MADAPPALLY SERVICE CO-OPERATIVE BANK LTD vs. ADDITIONAL COMMISSIONER OF INCOME TAX
What did the High Court hold?
The High Court allowed the writ petition. The Court took note of the concession made by the learned Standing Counsel for the 1st respondent (Additional Commissioner of Income Tax) that the petitioner would indeed be entitled to the benefit of the exemption provided under Section 194A(3)(v) of the Income Tax Act. Consequently, the Court declared that there would be no requirement for deducting tax at source in the case of payment of interest from the District Co-operative Bank, Kottayam, to the petitioner. The ratio decidendi is that where a co-operative society receives interest income from deposits maintained with another co-operative society, the exemption under Section 194A(3)(v) of the Income Tax Act is applicable, and TDS is not required.
What were the facts?
The petitioner, Madappally Service Co-operative Bank Ltd., a Primary Agricultural Credit Society, filed a writ petition challenging a communication from the Kottayam District Co-operative Bank. This communication, based on advice from the Income Tax Department, stated that interest payable to the petitioner on its Fixed Deposits with the Bank would be subject to Tax Deducted at Source (TDS). The petitioner contended that as per Section 194A(3)(v) of the Income Tax Act, interest income paid by one co-operative society to another is exempt from TDS. The assessment year(s) are not explicitly stated, nor is the specific order or action being challenged beyond the communication. The amount in dispute is not specified. The procedural history involves the petitioner receiving the communication and subsequently filing this writ petition.
What were the issues?
1. Whether the interest income payable by the Kottayam District Co-operative Bank to the petitioner, Madappally Service Co-operative Bank Ltd., is exempt from Tax Deducted at Source (TDS) under Section 194A(3)(v) of the Income Tax Act, 1961, on the grounds that it is a payment of income by one co-operative society to another co-operative society? Assessee's Contention: The petitioner argued that the payment of interest from the Kottayam District Co-operative Bank to the petitioner should be treated as a payment by a co-operative society to another co-operative society, thereby attracting the exemption under Section 194A(3)(v) of the Income Tax Act, 1961, and consequently, TDS should not be deducted. Revenue's Contention: The revenue, through the Additional Commissioner of Income Tax, conceded that the petitioner would be entitled to the benefit of the exemption provided under Section 194A(3)(v) of the Income Tax Act.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
JUDGMENT The petitioner is a Primary Agricultural Credit Society registered under the provision of the Kerala Co-operative Societies Act. In the writ petition, the petitioner is aggrieved by Ext.P2 communication received from the General Manager, Kottayam District Co-operative Bank, intimating them, based on the advice received from the Income Tax Department, that the interest payable to them on the Fixed Deposits maintained with the Bank is not exempt from the procedure for tax deduction at source (TDS) and that tax would be deducted at source and remitted to the Government on such interest payments. It is the case of the petitioner that the interest income accruing to it is from the deposits made by the petitioner with the Kottayam District Co-operative Bank and hence, as per the provisions of Section 194A(3)(v), the provisions of sub section (1) thereof, which contemplate a deduction of tax at source would not apply in cases where the income is paid by a Co-operative Society to any other Co-operative Society. It is the case of the petitioner that the payment of interest from the Kottayam District Co- operative Bank to the petitioner has to be viewed as a payment of income by a Co-operative Society to another Co-operative Society and hence the provisions of Section 194A (3)(v) would apply to exclude the receipts of interest income by the petitioner from the requirement of tax deduction at source. Through a statement filed by the learned Standing Counsel appearing on behalf of the 1st respondent, it is conceded that the petitioner would get
WP(C).No.9434 OF 2019 3 the benefit of the exemption provided under Section 194A(3)(v) of the Income Tax Act. Taking note of the statement, I allow the writ petition by declaring that there will be no requirement of deducting tax at source in the case of payment of interest from the District Co-operative Bank Kottayam to the petitioner. A.K.JAYASANKARAN NAMBIAR JUDGE SJ
WP(C).No.9434 OF 2019 4
Appendix — schedule of exhibits
More judgments on Section 194A(3)(v)
- The Vijapur Taluka Co-Operative Purchase… vs Income Tax Officer, Ward-1, PatanITA 925/AHD/2026[2017-18]Status: Disposed5 Oct 2026AY 2017-18
- ITO(TDS)-1(2)(1), Mumbai vs Dattatray Maharaj Kalambe Jaoli Sah. Bank…ITA 7429/MUM/2026[2017-18]Status: Disposed21 Sept 2026AY 2017-18
- ITO (TDS)-1(2)(1), Mumbai vs Dattatray Maharaj Kalambe Jaoli Sah. Bank…ITA 7428/MUM/2026[2018-19]Status: Disposed21 Sept 2026AY 2018-19
- ITO (TDS)-1(2)(1), Mumbai vs Dattatray Maharaj Kalambe Jaoli Sah. Bank…ITA 7427/MUM/2026[2018-19]Status: Disposed21 Sept 2026AY 2018-19
- ITO (TDS)-1(2)(1), Mumbai vs Dattatray Maharaj Kalambe Jaoli Sah. Bank…ITA 7426/MUM/2026[2019-20]Status: Disposed21 Sept 2026AY 2019-20
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