It Act,1961? v. Thenational Co-Operative Bank Limited. In The Abovereferred Decision, This Court Observed Thus

IN THE HIGH COURT OF KARNATAKA AT BENGALURUDATED THIS THE 27[th]DAY OF JUNE, 2016 PRESENT THE HON'BLE MR. JUSTICE JAYANT PATEL| AND THE HON’BLE MR. JUSTICE B.SREENIVASE GOWDA I.T.A. NO.495/2015 BETWEEN: 1.THE COMMIssIONER OF INCOME -TAX TDS.,. NO.59, HMT BHAVAN, 4[‘L]KFLOOR| BELLARY ROAD, GANGANAGAR BANGALORE —- 560 O32. «|THE ASST.COMMISSIONER OF INCOME-TAX (TDS)| CIRCLE-16(2) NO.59, HMT BHAVAN, 4[‘L]KFLOOR| BELLARY ROAD, GANGANAGAR BANGALORE —- 560 O32. ... APPELLANTS| (BY SRI.DILIP, ADV. ANDORI.K.V. ARAVIND, ADV.) AND: THERE KARNATAKA STATE APECO-OPERATIVE BANK LTD.,PADMANABHANAGAR BRANCH.BANGALORE. _.. RESPONDENT THIS [TA FILED UNDER SECTION 260-A OF INCOME TAX|ACT 1961, ARISING OUT OF ORDER DATED 30.04.2015 PASSEDIN ITA NO.1412/BANG/2014, FOR THE ASSESSMENT YEAR.2011-2012. THIS APPEAL COMING ON FOR ORDERS THIS DAY,|JAYANT PATEL J.DBLIVBRED THR FOLLOWING: JUDGMENT This appeal is preferred by the Revenue by raising the following substantial questions of law. !*"Whether the Tribunal is right in law in.relying on Circular No.9/2002 when theSa INhasbeenquashedby|theHon.Mumbai High Court in the case ofJalgaonDistrictCentralCo-operativeBank Ltd.?relying on Circular No.9/2002 when theSa INhasbeenquashedby|theHon.Mumbai High Court in the case ofJalgaonDistrictCentralCo-operativeBank Ltd.? !**"Whether the Tribunal was correct inholding that Co-operative Bank are notliable to deduct tax on the interest paid to.its members on the ground that they areexempt u/s 194A(3)(v) of the IT Act,1961?|holding that Co-operative Bank are notliable to deduct tax on the interest paid to.its members on the ground that they areexempt u/s 194A(3)(v) of the IT Act,1961?| !***"Whether the Tribunal is right in law inoverlooking the established principle of‘generalia specialibus non derogant’ vis-a-V1S_thespecificprovisions|OT sec. 194A(3)(viia)(b) and general provisionsof Sec. 194A(3)(v) of the Act?overlooking the established principle of‘generalia specialibus non derogant’ vis-a-V1S_thespecificprovisions|OT sec. 194A(3)(viia)(b) and general provisionsof Sec. 194A(3)(v) of the Act? !*6"Whether the tribunal was correct in not.appreciating the fact that the provision ofsection 194A(3)(v) 1s a general provision|erantingbenefit.TOallco-operativesocieties,whereas,the.provisions OT Section194A(3)(1)(b)dealswith|=: operative society carrying on the business_of banking, hence specific provisions inany.CASEOVeTrTridethegeneralprovisions?”appreciating the fact that the provision ofsection 194A(3)(v) 1s a general provision|erantingbenefit.TOallco-operativesocieties,whereas,the.provisions OT Section194A(3)(1)(b)dealswith|=: operative society carrying on the business_of banking, hence specific provisions inany.CASEOVeTrTridethegeneralprovisions?” 2. We have heard Mr.Dilip for Sri K.V. Aravind,learned counsel appearing for the appellant-Revenue. 3. After hearing the learned counsel appearing forthe appellant-Revenue, we find that, the issues whicharise for consideration in the present appeal are alreadycovered by the decision of this Court dated 21.6.2016 inITA No.604/2015 and other matters in case of TheCommissioner of Income Tax and others Vs. TheNational Co-operative Bank Limited. In the above|referred decision, this Court observed thus: “Tnallmatters,theappellant-Revenuehas|preferred the appeals by raising following substantialquestions of law: “1. Whether the Tribunal is right in law inrelying on Circular No.9/2002 when thesame has been quashed by the Hon. MumbaiHigh Court in the case of Jalgaon DistrictCentral Co-Operative Bank Ltd.,? 2. Whether the Tribunal was correct in/holding that Co-Operative Bank are notliable to deduct tax on the interest paid to itsmembers on the ground that they areexempt U/s 194A(3)(v) of the IT Act 1961? “Tnallmatters,theappellant-Revenuehas|preferred the appeals by raising following substantialquestions of law: “1. Whether the Tribunal is right in law inrelying on Circular No.9/2002 when thesame has been quashed by the Hon. MumbaiHigh Court in the case of Jalgaon DistrictCentral Co-Operative Bank Ltd.,? 2. Whether the Tribunal was correct in/holding that Co-Operative Bank are notliable to deduct tax on the interest paid to itsmembers on the ground that they areexempt U/s 194A(3)(v) of the IT Act 1961? 3. Whether the Tribunal is right in law inoverlooking the established principle of‘generalia specialibus non derogant’ vis-a-visthe specific provisions of Sec. 194A(3)(viia)(b)and general provisions of 194A(3)(v) of theAct? 4 Whether the Tribunal was correct in not|appreciating the fact that the provision ofsection 194A(3)(v) is a general provisioneranting benefit to all co-operative societies,whereas,theprovisionsOT Section|194A(3)(i)(b) deals with co-operative society|carrying on the business of banking, henceSpecific provisions in any case overrides thegeneral provisions?”| 2. We have heard Mr.Aravind K.V., learnedcounsel appearing for the appellant. As such, if we seethe observations of the Tribunal in this regard, the considerations are at paragraphs 12 to 14 which reads as under: “19. We have heard the rival submissions. Atthe time of hearing of the appeal, it wasbrought to our notice by the learned counselfor the assessee that the Bangalore Bench ofITAT in the case of Bagalkot District CentralCo-opBank,VsJICIT(2014)48|taxmann.com 11/(Bangalore-Trib) held thatCo-Operative Societies carrying on bankingbusiness while paying interest to members.on time deposit and deposits other than timedeposits need not deduct tax at source U/S|194-A of the Act by virtue of exemption|eranted U/s 194-A(3)(v) of the Act. Thelearned DR relied on the stand taken by therevenue in the grounds of appeal filed beforethe Tribunal. 13.)WehaveconsideredtheTival|submissions. This tribunal in the case otf Bagalkot District Central Co-operative Bank(Supra)dealtwithidenticalissueandidentical stand taken by the revenue and theAssessee in the case of co-operative societyengaged in banking business and haveupheld identical order of CIT(A). The relevantobservations of the Tribunal in this regardwere as follows: “15.Wehave|givenaVCErTcaretulconsideration to the rival submissions. We'§are of the view that the submissions made'by the learned counsel for the AssesseedeservesTO beaccepted.As|rightly contended by him Sec. 194A(3)(1i)(b) of the Acis a provision which mandates deduction oftax at source by a co-operative Societycarrying on the business of banking, wherethe income in the form of interest which is paid by such society is in excess of tenthousand rupees. Sec.194A(3)(v) of the Actprovides that tax need not be deducted at|source where the income in the form ot!interest is credited or paid by a co-operativesociety to a member thereof or to any otherco-operative society. This provision thereforeapplies to all co-operative societies includingco-operative society engaged in the business—of banking. It is not possible to exclude co-operative society engaged in the business ofbanking|fromtheprovisionsOT SEC,194A(3)(v) of the Act on the ground that the)same is covered by the provisions of sec.194A(3)(i)(b) of the Act. Sec.194A(3)(v) of the|Act refers to payment by a co-operativesociety to a member and payment by a co-operative society to non-member continue tobegovernedbytheprovisions OT sec. 194A(3)(i)(b) of the Act. Similarly U/s.194A(3)(viia)(b) interest on deposits other|than time deposits even if the payment ismade to a non-member by a co-operativesociety, the co-operative society need notdeduct tax at source. Thus this. section|CaI VESOUTanother|exceptionCO sec. 194A(3)(i)(b) of the Act. We do not thinkthat any of the above provisions can becalled a general provision an other provisioncalled specific provisions. Each provision|over-lap and if read in the manner asindicated above, there is perfect harmony to the various provisions. We do not agree withthe view expressed by the Pune ITAT SMC inthe case of Bhagani Nivedita Sahakari BankLtd(supra) when it says that co-operativesociety aS mentioned in CL.(v) is a generalSpecies, whereas the other five categories ofco-operative societies which are specificallyreferred to in other provisions are specific|co-operativesocieties.Thefurtherconclusion in the said decision that the term‘co-operative society in CL.(v) of S.194A(3)_has to be interpreted as co-operative societyother than co-operative bank, is againunsustainable. The law is well settled that|by a process of interpretation one cannotadd on words that are not found in the text|of the statute. Such a course is permittedonly when there is “causes omisus”’. We donotthinkthat.theprovisionsOT sec. 194A(3)(v)suffersfromanyCauSeS omisus as has been interpreted by the ITATPune Bench SMG. 16. We are also oft the view that the decisionof the Hon’ble Kerala High Court in the caseof Moolamattom Electricity Board EmployeesCo-op Bank Ltd(supra) supports the plea ofthe Assessee before us. The petitioners inthat case were primary credit societiesregistered under the Kerala Co-operativesocieties Act. In view of the specific)provisions of Sec.194A(3)(viia) of the Act,they claimed that they need not deduct taxat source on interest paid. It was submitted|by the petitioner that sub-s.194A(3)(v) deals—with such income credited or paid by a co-operative society to a member whereas sub.s(3)(viia)(a) provides a total exemption todeposits with the primary credit society. TheHon’ble Kerala High Court accepted thereplea and in their judgment have observedthat|pec. 194A(3)(1)exemptionlimitoT Rs.10,000/- to interest paid on time depositswithco-operativesocietiesengaged|1nNcarrying on in business of banking is allowedbut that does not mean that all co-operativesocieties who have credited or paid exceedingRs.10,000/- are Hable to deduct tax at'|source. The Court held that co-operativesociety engaged in carrying on business ofbanking and primary credit societies standon different footing and belong to differentclass.Thatdoes|notInle€that.sec. 194A(3)(v) of the Act is applicable only toco-operative societies other than co-operativesocieties carrying on the business of bankingas observed in para 37 of its judgment thePune ITAT in the case of Bhagani Niveditasah Bank Ltd(supra). In fact in para 2 ofCircular No.9 dated: 11.09.2002, the CBDThas very clearly laid down that co-operativesocieties carrying on banking business whenit pays interest on deposits by its members.need not deduct tax at source in view of theprovisions of Sec.194A(3)(v) of the Act. 17. We also find that the CBDT in Circular.No.9 dated 11.09.2002 clarified certain|aspects which are relevant to the present|case. The same reads thus: GCircular No.9 of 2002“Sub: Tax deduction at source Under|Section 194A of the [Income Tax Act1961- Applicability of the provisions inrespect of income paid or credited to amember of co-operative bank — Reg. 11.09.2002 TDS | 194A| Under Section 194A of the Income Tax Act,1961, Tax is deductible at source from any)payment of income by way of interest otherthan income by way of interest on securities. ©Clause (V) of Sub Section (3) of Section.194A_exempts such income credited or paid by aco-operative society to a member thereotfrom the requirement of TDS. On the otherhand, clause(viia) of Sub Section(3) ofsection 194A exempts from the requirementof TDS such income credited or paid in|respect of deposits (other than time-deposits_made on or after 1[+5]July, 1995) with a co-operative society engaged in carrying on thebusiness of banking. 2. Representations have been received in theBoard seeking clarification as to whether amember of a co-operative bank may receivewithout TDS interest on time deposit madewith the co-operative bank on or after l[+5]July, 1995. The Board has considered thematter and it is clarified that a member of a'co-operative bank shall receive interest on|both time deposits and deposits other thantime deposits with such co-operative bank| 2. Representations have been received in theBoard seeking clarification as to whether amember of a co-operative bank may receivewithout TDS interest on time deposit madewith the co-operative bank on or after l[+5]July, 1995. The Board has considered thematter and it is clarified that a member of a'co-operative bank shall receive interest on|both time deposits and deposits other thantime deposits with such co-operative bank| without TDS Under Section 194A by virtue ofexemption granted vide clause (v) of Subsection (3) of the said _ section. Theprovisions of clause (viia) of the said SubSection are applicable only in case of a non-member depositor of the co-operative bank,|who shall receive interest only on deposits.other than time deposits made on or after 1[+5]July, 1995 without TDS Under Section 194A. 3. A question has also been raised as to|whethernorma!members,associatemembers and sympathizer members are alsocovered by the exemptions Under Section194A(3)(v). It is hereby clarified that the)exemption is available only to such members—who have joined in application for theregistration of the co-operative society andthose who are admitted to membership aiterregistration in accordance with the bye-laws—and rules. A member eligible for exemptionUnderSection194A(3)(v)MUSThavesubscribed to and fully paid for at least oneShare of the co-operative bank, must beentitled to participate and vote in the|General|BodyMeetings|and/or|SpecialGeneral Body Meetings of the co-operativebank and must be entitled to receive share|from the profits of the co-operative bank. |F.No.2795/106/2000-IT(B)](2002) 177 CTR (St) 1°. (2002) 177 CTR (St) 1°.18. It can be seen from para 2 of the Circular|refered to above that the CBDT has veryClearly laid down that co-operative societiescarrying on banking business when it pays.interest on deposits by its members need not deductTAX|AT|SOUTCE.Theabove.interpretation of the provision by the CBDTwhich is in favour of the Assessee, in ourview 1S binding on the tax authorities. 19. In the case decided by ITAT Panaji Bench|in ITA No.85/PN/2013 for AY.O9-10 in thecase of the Bailhongal Uraban Co-op BankLtd Vs. JCIT order dated 28.08.2013, theTribunal proceeded on the footing that theaforesaid Circular has been quashed by theHon’ble Bombay High Court in the case ofThe Jalgaon District Central Co-OperativeBank Ltd. Vs. Union ot India 265 I[TR423(Bom) and therefore choose to follow thedecision rendered by Pune ITAT SMC in thecase of Bhagani Nivedita Sahakari BankLtd(supra). In our view the Hon’ble BombayHigh Court in the case of Jalgaon DistrictCentral Co-Operative Bank Ltds case was|dealing with a case of challenge to para 3 ofCBDT Circular No.9 dated: 11.09.2002|which tried to interpret the word “member”|as given in Sec.194A(3)(v) of the Act. It isonly that part of the Circular that had beenquashed by the Hon'ble High Court and theother paragraphs of the Circular had noconnection with the issue betore the Hon’ble|Bombay High Court. How could it be saidthat the entire Circular has been quashed bythe Hon’ble Bombay High Court? In ourview para 2 of the Circular still holds goodand the conclusion of the ITAT Pune Bench|in the case of the Bailhongal Uraban Co-opBank Ltd(supra) are not factually correct. —Consequently, the conclusions drawn in the aforesaid decision also contrary to facts andhence cannot be considered as precedent. aforesaid decision also contrary to facts andhence cannot be considered as precedent. 20. The learned counsel for the ASssessee asbroughtCO OUTnoticethat|theITATVishakapatnam Bench in the case of The|Vishakapatnam Co-operative Bank ITA No.and 19 ot 20O11 order dated: 29.08.2011 asheld that co-operative societies carrying onbanking business when it pays interest to itsmembers on deposits it need not deduct tax|at source in view of the provisions ofsec. 194A(3)(v) of the Act. Similar view hasalso been expressed by the Pune Bench ofthe ITAT in the case ot Ozer Merchant Co-operative Bank ITA No.1988/PN/2012 orderdated 30.10.2013. We may add that in boththese decisions the discussion did not turn|on the interpretation of Sec.194A(3)(i)(b) ofthe Act vis-a-vis Sec.194A(3)(v) of the Act. Itis thus clear that the preponderance ofjudicial opinion on this issue is that co-operative societies carrying on bankingbusiness when it pays interest to itsmembers on deposits need not deduct tax at|SOUTCE1nNVIEW|oT the.provisionsoT sec. 194A(3)(v) of the Act. | 21. For the reasons given above, we holdthat the Assessee which is a co-operative|society carrying on banking business when itpays interest income to a member both on.time deposits and on deposits other than thedeposits with such co-operative society neednot deduct tax at source Under Section 194A|by virtue of the exemption granted vide Clause (V) of Sub Section (3) of the saidsection”| "22. In our view the above decision renderedbytheco-ordinatebench1S|squarelyapplicable to the facts of the present case. —In fact the CIT (A) in canceling the order ofthe AO has placed reliance on the aforesaid|decision. Respectfully following the decisionof the co-ordinate bench referred to above,we uphold the order of the CIT (A).” 3. The aforesaid shows that the Tribunal wasbound by its earlier decision in case of Bagalkot DistrictCentral Co-operative vs. JCIT (2014) 48 TAxmann.com117. When we further enquired from the learned)counsel for the Revenue as to whether the decision ofthe Tribunal was carried by the Department before thisCourt or not and in response thereto, the learnedcounsel for the appellant has brought to our notice thedecision of this Court dated 16.12.2015 in ITA!100116/2014 whereby, the view taken by the Tribunalhas not been interfered with. We may record that thisCourt in the above referred decision observed thus: “In this appeal by the Revenue, the issueinvolved is for consideration whether the Co-operative Bank was required to deduct taxwhile paying interest to its members on timedeposits under Section 194-A of the Income|Tax Act. 2. The Ministry of Finance, Government ofIndia|videCircular.No.19/2015InF.No.142/14/2015- TPL, has held that the|Co-operative Banks are not required todeduct tax at source on time deposits of its|members paid or credited on or _ betor1.7.2015. The relevant portion of the circularreads as under: | “42.9. In view of this, the provisions of the|section 194A(3)(v) of the Income-tax Act havebeen amended so as to expressly providethat the exemption provided from deductionof tax from payment of interest to membersby a co-operative society under section194A(3)(v) of the Income-tax Act shall not)apply to the payment of interest on timedeposits by the co-operative banks to itsmembers.As this amendment is effectivefrom the prospective date of 1[+5]June, 2015,the co-operative bank shall be required todeduct tax from the payment of interest ontime deposits of its members, on or aiter theIst June, 2015. Hence, a cooperative bank|was not required to deduct tax from thepayment of interest on time deposits of itsmembers paid or credited before l[+5]June,|2015.” 3. In view of the aforesaid circular, thisappeal does not survive for considerationand is accordingly dismissed. No costs.” 3. In view of the aforesaid circular, thisappeal does not survive for considerationand is accordingly dismissed. No costs.” 4. As such, in view of the referred decision of thisCourt in case of Bagalkot District Central Co-operativeBank referred supra, when the question is alreadycovered by the decision of this Court, it cannot be saidthat any substantial question of law would arise forconsideration. — Oo. However, the learned counsel appearing for theappellant-Revenue made an attempt to contend andreiterate the same contention that in view of specialprovision Section 194A(3) (b), the general exemption asprovided under 194A(3) (v), would not be applicable forthe Co-operative Banks and he contended that the viewtaken by the Tribunal cannot be said as correct viewand this Court may independently consider the matterand may hold that in view of specific provision generalexemption would not be available to co-operative bank. Hence the TDS from the interest exceeding the amount of Rs.10,0O00/- was required to be deducted by therespondent-assessee in the present case which is a co-operative bank. 6. As such, we are not impressed by thesubmission that there is any specific provision and.therefore general exemption would not apply for thesimple reason that the word ‘Members’ is missing inClause (b). Further, in Circular No.19/2015 dated27.11.2015 at paragraph 42.5 it has been)inter aliamentioned as under: .....Hence, the Co-operative Bankwas not required to deduct tax from thepayment of interest on the time deposits ofits members paid or credited before first|June 2O1)D’. 7. Under the circumstances, the question of Specific provision as against general provision would notarise for further consideration. Hence, we find that no) 17 substantialquestions|oT|lawwolullarise for 4. In view of the aforesaid reasons, the question ofSpecific provisions aS against general provision wouldnot arise for consideration. Hence, we find that, no substantialquestionsOT lawwould|ATISe|forconsideration. Under circumstances, this appeal isdismissed. AP Sd/-JUDGE JUDGE Sd/-. JUDGE