208-4252889

A P C O B--HYDERABAD WORKSHOP ON PROVISIONS OF INCOME TAX

Charging Seci!n -"
Sub. Sec.(1) Where any central Act enacts that incoe-ta! shall be char"e# $or any
assessent year at any rate or rates% incoe-ta! at that rate or those rates shall be char"e#
$or that year in accor#ance &ith% an# sub'ect to the (ro)isions ( inclu#in" (ro)isions $or
the le)y o$ a##itional incoe-ta!) o$ this Act in res(ect o$ the # !a$ inc!%e& o$ the
(re)ious year o$ e)ery (erson.* +++++++..
Sec. 2 (45) total incoe eans the total aount o$ incoe re$erre# to in section 5%
co(ute# in the anner lai# #o&n in this Act.
Sec. 5 Sub'ect to the (ro)isions o$ this Act% the total incoe o$ any (re)ious year o$ a
(erson &ho is a resi#ent inclu#es all incoe $ro &hate)er source #eri)e# &hich-
+++++++++++++++++++++++++++++++++.
,ha(ter --- .his cha(ter consists o$ Seci!n' ()* ((* (+* (+ A* (+ AA* (, an- (, A
.his entire cha(ter --- s(eci$ies the -ncoes &hich #o not $or (art o$ .otal -ncoe*.
-n other &or#s% in res(ect o$ all the incoes those &ere entione# un#er these sections%
there is no char"e at all &ith in the eanin" o$ sec. 4 &hich is the ain char"in" section.
,on)ersely in res(ect o$ all the other sources o$ incoe the incoe is char"eable to ta!
but $or the )arious #e#uctions an# e!e(tions that are entione# un#er res(ecti)e
(ro)isions o$ the Act.
,ha(ter /--A% 0 an# , #eal &ith the e!e(tions an# #e#uctions in res(ect o$ certain
incoes an# (ayents sub'ect to those (ro)isions.
Accor#in"ly Sec. 80 1 #eals &ith the #e#uctions an# e!e(tions connecte# to )arious
ty(es o$ co-o(erati)e societies re"istere# un#er the res(ecti)e State2s ,o-o(erati)e
Societies Acts.
Aon" others Sec. 801 2 (a) (i) e!e(ts the incoe o$ a co-o(erati)e society en"a"e# in
carryin" on the business o$ ban3in" or .r!/i-ing cre-i 0aci$iie' ! i' %e%1er'2
Accor#in" to this section the incoe o$ any co-o(erati)e society &hich is en"a"e# in
carryin" the business o$ ban3in" or (ro)i#in" cre#it $acilities to its ebers is e!e(te#
$ro (ayent o$ ta!% to the e!tent the incoe relates to such business.
4o&e)er% 5inance Act% 2006% inserte# sub-section (4) in section 801 &hich rea#s as un#er
.he (ro)isions o$ this section shall not a((ly in relation to an3 c!-!.erai/e 1an4 other
than a (riary a"ricultural cre#it society or a (riary co-o(erati)e a"ricultural an# rural
#e)elo(ent ban3.*
7!(lanation- 5or the (ur(ose o$ this sub-section
(a) co-o(erati)e ban3* an# (riary a"ricultural cre#it society* shall ha)e eanin"s
res(ecti)ely assi"ne# to the in 1art / o$ the 0an3in" 8e"ulation Act% 1949*
(b) ++++.. 2
-- 2 --
9o& the ute :uestion is Whether all the co-o(erati)e societies (ro)i#in" cre#it
$acilities to their ebers are co-o(erati)e ban3s $or the (ur(ose o$ sec. 801(4) o$ the
Act.
-n y huble o(inion the ans&er is 9;*. All the <co-o(erati)e ban3s2 i"ht be <co-
o(erati)e societies (ro)i#in" cre#it $acilities to their ebers2 but con)ersely all those
<co-o(erati)e societies (ro)i#in" cre#it $acilities to their ebers2 can not be #eee# to
be the <co-o(erati)e ban3s2.
5or this% soe o$ the $ollo&in" (ro)isions o$ the 0an3in" 8e"ulations ( co-o(.Societies)
8ules 1966 are rele)ant $or consi#eration.
8ule 12 9othin" containe# in the 0an3in" ,o(anies 8ules% 1949 shall a((ly to co-
o(erati)e societies*
1art / o$ the 0an3in" 8e"ulation Act Section 56 <Act to a((ly to co-o(erati)e
societies sub'ect to o#i$ications =-
.he (ro)isions o$ this Act% as in $orce $or the tie bein"% shall a((ly to% or in relation to%
co-o(erati)e societies as they a((ly to% or in relation to% ban3in" co(anies sub'ect to the
$ollo&in" o#i$ications% naely=-
(a)+++++++++
(b)+++++++++
(c) - ,lause (cci) co-o(erati)e 0an3* eans a State co-o(erati)e 0an3% a ,entral ,o-
o(erati)e 0an3 an# a 1riary co-o(erati)e 0an3>*
- ,lause (ccii) co-o(erati)e cre#it society* eans a co-o(erati)e society% the
(riary ob'ect o$ &hich is to (ro)i#e $inancial accoo#ation to its ebers an#
inclu#es a co-o(erati)e lan# ort"a"e ban3.
.his is $or the si(le reason that the -ncoe ta! Act retaine# siultaneously both the
(ro)isions o$ sec. 80 1 (2) (a) (i) an# sec. 80 1 (4). .hat eans that the )ery Act
en)isa"es the (ossibility o$ co-o(erati)e societies en"a"e# in #oin" ban3in" business or
(ro)i#in" cre#it $acilities to their ebers can still clai e!e(tion% in s(ite o$ sec. 801
(4)% only an# only i$% they are not $allin" &ith in the eanin" o$ (art / o$ the 0an3in"
8e"ulation Act.
-n su((ort o$ this line o$ ar"uent% recently the 4on2ble 1?97 0ench <02 o$ -.A. ha#
an occasion to #eal &ith a siilar situation in the case o$ @an3alyan 9a"ri Saha3ri 1at
Sanstha At#.
.he 0ench ;bser)e# = ;n care$ul (erusal o$ abo)e #e$inition it is seen that basic
an#ate $or any co-o(erati)e society to be co)ere# in #e$inition o$ 1riary ,-;(erati)e
0an3* is that it2s (riary ob'ect shoul# be transactions o$ ban3in" business. .he ter
0an3in"* is #e$ine# in 0.8. Act% accor#in" to &hich there is no restriction that #e(ositor
shoul# be eber o$ the sai# society% but it is the (ublic at lar"e &ith &ho business
transactions can be carrie# out. .he (arliaent has a#o(te# the #e$inition o$ the co-
o(erati)e ban3 by re$errin" the sae as "i)en in the 0.8. Act% 1949. -n our o(inion ,o-
o(erati)e ,re#it Society is #istinct an# se(arate $ro the ,o-o(erati)e 0an3 nor it can be
sai# as a 1riary ,o-o(erati)e 0an3 &ith in the eanin" o$ the 0.8. Act% 1949. 4ence
the society is entitle# $or e!e(tion uBs 80 1 (2) (a) (i).*
------ C.
-- C --
9e!t i(ortant as(ect that is relate# to co-o(erati)e ban3s is the (ro)ision $or ba# an#
#oubt$ul #ebts an# the interest on 91As.
Sec. C6 ()ii) an# sec. C6 ()iia) are rele)ant $or the (ur(ose.
Sec. C6 ()ii) #eals &ith ba# #ebts &ritten o$$ in the boo3s o$ account o$ the ban3.
Sec. C6()iia) #eals &ith allo&ance o$ (ro)ision in res(ect o$ ba# an# #oubt$ul #ebts a#e
by a sche#ule# ban3 or non-sche#ule# ban3 or a coo(erati)e ban3.
Accor#in"ly an aount not e!cee#in" se)en an# one hal$ (ercent o$ the total incoe
(co(ute# be$ore a3in" any #e#uction un#er this clause an# ,ha(ter /-A) an# an
aount not e!cee#in" ten (ercent o$ the a""re"ate a)era"e a#)ances a#e by the rural
branches o$ such ban3 co(ute# in the (rescribe# anner.
1ro)i#e#% that at the o(tion o$ the ban3% a #e#uction in res(ect o$ any (ro)ision a#e by
it $or any asset classi$ie# by the 80- as -!5105$ a''e' !r $!'' a''e' in accor#ance &ith
the "ui#e lines issue# in this behal$% $or an aount not e!cee#in" $i)e (er cent o$ the
aount o$ such assets sho&n in the boo3s as on the last #ay o$ the (re)ious year. 4ere
&hether a (ro)ision to&ar#s sub-stan#ar# asset is co)ere# or not is #is(utable. .he -.;
al&ays ten#s to err in $a)or o$ the De(artent only.
9o& coin" to the interest (ro)i#e# or re)erse# in res(ect o$ 91As% the Act is silent.
.here is al&ays a (erce(tion #i$$erence bet&een the De(artent an# the 0an3s in this
re"ar#. .he case la& an# the 0oar# circulars hel( us in this re"ar#.
0e$ore that% let us see certain i(ortant (ro)isions o$ 80- Act.
Sec. 45 E in ,ha(ter ---0 #eals &ith (ro)isions relatin" to 905,s. -t says that the
(ro)isions o$ this ,ha(ter shall ha)e e$$ect not&ithstan#in" anythin" inconsistent
there&ith containe# in any other la& $or the tie bein" in $orce or any instruent ha)in"
e$$ect by )irtue o$ any such la&.
Sec. 45 4 .he (ro)isions o$ this ,ha(ter shall not a((ly to the State 0an3 or a ban3in"
co(any as #e$ine# in sec. 5 o$ the 0.8 Act% 1949 or a 8e"ional 8ural 0an3 or
a c!-!.erai/e 1an4 or a 1A,S.
.here$ore the o)erri#in" nature o$ 80- #irecti)es are not a((licable to a co-o(erati)e
ban3 in the atter o$ claiin" interest on 91As. -t is only the (ro)isions o$ -ncoe ta!
Act that a((ly $or co(utin" the re"ular incoe.
.he 4on2ble Su(ree ,ourt o$ -n#ia in the case o$ Southern .echnolo"ies At#. -n C20
-.8 5FF ha)e ore than elaborately #ealt &ith )arious as(ects connecte# to interest an#
(ro)isions on 91As. Accor#in"ly% as (er the ,0D. ,ircular 5.9o.201B21B84--.A---%
#ate# 9-10-1984% the interest in res(ect o$ #oubt$ul #ebts &ill be sub'ect to ta! but interest
char"e# in an account &here there has been no reco)ery $or three consecuti)e accountin"
years &ill not be sub'ecte# to ta! in the $ourth year an# on&ar#s.
------ 4.
-- 4 --
4ere a"ain the circular is silent in cases &here interest has not been char"e# to the
account o$ the borro&er. 4ence in y huble o(inion in such cases interest &hich is not
char"e# at all to an 91A borro&er account cannot be sub'ecte# to ta! un#er the abo)e
circular.
-n this connection - &oul# li3e to ta3e su((ort $ro the Decision o$ the 4on2ble -.A.%
@o#h(ur 0ench% in the case o$ -.; /s. Aar Sin"h Grishnachan#er% -F1 ..@ 182% &here
in it &as hel# that i$ the assessee is cre#itin" interest on 5D8s only as an# &hen recei)e#
$ro the ban3% then it cannot be assesse# on accrual basis by the De(artent. (5inality o$
abo)e -.A. #ecision is sub'ect to test in $urther a((eals o$ course.)
Hy huble su""estion is% i$ such an issue is ta3en u( as an in#ustry s(eci$ic issue be$ore
the ,0D. $or a clear "ui#ance% instea# o$ $i"htin" as an assessee s(eci$ic issue by each
ban3% then (erha(s the in#ustry can i(ress u(on the 0oar# $or issuin" "ui#elines to the
De(artent in or#er to a)oi# a##in" accrue# interest in one year an# then "i)in" relie$ in
the ne!t year o$ recei(t an# the li3e% &hich reains a &il# "oose chase (er(etually.
9o&% the other (ro)isions o$ the -ncoe ta! Act those are rele)ant $or ,o-o(erati)e
0an3s.
Ta6 De-5ci!n A S!5rce 7-
,ha(ter I/-- in the -ncoe ta! Act #eals &ith ,ollection an# 8eco)ery o$ .a!*.
/arious sections $ro 192 to 195 #eal &ith )arious situations un#er &hich ta! is to be
#e#ucte# an# (ai# to the Jo)ernent by the (ayer o$ those sus. Accor#in"ly%
Sec. 192 Salaries> co)ers (ayents &here e(loyer-e(loyee relations e!ists.
- Honthly-as (er slab rates a((licable #e(osit be$ore F
th
o$ ne!t onth.
Sec. 19C -nterest on Securities>
- K 8s. 5%000B- L 10M - #e(osit be$ore F
th
o$ ne!t onth.
Sec. 194 Di)i#en#s>
- L 10M - #e(osit be$ore F
th
o$ ne!t onth.
Sec. 194 A -nterest% other than interest on securities>
- K 8s.5%000B- or K 8s. 10%000B- L10M - #e(osit be$ore F
th
o$ ne!t onth.
5or year-en# (ayents% be$ore C1
st
Hay.
.
Sec. 194 , 1ayents to ,ontractors - #eals &ith (ayents a#e $or carryin" out any
&or3 in (ursuance o$ a contract. - K 8s. C0%000B- -n#l.B4?5 L1M -
others L2M - #e(osit be$ore F
th
o$ ne!t onth.
Sec. 194 77 1ayents in res(ect o$ #e(osits un#er 9SS>
-- K 8s. 2%500B- L20M - #e(osit be$ore F
th
o$ ne!t onth.
Sec. 194 4- ,oission or 0ro3era"e>
- K 8s. 5%000B- L10M - #e(osit be$ore F
th
o$ ne!t onth.
Sec. 194 - 8ent>
- K 8s. 1%80%000B- L2M on 1 N H Aan#% 0l#" etc.% L 10M -#e(osit
0e$ore F
th
o$ ne!t onth.
Sec. 194 @- 5ees $or (ro$essional or technical ser)ices>
- K 8s. C0%000B- L10M - #e(osit be$ore F
th
o$ ne!t onth.
----- 5.
-- 5 --
Sec. 19F an# 19F A 9o #e#uction to be a#e in certain cases. 5or 15-JB 15-4
Sec. 201 5ailure to #e#uct or (ay
Sec. 206 1ersons #e#uctin" ta! to $urnish (rescribe# returns.
- S. 192 5or 24 EB others 5or 26 E (8esi#ents) 5or 2F E (98-s)
Sec. 206 A 8ule C1 A,- Haintenance o$ :uarterly return in res(ect o$ (ayent o$
interest to resi#ents &ith out #e#uction o$ ta!.- 5or 26 EA
- 8ule C1 A,A Euarterly branch &ise 8eturn in res(ect o$ tie #e(osits in
5or 26 EAA-consoli#ate# returns $or all branches- to be
$ile# be$ore Director Jeneral o$ -.( -9/) 9e& Delhi
be$ore ne!t onth en#.
Sec. 2F1 ,- 1enalty $or $ailure to #e#uct ta! at source. Siultaneously (ro)isions o$
Sec. 40 (a) etc% #isallo& the un#erlyin" e!(en#iture &here no .DS &as a#e.

Aet e lea)e the rest o$ the #ay $or $loor interaction.
.han3 you.