The Income Tax Appellate Tribunal ( ITAT ), Pune bench has held that a co-operative bank has no obligation to deduct TDS on the interest payments made to the members.
The assessee, Mahesh Urban Co-operative Bank Ltd, has challenged the lower authorities action invoking section 40(a)(ia) interest payment disallowance of Rs.2,00,095/- on account of non-deduction of TDS regarding payments made to members /non-members. The assessee relied on the landmark decision in the Mavilavi Service Cooperative Bank Ltd. V/s. CIT wherein the Supreme Court has settled the law regarding the alleged distinction between members and nominal-members; as the case may be, regarding section 80P deduction claim; against the department.
Rejecting the arguments of the department, Shri S.S.Godara, JM And Shri G.D. Padmahshali, AM observed that “the factual position is hardly different on merits as well wherein Mr. Jasnani strongly supported the learned lower authorities’ conclusion that the assessee had failed to deduct TDS on its interest payments. We find no merit in the Revenue’s instant arguments as we are in assessment year 2010-11 whereas “a cooperative bank” has been excluded from the purview of section 194(A)(3)(v) vide Finance Act 2015 w.e.f. 01.06.2015 only.”
Concluding the order in favour of the assessee, the ITAT held that “This is coupled with the fact that hon’ble jurisdictional high court in (2004) 134 taxmann.com 1 (BOM) Jalgaon district Central Co-operative Bank Ltd., V/s Union Of India has quashed the CBDT’s circular dated 11.09.2002 as ultra vires violating section 119 of the Act. Their lordship’s further decisions in ITA No. 100001 of 2014 dated 16.12.2015 in The Bailhongal Urban Cooperative Bank Ltd., V/s. CIT and Tax Appeals No. 3 to 9 and 11 of 2015 dated 07.03.2017 in Saraswat co-operative Bank V/s. ITO take note of forgoing legislation developments to hold that a co-operative bank/ assessee has no liability to deduct TDS on interest payments made to members. We thus delete the impugned section 194A r.w.s. 40 (a)(ia) disallowance of Rs. 2,00,095/- in very terms therefore.”
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