ITAT held in Almora Urban Co-operative Bank Ltd Vs ITO that TDS was not required to be deducted when co-operative society pays interest to its members as per sec 194A(3).
Facts of the case :
Assessee had paid interest to its members on term deposits without deducting TDS on it so, AO disallowed the expense and levied penalty u/s 201; aggrieved by which assessee challenged the same with CIT(A) who also confirmed the order of AO .Then assessee filed an appeal with ITAT.
Contention of the assessee:
Assessee was of the view that sec 194A(3) exempts the co-operative society from the deduction of TDS on the payment of interest to its members. So assessee was not supposed to deduct the TDS on the payment of interest as all the interest had been paid to its members and disallowance of expense and levying of penalty was not in order.
Contention of the revenue:
Revenue was of the view that assessee was supposed to deduct the TDS u/s 194A so the provisions of sec 201 was applicable as the assessee failed to deduct the TDS. Moreover revenue was of the view that type of member should be checked whether it was primary or secondary member.
Held by ITAT :
ITAT relied on the decision given in the case of Kashipur Urban Co-operative Bank Limited vs. ITO, in which it was held that co-operative society was not supposed to deduct the TDS as per sec 194A(3) .Moreover sec 194(3) neither differentiate between the primary or secondary members nor between the type of society .So when the society pays interest to any of its members it was not required to deduct the TDS. The appeal of the assessee was upheld.