Section 194A(3)(v) of the Income Tax Act
The decision most relied on for Section 194A(3)(v) is Kerala State Co-operative Agricultural and Rural Development Bank Ltd. v. Assessing Officer (154 Taxmann.com 305), cited in 136 of the 112 judgments on BharatTax that turn on this section.
Leading authorities on Section 194A(3)(v)
Section 80P(4) is not applicable to a cooperative bank unless it is classified as a 'bank' under the provisions of the Banking Regulation Act, 1949. For cooperative banks not meeting this definition, the deduction for interest earned from investments in cooperative societies is available under Section 80P(2)(d) of the Income-tax Act.
The exemptions provided under Section 194A(3) do not extend to interest payments made to cooperative societies, thereby requiring the deduction of tax at source on such payments.
A co-operative society, not being a primary agricultural credit society, is not eligible for deduction under Section 80P(2)(a)(i) or Section 80P(2)(d) on interest income earned from deposits or investments made with other co-operative or scheduled banks, as Section 80P(4) restricts such claims.
CBDT circulars, instructions, or directions issued under Section 119 cannot override or detract from the provisions of the Income-tax Act, as a delegated authority lacks the power to amend law enacted by Parliament.
A CBDT circular restricting the definition of "member" under Section 194A(3)(v) to exclude nominal, associate, or sympathizer members of a co-operative society is invalid. Such a circular conflicts with the provisions of the Act and exceeds the powers granted to the CBDT under Section 119, meaning co-operative banks are not liable to deduct tax at source on interest paid to these members.
The Assessing Officer (AO) must provide a deduction to the assessee respondent. This deduction relates to cooperative society income, as the CIT(A) has relied on case laws supporting such deductions.
Judgments on Section 194A(3)(v)
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