THE KADAKKAVOOR SERVICE CO-OPERATIVE BANK LTD vs. THE ASSISTANT COMMISSIONER OF INCOME TAX

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WP(C)/11176/2019HC KeralaKLHC01027897201918 October 2019Author: HONOURABLE DR. JUSTICE A.K.JAYASANKARAN NAMBIAR5 pages
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What did the High Court hold?

The High Court of Kerala allowed the writ petition. The Court took note of the concession made by the learned Standing Counsel for the 1st respondent, who stated that the petitioner would indeed get 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 the Thiruvananthapuram District Co-operative Bank to deduct tax at source on the payment of interest to the petitioner. The reasoning was based on the acceptance of the petitioner's argument that the payment falls within the exemption under Section 194A(3)(v), as it is a payment of interest by one co-operative society to another. The ratio decidendi is that interest paid by a co-operative society to another co-operative society is exempt from TDS under Section 194A(3)(v). The operative direction was to declare no requirement of TDS. No issue was expressly left undecided.

What were the facts?

The petitioner, Kadakkavoor Service Co-operative Bank Ltd., a Primary Agricultural Credit Society, received a communication (Ext.P2) from the General Manager of Thiruvananthapuram 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 District Co-operative Bank would be subject to Tax Deduction at Source (TDS). The petitioner contended that this action was incorrect. The assessment year(s) are not specified. The order or action under challenge is the intimation regarding TDS and the implied decision to deduct tax at source. The authority that passed the initial order is not explicitly stated, but the advice originated from the Income Tax Department. The amount in dispute is not stated. The procedural history involves the petitioner filing a writ petition before the High Court of Kerala.

What were the issues?

1. Whether the interest income payable by the Thiruvananthapuram District Co-operative Bank to the petitioner, Kadakkavoor Service Co-operative Bank Ltd., is exempt from Tax Deduction at Source (TDS) under Section 194A(3)(v) of the Income Tax Act, 1961? Assessee's Contention: The petitioner argued that as per Section 194A(3)(v), TDS provisions do not apply when income is paid by one Co-operative Society to another Co-operative Society. They contended that the interest paid by the Thiruvananthapuram District Co-operative Bank to the petitioner should be viewed as such a payment, thus exempting it from TDS. Revenue's Contention: The learned Standing Counsel for the 1st respondent (Assistant 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?

Section 194A(3)(v)

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.11176 OF 2019(V) PETITIONER: THE KADAKKAVOOR SERVICE CO-OPERATIVE BANK LTD NO.1063, REPRESENTED BY ITS SECRETARY, KADAKKAVOOR P. O., THIRUVANANTHAPURAM DISTRICT. BY ADVS. SRI.T.R.HARIKUMAR SRI.ARJUN RAGHAVAN RESPONDENTS: 1 THE ASSISTANT COMMISSIONER OF INCOME TAX OFFICE OF THE ASSISTANT COMMISSIONER OF INCOME TAX, TDS RANGE, IIIRD FLOOR, AAYAKAR BHAVAN, KOWDIAR P. O., THIRUVANANTHAPURAM DISTRICT - 695 003. 2 THE CENTRAL BOARD OF DIRECT TAXES REPRESENTED BY ITS CHAIRPERSON, ROOM NO.143 E, NORTH BLOCK, DEPARTMENT OF REVENUE (CBDT)/ MINISTRY OF FINANCE, GOVERNMENT OF INDIA, NEW DELHI - 110 001 3 UNION OF INDIA REPRESENTED BY THE SECRETARY TO GOVERNMENT OF INDIA, MINISTRY OF FINANCE, NORTH BLOCK, CABINET SECRETARIAT, RAISANA HILL, NEW DELHI - 110001 4 THE REGISTRAR OF CO-OPERATIVE SOCIETIES THIRUVANANTHAPURAM - 695 001 WP(C).No.11176 OF 2019 -2- 5 THE THIRUVANANTHAPURAM DISTRICT CO-OPERATIVE BANK LTD., REPRESENTED BY ITS GENERAL MANAGER, HEAD OFFICE, EAST FORT, THIRUVANANTHAPURAM-695023 R1 BY SRI.CHRISTOPHER ABRAHAM, INCOME TAX DEPARTMENT R5 BY SRI.THOMAS ABRAHAM SC THIRUVANANTHAPURAM DIST. CO.OP BANK OTHER PRESENT: GP MM JASMINE, SC CHRISTOPHER ABRAHAM THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 18.10.2019, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C).No.11176 OF 2019 -3-

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, Thiruvananthapuram 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 Thiruvananthapuram 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 Thiruvananthapuram 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 WP(C).No.11176 OF 2019 -4- 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 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 Thiruvananthapuram to the petitioner. A.K.JAYASANKARAN NAMBIAR JUDGE SJ

WP(C).No.11176 OF 2019 5

Appendix — schedule of exhibits
APPENDIX PETITIONER'S/S EXHIBITS: EXHIBIT P1 A TRUE COPY OF THE CERTIFICATE DATED 17.03.2018, ISSUED BY THE ASSISTANT REGISTRAR OF CO-OPERATIVE SOCIETIES (GENERAL), CHIRAYINKEEZHU, ATTINGAL EXHIBIT P2 A TRUE COPY OF THE CIRCULAR BEARING NO.45/2018-19 DATED 12.02.2019, ISSUED BY THE 5TH RESPONDENT ALONG WITH ENGLISH TRANSLATION EXHIBIT P3 A TRUE COPY OF THE CIRCULAR F NO.ADDL.CIT/TDS/TVM/CO-OP SOCIETY/2018-19 DATED 26.12.2018, ISSUED BY THE 1ST RESPONDENT EXHIBIT P4 A TRUE COPY OF THE INTERIM ORDER IN WP(C) NO.9274/2019 DATED 26.03.2019, ISSUED BY THIS HON'BLE COURT

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