Law:

Section:

Circular No. 9 of 2002, dated 11-9-2002 is outside scope of section 119 Section 194A of the Income-tax Act, 1961, read with section 2(19) of the Maharashtra Co-operative Societies Act, 1960 - Deduction of tax at source - Interest other than interest on securities - Whether exemption granted to co-operative society under section 194A(3)(v) can be taken away by creating a distinction between duly registered member and nominal member, which is unknown to exemption clause contained in section 194A(3)(v) - Held, no - Whether, therefore, Circular issued by CBDT, namely, No. 9 of 2002, making a distinction between nominal member and duly registered member with regard to their rights and privileges, is outside scope of section 119 - Held, yes Circulars and notification - CBDT Circular No. 9/2002, dated 11-9-2002 FACTS Section 194A(3)(v) suggests that the provisions relating to TDS are inapplicable to the income credited or paid by the co-operative society to a member thereof or to any other co-operative society. The word 'member' used in the provision is without any words of limitation. The CBDT in its Circular No. 9, dated 11-9-2002 has made it clear that the exemption is available only to such members who have joined in application for the registration of co-operative society and those who are admitted to the membership after registration in accordance with the bye-laws and rules. The members eligible for exemption under section 194A(3)(v) who have subscribed to and fully paid for at least one share of the co-operative bank must be entitled to participate and vote in general body meeting or special general body meeting of the co-operative bank and must be entitled to receive share from the profits of the co-operative bank. Acting upon the said circular, consequential orders were issued by the income-tax authority. The petitioner, i.e., Central Bank within the meaning of section 2(6) of the Maharashtra Co-operative Societies Act, filed the instant writ petition challenging the validity of the circular issued by the CBDT on the ground that the said circular was contrary to the provisions of section 194A(3)(v) as the circular deprived the exemption granted by the…

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