Sadhana Sahakari Bank Ltd. Vs ACIT (ITAT Pune)
During the assessment proceedings, the AO observed that assessee has not deducted TDS on interest income earned by minor and partnership firm. The AO observed that minor and partnership firm are not members of the assessee. Therefore, the AO held that as per section 194A of the Act, TDS was mandatory, hence, AO disallowed an amount of Rs.7,92,500/- which was interest paid to minor and Rs.2,60,181/- which was interest paid to unregistered firm. Before the ld.CIT(A), assessee had submitted that TDS was not deducted in the case of minors, because minors income is clubbed with their parents and parents are members, therefore, assessee was under bonafide belief that TDS deduction is not required in the case of minors. No specific submission has been made vis-à-vis interest paid to unregistered firm. As per the bylaws of the assessee, unregistered firm and minor are not eligible to be members. As per proviso to section 194A exemption is granted only to the members in case of co-operative societies. In the case of the assessee, it is an admitted fact that minors and unregistered firms cannot become members of the society. Thus, assessee had paid interest to minor and unregistered firms who were not members of the assessee. This is violation of section 194A of the Act. In the facts and circumstances, we are of the opinion that the AO has rightly invoked provisions of section 40(a)(ia) of the Act and disallowed interest paid to minor and unregistered firm hence, the said addition is confirmed. A
FULL TEXT OF THE ORDER OF ITAT PUNE
This appeal filed by the Assessee is directed against the order of ld.Commissioner of Income Tax(Appeals)-7, Pune dated 15.12.2017 emanating from assessment order dated 19.12.2016 under section 143(3) of the I.T.Act, 1961 for the A.Y.2014-15. The Assessee has raised the following grounds of appeal:
“1. The learned CIT(A)-7, Pune and learned AO erred in law and on facts in making disallowance of Rs.91,200/- u/s 37(1) of the ITA, 1961 on account of advertisement expenses.
2. The learned AO erred in law and on facts in making adisallowanceand further learned CIT(A)-7 , erred in Confirming AO’s action for disallowing Rs. 41,78,942/- u/s 36(l)(viia) of the ITA, 1961 in respect of provision for bad and doubtful debts.
3. The learned CIT(A)-7 and learned AO erred in law and on facts in not appreciating that while calculating allowance u/s 36(l)(viia) i.e. 7.5% of total income, there is no requisite to have rural advances with the appellant bank.
4. The learned CIT(A)-7 and learned AO erred in law and on facts in making disallowance of Rs.10,59,681/- on account of interest on deposits paid to “minors” and “unregistered firms” u/s 40(a)(ia) holding that these category of account holders are not members of the bank and TDS u/s 194A ought to have been deducted by the appellant bank.
5. The learned ClT(A)-7 and the learned AO erred in law and on facts in not appreciating that both “minors (guardians of members who are major)” and “unregistered firms” are nominal members of the bank and as such are “members” as mentioned in section 194A and therefore there was no need to deduct tax on interest paid to these members.”
Brief Facts :
2. The assessee is a Co-operative Bank. The assessee filed return of income for A.Y. 2014-15 on 30.09.2014 declaring total income of Rs.5,04,27,080/-. The case was selected for scrutiny. After hearing, the ld.AR of the assessee, the AO passed assessment order under section 143(3) of the Act. The AO has made following additions:
i) Disallowance of Advertisement Expenditure being non-business expenditure of Rs.91,200/-; ii) Disallowance of claim under section 36(1)(viia), disallowance on account of non-deduction of TDS; iii) Amortization of Premium paid and iv) 40(a)(ia) disallowance.
3. Aggrieved by the same, the assessee filed appeal before this Tribunal.
4. We have heard both the parties and perused the records. Our discussion ground wise is as under:
Ground No.1, Disallowance of Advertisement Expenses of Rs.91,200/- :
5. The AO has mentioned as under :
“4. Disallowance of advertisement expenditure being for non- business purpose: Rs. 91.200/-
4.1 P & L a/c of the assessee, was debited on a/c of expenditure under the head Advertisement expenses” at Rs.91,200/-. On verification of such expenses and “advertisement given in the print media vis-a-vis business exigencies of such advertisement expenses, it is seen that the same is not for the purpose of business and thus, are not deductible u/s 37(1) of the Act. The details are given as under:
