KAIPUZHA SERVICE CO-OPERATIVE BANK LTD.NO.3793, V. THE COMMISSIONER OF INCOME TAX (TDS),

WP(C)/10712/2019

AI Insights

The case involves multiple petitioners, all Primary Agricultural Credit Societies, who challenged the tax deduction at source on interest payments from the Kottayam District Co-operative Bank. The Income Tax Department had advised the Bank that such interest payments were subject to TDS, leading to the petition. The petitioners argued that under Section 194A(3)(v) of the Income Tax Act, the interest income from one Co-operative Society to another should be exempt from TDS. The court, after considering the arguments and the relevant legal provisions, agreed with the petitioners, acknowledging the exemption under the specified section of the Income Tax Act.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 754595 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 18-10-2019
• Assessment Year: misc
• Laws Referred To: Kerala Co-operative Societies Act, Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: CHRISTOPHER ABRAHAM
• Assessee Lawyers: T A SHAJI; NIKHIL MOOKEN; S VISHNU
• Keywords: Co-operative Society; Exemption; Interest income; Tax deduction at source
• Section: 194A(3)(v)

Judgement Text

"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.10712 OF 2019(L) PETITIONERS: 1 KAIPUZHA SERVICE CO-OPERATIVE BANK LTD.NO.3793, KAIPUZHA (P.O), KOTTAYAM 686 602 REPRESENTED BY ITS SECRTARY JAYALAKSHMI P.S. 2 NATTAKOM SERVICE CO-OPERATIVE BANK LTD NO. 3839, PAKKIL (P.O), KOTTAYAM 686 023. REPRESENTED BY ITS SECRTARY T.R SATHYADEVAN. 3 BRAHMAMANGALAM GRAMA SWARAJ SERVICE COP-OPERATIVE BANK LTD NO. 2966, BRAHMAMANGALAM (P.O), THALAYOLAPARAMBU, KOTTAYAM 686 614 REPRESENTED BY ITS SECRETARY JAYALAKSHMI A.G BY ADVS. SRI.T.A.SHAJI (SR.) SHRI.NIKHIL SUNNY MOOKEN SRI.S.ABHILASH VISHNU RESPONDENTS: 1 THE COMMISSIONER OF INCOME TAX (TDS), CENTRAL REVENUE BUILDING, IS PRESS ROAD, COCHIN 682 018 2 THE ADDL. COMMISSIONER OF INCOME TAX, TDS RANGE, 3RD FLOOR, AYAKAR BHAWAN, KAWADIAR, TRIVANDRUM 695 003 3 INCOME TAX OFFICER, WARD-1, KOTTAYAM 686 001 4 INCOME TAX OFFICER, WARD-2, KOTTAYAM 686 001 5 INCOME TAX OFFICER, WARD-4, KOTTAYAM 686 001 6 THE PRINCIPAL CHIEF COMMISSIONER OF INCIME TAX, KERALA REGION, MINISTRY OF FINANCE, GOVERNMENT OF WP(C).No.10712 OF 2019 2 INDIA, CENTRAL REVENUE BUILDINGS, IS PRESS ROAD, KOCHI 682 018 7 THE CENTRAL BOARD OF DIRECT TAXES, DEPARTMENT OF REVENUE, MINISTRY OF FINANCE, GOVERNMENT OF INDIA, NORTH BLOCK, NEW DELHI 110 001, REPRESENTED BY ITS CHAIRMAN. 8 THE KOTTAYAM DISTRICT CO-OPERATIVE BANK LTD, DISTRICT CO-OPERATIVE BANK BUILDING, T.B ROAD, CENTRAL JUNCTION, KOTTAYAM 686 001 REPRESENTED BY ITS GENERAL MANAGER. 9 STATE OF KERALA, REPRESENTED BY THE PRINCIPAL SECRETARY TO GOVT. CO- OPERATION (C) DEPARTMENT, THIRUVANANTHAPURAM 695 001 R1 BY SRI.CHRISTOPHER ABRAHAM, INCOME TAX DEPARTMENT 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.10712 OF 2019 3 JUDGMENT The petitioners are Primary Agricultural Credit Society registered under the provision of the Kerala Co-operative Societies Act. In the writ petition, the petitioners are aggrieved by Exts.P1 and P3 communications 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 petitioners that the interest income accruing to it is from the deposits made by the petitioners 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 petitioners have 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 petitioners 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 petitioners would get WP(C).No.10712 OF 2019 4 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 petitioners. SD/- A.K.JAYASANKARAN NAMBIAR JUDGE SJ WP(C).No.10712 OF 2019 5 APPENDIX PETITIONER'S/S EXHIBITS: EXHIBIT P1 TRUE COPY OF THE COMMON LETTER DATED 14.1.2019 ISSUED TO PETITIONER BANKS, ALONG WITH ITS ENGLISH VERSION. EXHIBIT P2 TRUE COPY OF THE LETTER DATED 26.12.2018 ISSUED BY THE 2ND RESPONDENT TO THE KOTTAYAM DISTRICT CO-OPERATIVE BANK. EXHIBIT P3 TRUE COPY OF THE CIRCULAR NO.40/2018-19 DATED 14.2.2019 ISSUED BY THE KOTTAYAM DISTRICT CO-OPERATIVE BANK, ALONG WITH ITS ENGLISH VERSION. EXHIBIT P4 TRUE COPY OF THE LETTER DATED 31.1.2019 ISSUED BY THE IST RESPONDENT TO THE KOTTAYAM DISTRICT CO-OPERATIVE BANK. EXHIBIT P5 TRUE COPY OF THE ORDER DATED 29.1.2018 OF THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH IN ITA NO.596/COCH/2017. EXHIBIT P6 TRUE COPY OF THE ORDER DATED 25.10.2018 OF THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH IN ITA NO.420/COCH/2018. "