The Income Tax Appellate Tribunal (ITAT), Pune Bench has held that Cooperative bank share eligible for Tax Deduction at Source (TDS) exemption under section 194A for deposits by nominal members.
The appellants are a group of cooperative banksregistered under the provisions of the Maharashtra Cooperative Act andare engaged in the business of banking. The Assessing Officer made an addition under the provisions of section 40(a)(ia) alleging that the assessee had failed to deduct TDS on the interest paid on deposits received. On appeal the CIT(A) confirmed the addition, hence the appellant approached the ITAT.
Before ITAT, the counsel for the appellant submitted that any person who had done any transaction of business of banking with the appellant society is entitled to become a nominal member as per the bye-laws of the appellant society.The term “member of co-operative society” includes “nominal members” as per the provisions of the Maharashtra Cooperative Societies Act.
The Coram of Mr. Inturi Rama Rao, Accountant Member,and Mr. S. S. Viswanethra Ravi, Judicial Member observed that the cooperative bank is also a specie of cooperative societies, and is entitled to the benefit of general exemption provided to all the cooperative societies from deduction of tax on payment of interest to its members.
The Tribunal further observed that the provisions of the Maharashtra Cooperative Societies Act provide that the members include nominal members and, therefore, no reason for the denial of the exemption under clause (v) of sub-section (3) of section194A of the Act.
The division bench has held that “the reasoning of the lower authorities cannot be appreciated in the eyes of law. Accordingly, the orders of the lower authorities are hereby reversed and direct the Assessing Officer to delete the addition made u/s 40(a)(ia) of the Act for non-deduction of TDS on interest paid on deposit received from the nominal members of the society”.
Mr. Pramod Shingteand Mr. M. G. Jasnani appeared on behalf of the appellants and the respondent respectively.
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