KALLARA VILLAGE SERVICE CO-OPERATIVE BANK LTD NO.3123, V. THE COMMISSIONER OF INCOME TAX (TDS),

WP(C)/9415/2019

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, which the petitioners contested. They 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 submissions and the relevant legal provisions, agreed with the petitioners and ruled that no TDS should be applied on the interest payments in question.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 754591 (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: M M; 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.9415 OF 2019(B) PETITIONERS: 1 KALLARA VILLAGE SERVICE CO-OPERATIVE BANK LTD NO.3123, KALLARA SOUTH P.O., KOTTAYAM DISTRICT, REPRESENTED BY ITS SECRETARY A. MATHEW. 2 KURICHY SERVICE CO-OPERATIVE BANK LTD. NO.1538, KURICHY P.O., KOTTAYAM, REPRESENTED BY ITS SECRETARY N. VINOD. 3 MANGANAM SERVICE CO-OPERATIVE BANK LTD. NO.1920, MANGANAM P.O., KOTTAYAM, REPRESENTED BY SECRETARY MATHEW SCARIA. 4 ITHITHANAM JANATHA SERVICE CO-OPERATIVE BANK LTD. NO.1297, ITHITHANAM P.O., CHANGANASSERY, KOTTAYAM-686004, REPRESENTED BY ITS SECRETARY T.K. KUNJUMON. 5 THE ARPOOKARA SERVICE SERVICE CO-OPERATIVE BANK LTD. NO.1931, VILLOONNI P.O., ARPOOKARA, KOTTAYAM, REPRESENTED BY ITS SECRETARY, HAREENDRAN NAIR M.S. 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- 682018. 2 THE ADDL. COMMISSIONER OF INCOME TAX, TDS RANGE, 3RD FLOOR, AYAKAR BHAWAN, KAWADIAR, TRIVANDRUM-695003. 3 INCOME TAX OFFICER, WP(C).No.9415 OF 2019 2 WARD-1, KOTTAYAM-686001. 4 INCOME TAX OFFICER, WARD-2, KOTTAYAM-686001. 5 INCOME TAX OFFICER, WARD-3, KOTTAYAM-686001. 6 INCOEM TAX OFFICER, WARD-4, THIRUVALLA-689101. 7 INCOME TAX OFFICER, WARD-5, THIRUVALLA-689101. 8 THE PRINCIPAL CHIEF COMMISSIONER OF INCOME TAX, KERALA REGION, MINISTRY OF FINANCE, GOVERNMENT OF INDIA, CENTRAL REVENUE BUILDINGS, IS PRESS ROAD, KOCHI-682018. 9 THE CENTRAL BOARD OF DIRECT TAXES, DEPARTMENT OF REVENUE, MINISTRY OF FINANCE, GOVERNMENT OF INDIA, NORTH BLOCK, NEW DELHI-110001, REPRESENTED BY ITS CHAIRMAN. 10 THE KOTTAYAM DISTRICT CO-OPERATIVE BANK LTD., DISTRICT CO-OPERATIVE BANK BUILDING, T.B. ROAD, CENTRAL JUNCTION, KOTTAYAM-6860001, REPRESENTED BY ITS GENERAL MANAGER. 11 STATE OF KERLA, REPRESENTED BY THE PRINCIPAL SECRETARY TO GOVT., CO-OPERATIVE (C) DEPARTMENT, THIRUVANANTHAPURAM- 695001. 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.9415 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 petitioners 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 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.9415 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.9415 OF 2019 5 APPENDIX PETITIONER'S/S EXHIBITS: EXHIBIT P1 TRUE COPY OF THE COMMON LETTER DATED 14.1.2019 ISSUED TO PETITIONER BANKS 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 EXHIBIT P4 TRUE COPY OF THE LETTER DATED 31.1.2019 ISSUED BY THE 1ST 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 "