The Pr. Commissioner Of Income Tax,Having Office At Aayakar Bhavan,Patto-Plaza, …Panaji Goa v. Dama Seshadri Naidu, Jj

IN THE HIGH COURT OF BOMBAY AT GOA TAX APPEAL NO.14 OF 2017 The Pr. Commissioner of Income Tax,having office at Aayakar Bhavan,Patto-Plaza, …Panaji Goa. Appellant Versus The Goa State Cooperative Bank Ltd.,Dayanand Smriti Bldg.,Dr. A. B. Road,Panaji Goa. PAN : …Respondent Ms. Susan Linhares, Standing Counsel for the Appellant. Mr. S. R. Rivankar, Senior Advocate with Mr. Rama Rivankar, Advocatefor the Respondent. Coram:- M. S. SONAK & DAMA SESHADRI NAIDU, JJ. Date:- 7th January, 2021 ORAL JUDGMENT( Per M. S. Sonak, J) Heard Ms. Susan Linhares, learned Standing Counsel forthe Appellant and Mr. S. R. Rivankar, learned Senior Advocate withMr. Rama Rivankar for the Respondent. 2 TXA14-17dt.07.01.2021 2.The learned counsel for the parties submit that this matteris required to be detagged from the connected matters because the issuein this matter is not common with the issue involved in the connectedmatters. Accordingly, we have detagged this matter from the connected matters. th February, 2018 on four February, 2018 on four 3.This appeal was admitted on 26th February, 2018 on four February, 2018 on foursubstantial questions of law which are set out in the said order. However,the learned counsel for the parties point out that none of these questionsarise in the present appeal and such questions were framed, on accountof incorrect tagging of this matter along with other matters which werepresumed to be connected to this matter. 4.Ms. Linhares, learned counsel for the Appellant submitsthat the substantial question of law which arises in this appeal is the oneset out in paragraph 5 (c) of the appeal memo and the same reads as follows:- “Whether the ld. ITAT has erred in not appreciating thatthere is nothing in 194A(3)(i)(b) or 194A(3)(viia)(b) torestrict their application to only non members particular when the legislature has not so intended and theexplanatory memorandum to these clauses also does notbring out any such restricted interpretation.” 5.Mr. Rivankar, learned Senior Advocate for the Respondentalso agrees that the issue involved in the present appeal is the one set out 3 TXA14-17dt.07.01.2021 at paragraph 5(c) of the appeal memo. He however submits that thisvery issue had been decided in favour of Respondent – Assessee inrelation to Assessment Year 2013-2014 and 2014-2015, inter alia by theIncome Tax Appellate Tribunal (ITAT). He submits that as against thedecisions of the ITAT, the Appellant-Revenue had in fact instituted theappeals before this Court. However, on 11th April, 2016 such appealswere withdrawn by the Revenue. He therefore submits that there oughtnot to be any inconsistent decision in so far as the Assessment Year2012-2013 is concerned and therefore, this appeal may be dismissed on this ground alone. 6.Ms. Linhares points out that the appeals pertaining to theAssessment Years 2013-2014 and 2014-2015 were withdrawn by theRevenue on the ground that the tax effect involved in the said appealswas less than that prescribed by the CBDT Circular. In any case, shesubmits that in such matters the principle of res judicata is not attractedand therefore there can be no bar to maintainability of the presentappeal. 7.Accordingly, we proceed to frame the aforesaid question asset out in paragraph 5(c) of the appeal memo as substantial question oflaw in the present appeal and proceed to decide the same. 8.In this case, the Respondent – Assessee filed his return of income 4 TXA14-17dt.07.01.2021 this ground alone. 6.Ms. Linhares points out that the appeals pertaining to theAssessment Years 2013-2014 and 2014-2015 were withdrawn by theRevenue on the ground that the tax effect involved in the said appealswas less than that prescribed by the CBDT Circular. In any case, shesubmits that in such matters the principle of res judicata is not attractedand therefore there can be no bar to maintainability of the presentappeal. 7.Accordingly, we proceed to frame the aforesaid question asset out in paragraph 5(c) of the appeal memo as substantial question oflaw in the present appeal and proceed to decide the same. 8.In this case, the Respondent – Assessee filed his return of income 4 TXA14-17dt.07.01.2021 for Assessment Year 2012-2013 declaring total income of 88,83,130/-.₹This was followed by a revised return declaring a loss of 6,91,77,785/-.₹The case was selected for scrutiny and due notice under Section 143(2)of the Income Tax Act, 1961 (IT Act) was issued to the Assessee. In thecontext of substantial question of law now framed, suffice to state thatthe Assessing Officer disallowed the interest of 27,09,30,388/- paid to₹various members of the Society ( where individual interest amountexceeded 10,000/-) in terms of Section 40(a)(ia) on the ground that₹the Assessee failed to deduct tax at source on the said amount anddeposit the same in the Government treasury on or before the due date.For this purpose, the Assessing Officer relied upon the provisions ofSection 194A(3)(i)(b) of the IT Act. 9.The Assessee appealed the Assessment Order dated 27thFebruary, 2015, and the Commissioner of Income Tax (Appeals)reversed the Assessment order. The CIT (Appeals) relied on theprovisions of Section 194A(3)(v) of the IT Act as they obtained duringthe Assessment Year 2012-2013 to hold that the provisions of Section194A(1) were not at all applicable to the income credited or paid by aco-operative society to its members. The CIT (Appeals) also made areference to the decision of ITAT, Panaji Bench in the case of Goa StateCo-operative Bank, which is incidentally the Respondent – Assessee inthe present matter as well ( ITA Nos. 123 to 137/PNJ/2015 ) as well asCircular No. 9/2002 issued by the CBDT which had clarified that the 5 TXA14-17dt.07.01.2021 provisions of TDS are not enforceable in respect of interest paid by theCo-operative Society/Bank to its members but tax has to be deductedfrom the interest paid to the non-members. 10.The Revenue appealed to the ITAT, which has by orderdated 20th January, 2016 dismissed the appeal of the Revenue andconfirmed the view taken by the CIT (Appeals). Hence, the presentappeal. 11.The liability to deduct tax at source arises from theprovisions of Section 194A(1) of the IT Act. However, 194A(3) providesthat the provisions of sub-section (1) of Section 194A will not apply incertain contingencies. One of the contingencies is provided in sub clause(v). This contingency relates to income credited or paid by a co-operative society to a member thereof. There is no dispute that this wasthe position for the Assessment Year 2012-2013 and therefore, we feelthat the CIT (Appeals) as well as the ITAT were quite right in reversingthe Assessing Officer's order and holding that there was no liability fordeducting tax at source in respect of amount of interest paid by the co-operative society to its members, even though such amount may haveexceeded 10,000/-. ₹ 12.No doubt, by the Finance Act, 2015 which entered intoforce with effect from 01.06.2015, clause (v) of Section 194A(3) came 6 TXA14-17dt.07.01.2021 12.No doubt, by the Finance Act, 2015 which entered intoforce with effect from 01.06.2015, clause (v) of Section 194A(3) came 6 TXA14-17dt.07.01.2021 to be amended and the exemption from application of provisions of sub-section (1) of Section 194A was restricted to co-operative society otherthan a co-operative bank. This subsequent amendment, will howevernot apply for the Assessment Year 2012-2013 with which we areconcerned in the present case. Further, the very fact that the Legislaturehad to step in and specifically exclude the co-operative banks with effectfrom 01.06.2015, indicates that prior to the said date the benefits ofexemption were very much available to the co-operative banks like theAssessee as well. 13.For the aforesaid reasons, we see no error whatsoever in theview taken by the CIT (Appeals) and the ITAT in this matter. Thesubstantial question of law as now framed is therefore required to beanswered against the Revenue and in favour of the Assessee. 14.as to costs. As a result, we dismiss this appeal. There shall be no order DAMA SESHADRI NAIDU, J. M. S. SONAK, J at*