THE CHENKAL SERVICE COOPERATIVE BANK LTD. NO.1258 vs. THE CENTRAL BOARD OF DIRECT TAXES

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WP(C)/25615/2019HC KeralaKLHC01065828201918 October 2019Author: HONOURABLE DR. JUSTICE A.K.JAYASANKARAN NAMBIAR3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the prayer sought for in the Writ Petition, which was based on the judgment of this Court in Chirakkal Service Co-operative Bank Ltd. v. Commissioner of Income Tax, cannot be granted. The reasoning was that the aforementioned judgment, which the petitioner relied upon, had been overruled by a Full Bench of the same Court in Mavilayi Service Co-operative Bank Ltd. v. Commissioner of Income Tax, Calicut. Consequently, the basis of the petitioner's claim for exemption from TDS under Section 194A was no longer valid. The Court found that the Writ Petition therefore failed. No specific issue was left undecided; the Court directly addressed the validity of the petitioner's claim based on the changed legal position.

What were the facts?

The petitioner, The Chenkal Service Co-operative Bank Ltd. No. 1258, is a Primary Agricultural Credit Co-operative Bank. It filed a writ petition before the High Court of Kerala challenging Exts. P4 and P5 Circulars issued by the Treasury Directorate. These circulars provided instructions for deducting income tax from interest amounts paid to Co-operative Societies/Co-operative Banks on Treasury deposits. The petitioner argued that as it is eligible for deduction under Section 80P of the Income Tax Act, as interpreted by this Court in Chirakkal Service Co-operative Bank Ltd. v. Commissioner of Income Tax, no deduction under Section 194A should be made from interest payments received from the Treasury.

What were the issues?

1. Whether the petitioner, a Primary Agricultural Credit Co-operative Bank, is entitled to exemption from TDS under Section 194A of the Income Tax Act on interest income from Treasury deposits, in light of its eligibility for deduction under Section 80P? Assessee's Contention: The petitioner argued that since it is eligible for deduction under Section 80P of the Income Tax Act, as interpreted by this Court in Chirakkal Service Co-operative Bank Ltd. v. Commissioner of Income Tax [2016 (2) KLT 535], the deduction contemplated under Section 194A of the Income Tax Act cannot be effected in respect of interest payments made to it from the Treasury. Revenue's Contention: The learned Standing Counsel for the Income Tax Department brought to the notice of the Court that the decision relied upon by the petitioner (Chirakkal Service Co-operative Bank Ltd.) has since been overruled by the Full Bench of this Court in Mavilayi Service Co-operative Bank Ltd. v. Commissioner of Income Tax, Calicut [2019 (2) KHC 287 (FB)].

Which sections of the Income-tax Act were involved?

Section 80P,Section 194A

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE A.K.JAYASANKARAN NAMBIAR FRIDAY, THE 18TH DAY OF OCTOBER 2019 / 26TH ASWINA, 1941 WP(C).No.25615 OF 2019(B) PETITIONER: THE CHENKAL SERVICE COOPERATIVE BANK LTD. NO.1258 CHENKAL.P.O,NEYYATTINKARA,THIRUVANANTHAPURAM- 695132,REPRESENTED BY THE SECRETARY,VIMAL.V.V,S/O VALSALAN,AGED 28 YEARS,RESIDING AT V.S.VILAS,ELLUVILA, ARAYOOR.P.O,NEYYATTINKARA,THIRUVANANTHAPURAM-695121. BY ADVS. SMT.P.DEEPTHI SRI.K.P.UNNIKRISHNAN (ELOOR) SMT.G.BINDU RESPONDENTS: 1 THE CENTRAL BOARD OF DIRECT TAXES DEPARTMENT OF REVENUE,MINISTRY OF FINANCE,GOVERNMENT OF INDIA,NORTH BLOCK,NEW DELHI-110001,REPRESENTED BY ITS CHAIRMAN. 2 THE PRINCIPAL CHIEF COMMISSIONER OF INCOME TAX,KERALA, CENTRAL RESERVE BUILDINGS,I.S.PRESS ROAD,KOCHI-682018. 3 THE COMMISSIONER OF INCOME TAX(APPEALS), AAYAKAR BHAVAN,PEROORKADA ROAD, KOWDIAR,THIRUVANANTHAPURAM-695003. 4 STATE OF KERALA, KOWDIAR,THIRUVANANTHAPURAM-695003. 5 THE TREASURY DIRECTOR, DIRECTORATE OF TREASURIES,KRISHNA BUILDINGS,THYCAUD.P.O,THIRUVANANTHAPURAM-695014. R1-R2 BY SRI.CHRISTOPHER ABRAHAM, INCOME TAX DEPARTMENT BY GOVERNMENT PLEADER SMT.M.MJASMINE THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 18.10.2019, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: W.P.(C).No.25615 of 2019 2

JUDGMENT The petitioner, a Primary Agricultural Credit Co-operative Bank, has approached this Court aggrieved by Exts.P4 and P5 Circulars issued by the Treasury Directorate giving instructions with regard to deduction of income tax from interest amounts paid to the Co-operative Societies/Co-operative Banks in connection with the Treasury deposits. The case of the petitioner is essentially that inasmuch as it is entitled to the deduction in terms of Section 80P of the Income Tax Act as interpreted by this Court in Chirakkal Service Co-operative Bank Ltd v. Commissioner of Income Tax [2016 (2) KLT 535], the deduction contemplated under Section 194(a) cannot be effected in respect of interest payments made to it from the Treasury. It is brought to my notice by the learned Standing counsel for the Income Tax department that the decision relied upon by the petitioner has since been overruled by the decision of the Full Bench of this Court in Mavilayi Service Co- operative Bank Ltd. v. Commissioner of Income Tax, Calicut [2019 (2) KHC 287 (FB)]. Under such circumstances, I find that the prayer sought for in the Writ Petition, based on the judgment of this Court in Chirakkal Service Co-operative Bank Ltd supra, cannot be granted. The Writ Petition therefore fails and is accordingly dismissed. A.K.JAYASANKARAN NAMBIAR

JUDGE mns

W.P.(C).No.25615 of 2019 3

Appendix — schedule of exhibits
APPENDIX PETITIONERS EXHIBITS EXHIBIT -P1 TRUE COPY OF THE CERTIFICATE DATED 29.06.2015 ISSUED BY THE JOINT REGISTRAR (GENERAL) THIRUVANANTHAPURAM EXHIBIT P2- TRUE COPY OF THE APPELLATE ORDER IN ITA NO.2/TVM/CIT(A)TVM/2015-16 DATED 17.11.2017 OF THE 3RD RESPONDENT EXHIBIT P3- TRUE COPY OF THE ORDER DATED 29.01.2019 IN ITA NO.22/COCH/2018 OF THE HON'BLE INCOME TAX APPELLATE TRIBUNAL,KOCHI EXHIBIT P4:TRUE COPY OF THE CIRCULAR NO.58/2018 DATED 05.12.2018 IN FILE TDS/TX/DOC/22726/2018 ISSUED BY THE 5TH RESPONDENT ALONG WITH ENGLISH TRANSLATION. EXHIBIT P5:TRUE COPY OF THE LETTER NO.TRY/11273/2019-ETDS 2 DATED 19.07.2019 ISSUED BY THE 5TH RESPONDENT ALONG WITH THE ENGLISH TRANSLATION EXHIBIT P6:- TRUE COPY OF THE INTERIM ORDER DATED 19.07.2019 IN WP(C).NO.19707/2019 RESPONDENTS EXHIBITS:NIL //TRUE COPY// P.A TO JUDGE

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