Ita/100047/2015 Of M/S Daivadnyasahakara Bank v. The Joint Commissioner Of Income Tax

IN THB HIGH COURT OF KARNATAKADHARWAD BENCH DATEBD THIS THE 1 DAY OF DECEMBER, 2015 PRESENT THE HON’BLE MR.JUSTICE S. ABDUL NAZEER AND THE HON’BLE MR.JUSTICE P.S.DINESH KUMARITA Nos. 100047 OF 201AND 100048"49/2015 IN ITA NO.100047/2015 BRIWEHENM/S.DAIVADNYA SAHAKARA BANK NIYAMITA.,NO.1169, SARAF GALLI, SHAHAPUR,BBRLAGAVI-590 003RBEPRBSEBENITBD BY ITS PRESID . APPBLLANT (BY SRI A. SHANKAR, ADV.) ANT THER JOINT COMMISSIONER OF [INCOTAX, CIRCLE-1,DR. B.R.AMBEDKAR ROAD,OPP. CIVIL HOSPITAL,BBLAGAVI-590 OO]. _.. RESPONDE (BY SRI Y.V.RAVIRAJ, ADV.) IN ITA NO.100048/2015 BRIWEHENM/S.DAIVADNYA SAHAKARA BANK NIYAMITA.,NO.1169, SARAF GALLI, SHAHAPUR,BELAGAVI-590 003,RBEPRBESEBENITBD BY ITS PRESI . APPBLLANT (BY SRI A. SHANKAR, ADV.) ANT THER JOINT COMMISSIONER OF [INCOTAX, CIRCLE-1,DR. B.R.AMBEDKAR ROAD,OPP. CIVIL HOSPITAL,BELAGAVI-590 OO].(BY SRI Y.V.RAVIRAJ, ADV.) ... RESPONDE IN ITA NO.100049/2015 BETWEEN: M/S.DAIVADNYA SAHAKARA BANK NIYAMITA.,NO.1169, SARAF GALLI, SHAHAPUR,BELAGAVI-590 003,RBEPRBESEBENITBD BY ITS PRESIAPPRLLANT (BY SRI A. SHANKAR, ADV.) AND THE ASST. COMMISSIONER OF [INCOMBTAX, CIRCLE-1,DR. B.R.AMBEDKAR ROAD, OPP. CIVIL HOSPITAL,BELAGAVI-590 OO]. ... RESPONDE (BY SRI Y.V.RAVIRAJ, ADV.) THESE [TA’s ARE FILED UNDER SECTION Q6O0A OF THINCOME TAX ACT, 1961 PRAYING TO SET ASIDE THEFINDINGS TO THR BXTEBENT AGAINST THE APPBLLANTS IN TORDER PASSED BY THE INCOME TAX APPELLATE TRIBUNAL,PANAJIBENCHPANAJLIN|ITA|NO.327/PNJ/2013,329/PNJ/2013 AND C.O.NO.31/ PNJ/2014 DATED 06.01.2015RELALING TO ASSHSSMENT YEAR JOO9-10. THESE ITAs COMING ON FOR ORDERS THIS DAY,P.S.DINESH KUMAR, J.2DELIVEREDTHERE FOLLOWIN JUDGMENT In these appeals filed by the assessee following two substantial questions of law are raised; (1)Whether the Tribunal erred in law indirecting the Assessing Officer to verilywhether the Appellant is following themercantileOThybrid|system94accounting without appreciating thelaw that interest on sticky and non-performing assets are not liable to betreated as income on the facts andcircumstances of the case? (2)Whether the Tribunal erred in law inholding that the Appellant was requiredto deduct tax at source on payment ofinterestOTltime-deposits CO 5.*membersOT]thefacts1-6circumstances of the case?holding that the Appellant was requiredto deduct tax at source on payment ofinterestOTltime-deposits CO 5.*membersOT]thefacts1-6circumstances of the case? a2ori A.Shankar, Learned counsel appearingfor the Assessee submits that in ITA No.471/2013disposed of on 30.06.2014, on the issue of interest onnon performing assets a Division Bench of this Courthas answered the substantial questions of law infavour of the Assessee by following the _ earlijudgment in the case ofCommissioner of IncomeTax, Central Circle, Bangalore /vs./ Canfin HomesLimited((201 1)201 TAXMAN273/13taxmann.Com 43(Karnataka) 3.Learned counsel for the appellants andrespondent agree that the issue involved in this appeal and ITA No.471/2013 are one and the same.Accordingly, this appeal is disposed off in like terms. 4In so far as the substantial question of lawwith regard to Section 194A, it is brought to the noticeof this Court by the learned counsel appearing for theAssesseethat|videCircular.No.19/2015|5-F.No.142/14/2015-TPL, the Ministry of Finance,Government of India, has clarified as under: “42.9 In view of this, the provisions of thesection 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 notapply to the payment of interest on timedeposits by the co-operative banks to itsmembers.As this amendment is effectivefrom the prospective date of 1[*.]June, 2015,the co-operative bank shall be required to 4In so far as the substantial question of lawwith regard to Section 194A, it is brought to the noticeof this Court by the learned counsel appearing for theAssesseethat|videCircular.No.19/2015|5-F.No.142/14/2015-TPL, the Ministry of Finance,Government of India, has clarified as under: “42.9 In view of this, the provisions of thesection 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 notapply to the payment of interest on timedeposits by the co-operative banks to itsmembers.As this amendment is effectivefrom the prospective date of 1[*.]June, 2015,the co-operative bank shall be required to deduct tax from the payment of interest ontime deposits of its members, on or aiter the1[*.]June, 2015. Hence, a cooperative bankwas not required to deduct tax from thepayment of interest on time deposits of itsmembers paid or credited before l[*.]June,2015.” Consequently, the finding of the Tribunal that the Co-operative banks were required to deduct tax at sourceis unsustainable. Accordingly, these appeals filed bythe assessee stands allowed. Sd/-Sd/-JUDGE. JUDGE. KLY/