TaxTMI 
TaxTMI 
2025 (7) TMI 1036
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....MA43528C, MUMA45138C 2. Grounds taken by the assessee are identical in each of the appeal except for variation in the amount of demand raised. Accordingly, for the sake of brevity, grounds of appeal raised by the assessee in of the appeals in ITA No. 2571/Mum/2025 are reproduced as under: "1. In the facts and circumstances of the case, the lower authorities have erred in law as well as in fact treating assessee in default in respect alleged non- deduction of tax from interest paid to co-operative societies u/s. 194A of the Income Tax Act 1961. 2. Without prejudice to Ground No 1 above, the lower authorities have erred in law as well as in fact that interest received by co-operative societies is deductible u/s. 80P of the Act. Therefore, the requirement of TDS u/s. 194A is redundant hence TDS applicability u/s. 194A is infructuous. 3. The appellant craves leave to add, alter, omit or substitute any of the grounds at the time of hearing of the appeal." 3. Common issue is involved in all these 20 appeals which are identical in nature expect for various in the quantum of tax liability imposed on the assessee by holding the assessee as 'assessee in defau....
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....rest payments on time deposits, if the amount of such interest payment exceeds specified threshold of Rs. 10,000/-. Ld. AO did take note of provision contained in section 194A(3)(v) which provides a general exemption on making tax deduction from payment of interest by all the co-operative societies to its members and according to him, the same is not available to the assessee since it is a co-operative bank. He also took note of the amendment made under the Finance Act, 2020 wherein it is stated that co-operative bank is required to deduct tax at source on payment of interest to co-operative society after 01.04.2020. Ld. AO also took note of the factual position by considering that customer of the assessee are co-operative housing societies registered under the state and are not in the business of banking. The uncontroverted fact is that payment of interest by the assessee being a co-operative bank is to its customers who are co- operative housing societies registered under the state. 6. Based on the above observations and after taking into account the submissions made by the assessee, ld. AO computed the TDS liability along with interest thereon by holding the assessee as asses....
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....e society registered under the Co-operative Societies Act of the respective state for the purpose of registration of cooperative society. In order to carry on the business of the banking, it has been granted a banking licence from RBI and thus, is referred to as a co-operative bank. It is also a fact on record that assessee has made payment of interest to its customers who are co-operative housing societies on which tax deduction at source has not been done or if done, it is at lower rate than prescribed. 7.3 To deal with the issue in hand, it is worthwhile to refer to the provisions contained in section 194A which is reproduce below: "Interest other than "Interest on securities". ^72194A. ^73(1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying ^74to a resident any income ^74 by way of interest other than income ^75[by way of interest on securities], shall, at the time of credit of such income to the account of the payee ^76or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force : ^77[Provided that....
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....ance for construction or purchase of houses in India for residential purposes ^86[and which is eligible for deduction under clause (viii) of sub-section (1) of section 36] ^87[***]; ^88[***] the aforesaid amount shall be computed with reference to the income credited or paid by a branch of the banking company or the co-operative society or the public company, as the case may be :] ^89[Provided further that the amount referred to in the first proviso shall be computed with reference to the income credited or paid by the banking company or the co-operative society or the public company, as the case may be, where such banking company or the co-operative society or the public company has adopted core banking solutions:] ^90[Provided also that in case of payee being a senior citizen, the provisions of sub-clause (a), sub-clause (b), and sub-clause (c) shall have effect as if for the words " ^91[fifty] thousand rupees", the words " ^91a[one lakh] rupees" had been substituted. Explanation.- ^92[***]] (ii) ^93[***] (iii) to such income credited or paid to- (a) any banking company to which the Banking Regulation Act, 1949 (10 of....
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.... ^4[(viii) to such income credited or paid by the Central Government under any provision of this Act or the Indian Income-tax Act, 1922 (11 of 1922), or the Estate Duty Act, 1953 (34 of 1953), or the Wealth-tax Act, 1957 (27 of 1957), or the Gift-tax Act, 1958 (18 of 1958), or the Super Profits Tax Act, 1963 (14 of 1963), or the Companies (Profits) Surtax Act, 1964 (7 of 1964), or the Interest-tax Act, 1974 (45 of 1974);] ^5[(ix) to such income credited by way of interest on the compensation amount awarded by the Motor Accidents Claims Tribunal; (ixa) to such income paid by way of interest on the compensation amount awarded by the Motor Accidents Claims Tribunal where the amount of such income or, as the case may be, the aggregate of the amounts of such income paid during the financial year does not exceed fifty thousand rupees;] ^6[(x) to such income which is paid or payable by an infrastructure capital company or infrastructure capital fund or ^7[infrastructure debt fund or] a public sector company ^8[or scheduled bank] in relation to a zero coupon bond issued on or after the 1st day of June, 2005 by such company or fund or public sector compan....
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.... the first part/limb of the amended clause (v). Thus, in the first part/limb, the requirement for deduction of tax at source is waved on interest credited or paid by co-operative society to its members and the payer co-operative society is other than a co-operative bank. In the second part/limb, the waver is provided in respect of such interest credited or paid by a co-operative society to any other co-operative society. In this second part of the amended clause (v), the phrase 'Other than Co-operative Bank' is not included when compared with the first part. Thus, when the payment of interest is from a co-operative society to any other co-operative society, there is no requirement of deduction of tax at source. 8. In view of this it was thus submitted that assessee is a co- operative society duly registered under co-operative societies Act, holding banking licence issued by RBI for the conduct of its banking business. It has paid interest to other co-operative societies and no deduction of tax at source has been done in view of the provisions contained in clause (v) of Section 194A(3). 8.1. Reference is also made to clause 42 of the Explanatory Memorandum to Finance Bill, 201....
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....of the Baking Regulation Act, 1949 speaks about licence to be obtained by a bank to do banking business which is modified as per clause (o) of Section 56 of the Banking Regulation Act, 1949 which states that no co-operative society shall carry on banking business in India unless it is a co-operative bank and holds a licence issued in that behalf by RBI. 8.4. Further, Hon'ble Supreme Court made similar observations in its another decision in the case of Mavilayi Service Co-operative Bank Ltd. vs. CIT [2021] 123 taxmann.com 161 (SC). It was observed by the Hon'ble Court that u/s.22(1)(b) of the Banking Regulation Act, 1949, as applicable to co-operative societies, no co-operative society shall carry on banking business in India, unless it is a co-operative bank and holds a licence issued in that behalf by the RBI. Also, Hon'ble High Court of Gujarat in the case PCIT v. Shree Aradhana Urban Co-operative Credit Society Ltd. [2025] 172 taxmann.com 537 (Guj) observed that co- operative banks are primarily cooperative societies. 8.5. Accordingly, in the given set of facts and discussion made above both, considering the applicable provisions of the Act as well as judicial precedents ....