TaxTMI 
TaxTMI 
2024 (6) TMI 1606
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.... 143(3) 24.12.2019 3. 768/Kol/2023, AY 2017-18 10.06.2023 201(1)/201(1A)16.03.2018 2. Grounds of appeal raised by the assessee in ITA No. 766/Kol/2023 are reproduced as under: "1. THAT on facts of the case, the Ld. Commissioner of Income Tax (Appeals)- NFAC, Income Tax Department was wrong and not justified by confirming the order passed by the Ld. Assistant Commissioner of Income Tax(OSD)(TDS), Ward-5(3), Darjeeling on 16-03-2018 u/s.201(1)/201(1A) of the Income Tax Act, 1961 demanding Rs.26,24,748/- for non deduction of tax at source under section 194A and Rs. 77,12,381/- for interest u/s.201(1A) of the Income Tax Act, 1961 though no tax was deductible in terms of exemption provided u/s. 194A(3)(v) of the Income Tax Act, 1961 even after amendment in said section w.e.f. 01.06.2015. 2. THAT on facts of the case, the Ld. Commissioner of Income Tax (Appeals)- NFAC, Income Tax Department was wrong and not justified by confirming the demand of Rs.77,12,381/- for interest u/s.201(1A) of the Act, which was wrongly calculated on the amount of interest paid without TDS instead of amount of TDS default and as a result wrongly and illegally abnormally highe....
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....e Income Tax Act, 1961 for non deduction of tax at source under section 194A of the Income Tax Act, 1961 on the amount of Rs.2,48,33,642/- though no tax was deductible in terms of exemption provided u/s. 194A(3)(v) of the Income Tax Act, 1961 even after amendment of said section w.e.f. 01.06.2015. 2. THAT on facts of the case, the Ld. Commissioner of Income Tax (Appeals)- NFAC, Income Tax Department was wrong and not justified by not considering and ignoring that all the payees to whom interests were paid, are co-operative societies and no tax was deductible even after amendment in section 194A(3)(v) of the Income Tax Act, 1961 w.e.f. 01.06.2015. 3. THAT on facts of the case, the Ld. Commissioner of Income Tax (Appeals)- NFAC, Income Tax Department was wrong and not justified by not considering and ignoring clear instruction given in Paragraph-42.7 of Circular No.19 of 2015 that the existing exemption provided under section 194A(3)(v) of the Income-tax Act from deduction of tax from interest paid by a co-operative society to another co-operative society shall continue to apply to the co-operative bank and, therefore, a co-operative bank shall not be required to de....
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....ere paid, are co- operative societies and no tax at source was deductible even after amendment in section 194A(3)(v) of the Income Tax Act, 1961 w.e.f. 01.06.215. 5. That on the facts of the case, the ld. AO(TDS) has erred in law by initiating proceedings under section 201(1) and 201(1A) of the I.T.Act,1961 without satisfying himself as to whether the deductee/ payee assessee has failed to pay taxes directly, which has been held as foundational and jurisdictional fact and only after finding that deductee/payee assessee has failed to pay tax directly, deductor i.e. the appellant can be deemed to be an assessee in default in respect of such tax and the very initiation of proceedings would be without jurisdiction and all subsequent action would be without jurisdiction and would be null and void. 6. THAT your petitioner reserves the right to prefer further ground(s) and/ or delete/ modify ground(s)/ arguments, submit documents before the final disposal of this appeal." 5. Since the issues in ITA Nos. 768 and 766/Kol/2023 are similar and the issue in ITA No. 767/Kol/2023 arises out of the disallowance confirmed relating to ITA No. 768/Kol/2023, therefore, all the ap....
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....rders were passed on 16/03/2018 raising demand of- Rs.26,24,748/- u/s.201(1) and Rs.77,12,381/- for interest u/s. 201(1A) for the A.Y. 2016-17 and Rs. 24,83,365/- u/s.201(1) and Rs.61,43,215/- for interest u/s. 201(1A) of the Act for the A.Y. 2017-18. The said order was subsequently rectified u/s. 154 of the Act on 30-03-2018 for both the years reducing interest amount to Rs. 7,84,206/- u/s. 201(1A) for A.Y. 2016-17 and Rs. 4,50,672/- u/s.201 (LA) for A.Y. 2017-18 of the Act keeping intact the default amount Rs. 26,24,748/- and Rs. 24,83,365/- u/s.201(1) of the Act. Even normal period of 30 days for paying the amount was also not allowed instead 7 days time was allowed after obtaining approval from Additional Commissioner of Income Tax and the amount was recovered by adopting coercive method of attaching appellant's bank account. Penalty proceedings u/s.271C of the Act was also initiated for both the years. Assessment for the A. Y. 2017-18 u/s.143(3) of the Act was completed 24-12-2019. The same issue again cropped up during the course of assessment and interest paid to other co-operative societies Rs. 74,50,100/- being 30% of interest paid Rs. 2,48,33,642/- was disallowed u/s.....
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.... Explanation- For the purpose of this section, where any income by way of interest as aforesaid is credited to any account, whether called interest payable account or "Suspense Account" or by any other name, in the books of account of the person liable to pay such income to the account of the payee and the provisions of this section shall apply accordingly. (2) [Omitted by the Finance Act, 1992, w.e.f. 1-6-1992] (3) The provision of sub-section (1) shall not apply- " (i) (ii) .. (v) To such income credited or paid by a co-operative society to a member thereof or to such income credited or paid by a co-operative society to any other co-operative society; "Explanation-For the purpose of this clause "co-operative bank " shall have the same meaning as assigned to it in Part V of the Banking Regulation Act, 1949 (10 of 1949;" Finance Act, 2015 made amendment in clause (v) of sub-section (3) of section 194A and the amended clause (v) is reproduced below. "(v) To such income credited or paid by a co-operative society (other than a co- operative bank) to a member thereof or to such income credited or paid ....
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.... of both the Ld. AO (TDS) and the Ld. CIT(A)-NFAC that the provisions of the Finance Act, 2015 were explained in circular No. 19 of 2015 dated November 27, 2015 issued by the Central Board of Direct Taxes to clear any confusion. The reason why a cooperative bank was excluded in the first part of clause (v) was duly explained in the said circular under paragraph 42.1 to 42.5." 10. The assessee has reproduced para 42 of Circular 19/2015 dated 27.11.2015, sub paras 42.5 to 42.7 are reproduced as under: "42.5 In view of this, the provisions of the section 194A(3)(v) of the Income-tax Act have been amended so as to expressly provide that the exemption provided from deduction of tax from payment of interest to members by a co-operative society under section 194A(3)(v) of the Income-tax Act shall not apply to the payment of interest on time deposits by the co-operative banks to its members. As this amendment is effective from the prospective date of 1st June, 2015, the co-operative bank shall be required to deduct tax from the payment of interest on time deposits of its members, on or after the 1st June, 2015. Hence, a cooperative bank was not required to deduct tax from the p....
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.... the second part of clause (v) of section 194A(3) and Para 42.7 of the said explanatory circular. 12. It is further stated that it may not be irrelevant to mention here that in most of the cases the exemption/relief granted to Co-operative Societies under different sections of Income Tax, in particular section 80P are allowed only if those transactions are done with members only. But the Ld. AO (TDS), W-5(3), Darjeeling as well as the Ld. CIT(A)-NFAC failed to appreciate that explanation in Para 42.7 in Circular No. 19 of 2015 dated November 27, 2015 was given after taking into consideration the explanation in Para 42.5 and also to avoid any confusion regarding the intent of the legislation. The object of amendment was not directed to place a member co-operative society in less privileged situation than a non-member co-operative society and to take away the exemption/relief granted u/s.194A(3)(v) to a member co- operative society and a co-operative bank which is also a co-operative society. Thus, the assessee submits that the Ld. A.O. has also erred in law by declaring the assessee, an assessee in default u/s. 201(1) of the Act. 13. Explanation to section 191 of the Income Ta....
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.... a cooperative bank to another cooperative society being a member was exempted from the purview of TDS but due to amendment in the Act, the interest paid by cooperative society to its members was exempted w.e.f. 01.06.2015. However, cooperative bank was excluded and interest paid by a cooperative society to another cooperative society was exempted. There was a survey on 23.10.2017 it was an inspection/spot verification carried out at the head office at Rishi Road, PO & Dist. Kalimpong-743301 on the basis of which the AO worked out the interest paid/credited to its members cooperative bank branch wise. There was a clarification issued by the CBDT in clause 42(5), an extract from which has been reproduced above and it is submitted that para 42.7 was applicable to the assessee as all the interest was paid to cooperative societies. The Ld. DR relied upon the decision in the case of ITO Vs. The Ludhiana Central Cooperative Bank Ltd. ITA Nos. 798 to 801/Chd/2016, AY 2012-13 dated 28.11.2016 and submitted that since all these are time deposits, therefore, the assessee was liable to deduct tax at source. 17. We have gone through the rival submissions and also the contents of circular 19....