87,638/- is according to law and therefore the same be allowed. 2. The order passed by the CIT(A), Belgaum on allowing interest on NPA is according to and on the basis of Hon. High Court of Karnataka in Canfin Homes Ltd. (2011) 5 Tax Corp (DT) 49593 and hence, the same be allowed. 3. The assessee craves to add, to alter, to amend, to delete or modify any of the grounds at the time of hearing of the appeal." I.T.A. No. 327/PNJ/2013 3. Short facts of the case are that the assessee is a Co-operative Bank carrying on the business of ....
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....n of the prescribed accounting standards, which may not give true and correct income of the assessee. The Assessing Officer has verified the NPA account interest receivable on various types of loans as on 11/11/2011 which are as under:- Previous year balance Interest receivable 2008-09 Total Balance Interest received 2009-10 2010-11 2011-12 Total 28,44,043 31,87,638 60,31,681 9,15,318 7,94,219 2,72,571 19,82,108 The assessee had not credited the interest receivable on various loans, therefore the Assessing Officer has held that the interest receivable is income of the assessee and he made the addition. 4. Matter was carried to the CIT(A) and CIT(A) has deleted the addition by observing as under:- "5.2.7 Hon'ble Supreme Court (3 members) in the case of UCO Bank v. CIT (1999) 237 ITR 889 has held that interest accrued on sticky advances which was not brought in profit and loss account but taken to separate suspense account should be added as income only when actually received. This judgment of the Apex Court in its essence lays down law on the issue unless expressly overruled either by itself or by a legi....
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....sessee-bank has received the interest or the assessee-bank has accrued the interest on non-performing assets, which is not clarified and the Assessing Officer has also not verified. Therefore, the decision of Hon‟ble Karnataka High Court is not applicable to the facts of the assessee‟s case. The Jurisdictional High Court in the case of JCIT v. M/s. Cafin Homes Ltd. (2011) 5 Tax Corp (DT) 49593 has held that if the assessee is adopted mercantile system of accounting and in his accounts he shows a particular income as accruing, whether that amount is really accrued or not, is liable to bring the said income to tax. Merely because the said amount accrued was not realized immediately cannot be a ground to avoid payment of tax. But, if in his account it is clearly stated though a particular income is due to him but it is not possible to recover the same then it cannot said to have been accrued and the said amount cannot be brought to tax. The Assessing Officer as well as CIT(A) has not verified this fact from the accounts of the assessee and simply followed the decision of Karnataka High Court. Therefore, matter may be restored to the Assessing Officer to decide the issue as....
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....m 01/04/1989, as per sec. 145 of the Act, assessee has to follow either mercantile system of accounting or cash system. In the above decision of Karnataka High Court wherein the Hon‟ble High Court has held that if the assessee adopts mercantile system of accounting and his accounts he shows a particular income as accruing, whether that amount is really accrued or not is liable to bring the said income to tax. His accounts should reflect true and correct statement of affairs. Merely because the said amount, accrued was not realized immediately cannot be a ground to avoid payment of tax, but if in his account it is clearly stated though a particular income is due to him but it is not possible to recover the same, then it cannot said to have been accrued and the said amount cannot be brought to tax. Therefore, we reverse the finding of CIT(A) and restore the issue back to the file of Assessing Officer to verify whether the assessee has followed the mercantile system of accounting or not? Secondly, if this amount is accrued to the assessee, but it is not possible to recover the same then it cannot be said to have been accrued and the said amount cannot be brought to tax. The Asse....
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....rly held that section 194A(3)(viia)(b) makes no distinction between members and non-members of cooperative bank for purpose of deduction of tax at source on interest on time deposits id/credited and therefore, co-operative bank would be liable to deduct lax at source under section 194A(1) on interest on time deposits paid/credit to its depositors if such interest amount exceeded the limit prescribed in proviso to section 194A(3)(ii). Further, the Hon'ble Kerala High Court in the case of Moolamattom Electricity Board Employees Co-op Bank Ltd 238 ITR 630 has made a clear distinction between primary credit society and a co-oh society engaged in banking business, Thus, section 194A deals with co-op societies engaged in the business of banking, co-operative societies engaged in providing credit facilities to the members, etc. As has been rightly held by the Assessing Officer that the moment the amount paid/credited to any depositor during the year exceeds Rs. 10,000 the provisions of section 1944(1) shall apply and the co-operative society engaged in the banking business shall have to deduct tax on such payments, From the facts of the case, it is seen that the Assessing Officer categori....
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.... No 621 dated 1-12 1991 which among others, provides that "With a view to Improving tax compliance, Sec 194A of the Act has been amended to secure deduction of tax at source from interest on time deposits with the aforesaid banking companies and co-operative societies engaged in carrying on the business of banking". This Circular of the CBDT explains in no uncertain terms that the intention of the legislature n amendment of Section 1944, inter alia was to secure deduction of tax at source from interest on time deposits with the banking companies and co-operative societies 2ngaged in carrying on the business of banking. The appellant being a co-operative society engaged in carrying on the business of banking s liable to make TDS u/s 194A. 5.1.8 In view of the above discussion and taking into consideration the various reasons en by the Assessing Officer, the disallowance made under section 40(a)(ia} amounting to Rs. 53,00,668/- is confirmed. The next grounds of appeal relate to the addition of Rs. 31,87,638/- on account interest receivable NPAs not credited to P '& I account as per the method of accounting followed, by the, appellant Bank. The Assessing office....
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.... type of activities. Wherever, the reference is made to any co-operative society, the Income tax Act, 1961 has clearly distinguished and specified the type of co-operative society based on the type of activity carried out. Such a distinction was required as the legislation intends to extend different benefits to different types of co-operative societies through the Income tax Act. The assessee claimed the benefit of sections 36(1)(viia), 269 SS and 269T on the ground that it is a co-operative bank but for availing exemption from TDS under section 194A, it is claiming itself as an ordinary 'co-operative society' within the meaning of section 194A(3)(v) of the Act. We find that this distinguishes the co-operative society and the cooperative society carrying on business of banking. The Hon'ble Kerala High Court in the case of Moolamatom Electricity Board Employees Co-operative Bank Ltd., 238 ITR 630 has distinguished this. We also rely upon the decision of Hon'ble Jurisdictional Karanataka High Court in the case of CIT vs. Yeshwanthpur Credit Co-operative Society Limited in Income Tax Appeal No.2372012, wherein, the Hon'ble High Court has interpreted the co-operative bank by observing....
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....rimary co-operative agricultural rural development bank. The Legislature did not want to deny the said benefit to a primary agricultural credit society or a primary cooperative agricultural and rural development bank. They did not want to extend the said benefit to a co-operative bank which is exclusively carrying on banking business i.e., the purport of the amendment. If the assessee is not a Co-operative bank carrying on exclusively banking business and if it does not possess a license from the Reserve Bank of India to carry on business, then it is not a Co-operative bank. It is a Co-operative society which also carries on the business of lending money to its members which is covered under Section 80P(2)(a)(i) i.e., carrying on the business of banking for providing credit facilitates to its members. The object of the aforesaid amendment is not to exclude the benefit extended under Section 80P(i) to the society." 11. In the above judgement, Hon'ble High Court has held that the co-operative bank and co-operative society is different entity and they are on different footing. We also rely upon the clarification made by CBDT in this regard, which reads as under: &nbs....
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....n of tax at source from interest on time deposits with the aforesaid banking companies and co-operative societies engaged in carrying on the business of banking". Since the assessee bank is covered by the provisions of said clause (b) of clause (i) of section 194A(3) as well as provisions of clause (a) of said section, which are specific in nature, we hold that the assessee is not entitled for benefit by arguing that section 194A(3) is specific in nature. We find that wherever there is specific provision, it override the general provision. For this proposition, we rely upon the decision of the Jurisdictional Karnataka High Court in the case of M.L.Vasudeva Murthy and Sons and others vs. Joint Commissioner of Agricultural Income tax, 198 ITR 426(KAR). The Hon'ble Supreme Court in the case of South Indian Corpn. (P) Ltd. vs. Secretary, Board of Revenue AIR 1964 SC 207 has held that "a special provision should be given to the extent of its scope leaving the general provision to control cases where the special provision does not apply" Therefore, we are of the view that in this case, assessee's case is covered by the provisions of clause (i) and (va) which are the general provisions of....
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.... Co-operative Society. The Co-operative Bank and Co-operative Society is also interpreted in the case of Bhagani Nivedita Sahakari Bank Ltd. vs. ACIT (2003) 87 ITD 567 where in it is held that Co-operative Society mentioned in Section 194A(3)(v) should be interpreted as Co-operative Society other than Co-operative Bank. We find that the ITAT Pune Bench has interpreted the word Co-operative and Co-operative Society and further the Hon'ble Kerala High Court in the case of Moolamattom Electricity Board Employees Co-operative Bank Ltd. 630 has made a clear distinction between primary credit society and a co-operative society engaged in banking business. Section 194A dealt with Co-operative Society engaged in business as banking. We find that the assessee bank is covered by the provisions of sub-clause (b) of clause (i) of Sec.194A(3) as well as the provisions of clause (viia) of Section 194(3)A which are specific in nature and 194(3)(v) which are general in nature. We find that the Hon'ble Kerala High Court in the case of ITO& Ors. vs. Thodupuzha Urban Co-operative Bank and others have filed the writ before the Hon'ble Kerala High Court, wherein the Hon'ble High Court has held as under....
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.... on or after the 1st day of July, 1995) with a co-operative society, other than a co-operative society or bank referred to in sub-clause (a), engaged in carrying on the business of banking;" The result will be that interest paid on time deposits by a co-operative society, other than a co-operative society or bank referred to in sub-clause (a), engaged in carrying on the business of banking will be covered by sub-section (1), and therefore, will be liable to deduct income-tax. The appellant does not have a case before us that the 4th petitioner, the first respondent herein, does not come within any of the types of co-operative societies made mention of in sub-clause (a) of clause (viia) of sub-section (3) of section 194A of the Act. Therefore, irrespective of Whether it is a time deposit or any other type of deposit, the 4th petitioner, first respondent will not be liable to deduct income-tax, as such society is under sub-section (3) taken out of the purview of section 194A(1) of the Act. Therefore, the writ appeal fails, dismissed. W.A. No. 2270 of 1998: A reading of the impugned judgment discloses that the writ petitioner, the first respondent, was....
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....ty of collecting payment with no tax deduction by filing a declaration in the prescribed manner. Such provision relates to TDS introduced by Finance Act. 1991. Invited consideration criticism from taxpayers, bankers above inconvenience and difficulty in implementation of this provisions. The finance minister in his budget speech in 1992 expressed that "The system of tax deduction at source is a useful tool and one of the well recognised methods of enforcing tax compliance in many countries. However, a harassed Finance Minister has to be sensitive to the opinions of Honourable Members of Parliament even when they differ from his own convictions." He accordingly withdrawn the provision relating to deduction at source in respect of interest on term deposit with the bank and commission w.e.f., June 1992. Accordingly, Finance Act 1992 substituted a new Clause (vii) w.e.f., 1st June, 1992, sub-section 3 of Section 194A for clause (vii) and someone as earlier introduced by Finance No.2 Act w.e.f., 1st October, 1991. This amendment was made to restore the position as was before 1st October, 1991 in relation to deduct tax at source in the case of income credited or p....
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....r issued by CBDT following the judgement of Jalgaon District Central Co-operative Bank Ltd. & Anors. Vs. Union of India, they were of the opinion that the Co-operative Bank are not subject to TDS under 194A. We do not agree with the finding of ITAT, Tribunal as Hon'ble Kerala High Court has occasioned to interpret Section194A(3)(v) and 194A(3)(va) of the Act. The decision of Hon'ble Kerala High Court in the case of ITO & Ors. vs. Thodupuzha Urban Co-operative Bank, wherein they have clearly defined and interpreted the Section it appears that the bank did not consider the provision of section 194A(viia). Therefore, when there is a specific provision, general provision cannot be applied in the case of the assessee otherwise the provision of section 194A (viia) will become redundant. The section cannot be read in this manner. For the sake of clarity, we have analyse the Section 194A(3)(v) and (viia) which read as under: "(3) The provisions of sub- section (1) shall not apply- (i) 5 where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year by ....
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....rs. The said clause is reproduced below for the sake of clarity: 194A(3) The provisions of sub-section (1) shall not apply- (i) where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year by the person referred to in sub-section (1) to the account of, or to, the payee, [does not exceed- (a) ten thousand rupees, where the payer is a banking company to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution, referred to in section 51 of that Act); (b) ten thousand rupees, where the payer is a co-operative society engaged in carrying on the business of banking [emphasized] (c) ten thousand rupees, on any deposit with post office under any scheme framed by the Central Government and notified by it in this behalf; and (d) five thousand rupees in any other case]:] From the above it is clear that, in case of a payer which is a cooperative society engaged in the business of banking, the monetary limit prescribed is Rs. 10000/-. Once the interes....
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.... section 51 of that Act), or with a co-operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank or a co-operative land development bank). All such banking institutions are, therefore, no longer required to deduct tax from interest paid or credited to the accounts of a resident depositor. (emphasized) From the above circular it is very clear that, by virtue clause(vii), a co-op bank is exempted from making TDS. c. The Finance Act 1971, which inserted the words (to a member thereof or) in clause (v) and the said amendment was directed only at the general co-operative society and not at the specific gene i.e cooperative society engaged in carrying on the business of banking. d. The stand of appellant is that, even after insertion of specific clause(vii), the general clause(v) will continue to apply to the cooperative banks. If that stand is accepted, the cooperative banks were required to deduct tax from interest paid to depositors who are not its members, rendering clause (vii) redundant. e. The by Finance Act 1991, for the first time introduced TDS on time deposits by substituting above mentione....