TaxTMI 
TaxTMI 
2021 (1) TMI 831
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.... Act,1961 ['the Act' for short]. 2. The assessee is a Credit Co-operative Society and it is engaged in the business of accepting deposits from its members and lending loan to its members. The revenue carried out a survey operation in the hands of the assessee. It was noticed that the assessee has not deducted tax at source from the payment of interest made on deposits. Hence, the proceedings u/s 201 of the Act was initiated against the assessee for the year under consideration. The assessee submitted before the A.O. that it has paid interest to its members only and hence, as per the provisions of section 194A(3)(v) of the Act, the assessee is not required to deduct tax at source from the interest paid to its members. 3. The A.....
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....for not deducting TDS will not apply to the interest given to the associate members. The A.O. also took support of the decision rendered by Hon'ble Supreme Court in the case of the Citizen Co-operative Society Vs. ACIT (Civil Appeal Noi.10245 of 2017) and observed that the decision rendered by Hon'ble Supreme Court of India clearly classifies members and non-members and hence the above said decision shall apply to the instant case. Accordingly, the A.O. held that the assessee is liable to deduct tax at source from the interest payments made to associate members. The assessee had paid interest of Rs. 2,61,74,593/- to the associate members, which were above the threshold limit of Rs. 10,000/- prescribed for not deducting tax at source. Accord....
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....ty (other than a co-operative bank) to a member thereof or to such income credited or paid by a co-operative society to any other co-operative society." There should not be any dispute that the interest paid by a cooperative society to its members is not liable for deduction of tax at source u/s 194A of the Act. The dispute is whether "an associate member" would fall under the category of "member" as mentioned in sec.194A of the Act. 6. The tax authorities have taken the view that the "member" should be construed as a person who has subscribed to the shares and he should be entitled to participate in profits, entitled to vote and entitled to participate in the management of the society. Admittedly the Associate members are not entitle....
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....ssion "members" in Section 80-P(2)(a)(i) must, therefore, be construed in the context of the provisions of the law enacted by the State Legislature under which the cooperative society claiming exemption has been formed. It is, therefore, necessary to construe the expression "members" in Section 80-P(2)(a)(i) of the Act in the light of the definition of that expression as contained in Section 2(n) of the cooperative Societies Act. The said provision reads as under: "2. (n) 'Member' means a person who joined in the application for registration of a society or a person admitted to membership after such registration in accordance with the provisions of this Act, the rules and the bye-laws for the time being in force but a reference to ....
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....e Society Ltd. (supra)." 9. The above said decision of Hon'ble Supreme Court makes it clear that the term "member" has not been defied under the Income tax Act and hence its meaning should be construed in the context of the provisions of the law enacted by the State Legislature under which the cooperative society claiming exemption has been formed. As per sec. 2(f) of the Karnataka Co-operative Societies Act, 1959, the expression "member" is defined as under:- 2(f) "Member" means a person joining in the application for registration of co-operative society and a person admitted to membership after such registration in accordance with this Act, the rules and the by-laws and includes, a nominal and an associate member." Further,....
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....-12- 2020), the co-ordinate bench has expressed the following view:- "11. We have considered the rival submissions. We find that a sum of Rs. 93,36,928/- is interest paid to Associate Members. The CIT(A) has, however, made a reference to the decision of Hon'ble Supreme Court in the case of Citizens Co-operative Society Ltd., Vs. ACIT in appeal No.10245 of 2017 Dt. 08.08.2017 which was a decision referred in the context of allowing deduction u/s. 80P(2)(a)(i) of the Act. 12. We are of the view that the analogy so drawn by the CIT(A) is erroneous. The provisions of Sec.194A which are in relation to deduction of tax at source cannot be equated with the provisions of Sec. 80P(2)(a)(i) of the Act, which deals with deduction whi....