Union Of India v. Mohta & C. V. Bhadang, Jj

IN THE HIGH COURT OF BOMBAY AT GOA TAX APPEALS NO.3,4,5,6,7,8,9 & 11 OF 2015 Saraswat Co-operative Bank Ltd.Samadevi Galli (TAN ),Through its Managing Director, Mr. Samir Kumar Banerji, A/c Dept, Plot 953, Appasaheb Marathe Marg, Prabhadevi, Mumbai 400025. PAN : [ ]V/s …. Appellant 1. Income Tax Officer, TDS Ward, Belgaum. TDS Ward, Belgaum. 2. Union of India, Through the Secretary (Revenue), Ministry of Finance, North Block, New Delhi. …. Respondents Ms. Vinita Palyekar, Advocate for the Appellant. Ms. Amira Razaq, Junior Standing Counsel for the Respondents. Coram:- ANOOP V. MOHTA & C. V. BHADANG, JJ. Date:- 7[th] March, 2017 ORAL JUDGMENT :(Per ANOOP V. MOHTA, J.) Called out from final hearing Board. Heard finally by consent ofthe parties. Both the Counsel appearing for the respective parties havesubmitted that all the above tax appeals can be disposed off by acommon order as common issues are involved. Therefore this commonjudgment. The Ministry of Finance, Government of India through txa nos.3 to 9 & 11 of 2015Explanatory Notes to the Provisions of the Finance Act, 2015 dated27/11/2015 has clarified about the obligation of the Co-operative Bankfrom deduction of tax at source under Section 194A of the Income TaxAct (The Act). Reliance is also placed on a supporting judgment ofDivision Bench dated 16/12/2015 in ITA No.100001 of 2014 in TheBailhongal Urban Cooperative Bank Ltd. V/s. The Commissioner ofIncome Tax & Anr. 2.Impugned orders by the Income Tax Appellate Tribunal (theappellate tribunal) refer to the liability or the obligation of theassessment years 2010-11 to 2013-14, based upon the then existingposition of law and the interpretation given to Section 194(v) and194(va) of Section 194A(3) of the Act whereby it has been held that theappellant Co-operative Bank has to deduct TDS on income credited orpaid in respect of deposit of described limit, except which falls under theprovisions. The appeals therefore of the respective assessee/appellantwere dismissed by the tribunal by the separate orders. Therefore the taxappeals. 3.This High Court on 9/04/2015 admitted the appeals on thefollowing substantial questions of law: (I)Whether on the facts and in the circumstancesof the case and in law, the ITAT was justified inholding that the appellant was not entitled to thebenefit of S.194A(3)(v) of the Income Tax Act,1961? (II)Whether the ITAT was justified in dismissingthe appellant's appeal without at all addressing thealternative contentions taken before it, despite suchcontentions being specifically urged before it? 4.Reference to the Explanatory Note makes the position of relevantlaw clear specifically para 42.5 which is reproduced as under: “42.5 In view of this, the provisions of the section194A(3)(v) of the Income-tax Act have been amended soas to expressly provide that the exemption provided fromdeduction of tax from payment of interest to members bya co-operative society under section 194A(3)(v) of theIncome-tax Act shall not apply to the payment of intereston time deposits by the co-operative banks to itsmembers. As this amendment is effective from theprospective date of 1st June, 2015, the co-operative bankshall be required to deduct tax from the payment ofinterest on time deposits of its members, on or after the1[st] June, 2015. Hence, a cooperative bank was notrequired to deduct tax from the payment of interest ontime deposits of its members paid or credited before 1st (emphasis added) 5.The Division Bench in The Bailhongal Urban Cooperative BankLtd. (supra) based upon the Explanatory Notes in question has allowedthe appeal in following terms : “3. In the light of the aforesaid circular, the view of theTribunal holding that Co-operative bank was required todeduct tax is not sustainable. Hence, this appeal meritsconsideration. (emphasis added) 5.The Division Bench in The Bailhongal Urban Cooperative BankLtd. (supra) based upon the Explanatory Notes in question has allowedthe appeal in following terms : “3. In the light of the aforesaid circular, the view of theTribunal holding that Co-operative bank was required todeduct tax is not sustainable. Hence, this appeal meritsconsideration. 4. In the result, the appeal stands allowed. Thesubstantial question of law raised by the Assessee isanswered in its favour. The judgment of the Tribunal inITA No.85/PNJ/2013 is set aside. No costs.” 6.Therefore, taking overall view of the matter and according to theCounsel appearing for the parties it also goes to the root of the issues soraised, we are inclined to allow the appeals. The Explanatory Notes hasmade the position of law clear that such Co-operative Banks are notliable to deduct any amount from the TDS, prior to the effective date1/06/2015. The appellant Co-operative Bank was not under obligation todeduct the amount from the TDS, for the assessment years prior to1/06/2015 i.e. from 2010-11 to 2013-14. There is substance in thesubmission of the Counsel appearing for the parties. 7.Therefore following order: O R D E R (a) All appeals are allowed. (b) The substantial question of law by the assesse isanswered in its favour. answered in its favour. (c) The impugned judgments of the respective Tribunalsare set aside.are set aside. (d) No costs. NH C. V. BHADANG, J. ANOOP V. MOHTA, J.