The Income Tax Appellate Tribunal, Hyderabad bench has recently observed that section 194A(3)(v), is applicable to the cooperative societies and not cooperative banks. The ITAT was deciding an appeal filed by an Urban Cooperative Bank having its head quarters at Warangal. It filed its return of income of Rs. 50,70,880/-by claiming deduction in respect of Rs. 1,52,36,988/-being the interest paid on time deposits. In the scrutiny assessment, the AO made disallowance of, the said amount u/s 40(a)(ia) of the Income-tax Act, 1961 on ground that that such payment is liable to tax deduction u/s 194A and the assessee has not deducted the said amount. AO also observed that the assessee claimed exemption from TDS u/s 194A(3)(v). However, this provision is general in nature. There are specific provisions194A(3)(i) and 194A(3)(viia) which clearly specify that TDS is deductible on interest paid by a cooperative bank.
On appeal, the CIT(A), after considering the submissions of the assessee and referring to the provisions of section 194A as well as CBDT Circular No. 09 dated 11/09/2002, the CIT(A) deleted the disallowance made by the AO and held that the interest payments made below Rs. 10,000, the TDS provisions are not applicable. The interest payments made to member shareholders are exempt u/s 194A(3)(viia). With reference to interest payment to nonmembers they are again not liable to TDS as the amount was already paid during the FY and the same was not payable as on 31.03.2012. Against the said order, the Revenue preferred an appeal before the Appellate Tribunal.
The Tribunal bench comprising of Vice President D.Manmohan and Accountant Member Rifaur Rahman found that, the assessee had paid Rs. 64,89,904/- to the depositors, which is less than Rs. 10,000/- limit, which is exempt from TDS provision u/s 194A(3)(i) of the Act.It was further observed that “under section 194A(3)(v), it is clear that it is applicable to the cooperative societies and not cooperative bank. In the present case, assessee is a cooperative bank. At the same time reading the sub-section 194A(3)(viia), it explains the type of deposits which is eligible for exemption. In the present case, we are not sure, whether these deposits are time deposits or other deposits of member/shareholders of the assessee.” The matter was therefore, remanded to the Assessing Authority to verify the type of deposits.
With regard to interest payment of Rs. 20,50,008 to the non-members, the Tribunal opined that if the assessee had collected form 15G, it should be made available to the AO so that it can be verified and exemptions may be granted to the assessee.
Read the full text of the order below.
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