Karnataka State Co-operative Apex Bank Ltd, Basaveshwaranagar Branch and Karnataka State Co-operative Apex Bank Ltd, Jayanagar 9th Block Branch and Karnataka State Co-operative Apex Bank Ltd, Padmanabhanagar and Karnataka State Co-operative Apex Bank Ltd, Viyalikaval Branch and Karnataka State Co-operative Apex Bank Ltd, Shivaji Nagar Branch and Karnataka State Co-operative Apex Bank Ltd, Vijayanagar Branch and Karnataka State Co-operative Apex Bank Ltd, Lakkasandra Branch and Karnataka State Co-operative Apex Bank Ltd, L H Branch and Karnataka State Co-operative Apex Bank Ltd, Magadi Road Branch and Karnataka State Co-operative Apex Bank Ltd, Indianagar Branch and Karnataka State Co-operative Apex Bank Ltd, Ashoka Pillar Branch and Karnataka State Co-operative Apex Bank Ltd, Vidhana Soudha Branch and Karnataka State Co-operative Apex Bank Ltd, Kengeri Branch and Karnataka State Co-operative Apex Bank Ltd, Gandhinagar Branch and Karnataka State Co-operative Apex Bank Ltd, R.T. Nagar Branch and Karnataka State Co-operative Apex Bank Ltd, Jayanagar 4th Block Branch and Karnataka State Co-operative Apex Bank Ltd, Ganganagar Branch V. Commissioner of Income Tax (TDS) and Additional Commissioner of Income Tax (TDS) Range 18 and Deputy Commissioner of Income-Tax Circle-16(2) and Commissioner of Income Tax (Appeals)-V

WP/14973/2014

AI Insights

The case involves multiple branches of the Karnataka State Co-operative Apex Bank Ltd., which are petitioners, challenging the demand notices issued by the Deputy Commissioner of Income Tax, Circle-16(2), under Section 156 of the Income Tax Act, 1961. The notices demanded tax and interest on payments made to members, which the petitioners argued were exempt under Section 194A of the Act. The petitioners sought a stay on these notices pending the disposal of their appeals before the Commissioner of Income Tax (Appeals). The respondents contended that the issues were sub judice and could be addressed in the ongoing appellate proceedings. However, the court decided to stay the recovery proceedings to allow the petitioners to seek relief from the appellate authority.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 794206 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 26-03-2014
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961, Banking Regulation Act, 1949, Co-operative Societies Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: JEEVAN NEERALGI
• Assessee Lawyers: SHANKAR
• Keywords: Banking Business; Co-operative societies; Demand notice; Interest payment; Jurisdiction challenge; Stay of recovery; Tax liability
• Section: 5; 156; 22(1); 220(1); 56(o)

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 26TH DAY OF MARCH 2014 BEFORE THE HON’BLE Dr.JUSTICE JAWAD RAHIM W.P. NOS. 14973-14989/2014 (T-IT) BETWEEN 1. THE KARNATAKA STATE CO-OPERATIVE APEX BANK LTD BASAVESHWARNAGAR BRANCH REP BY MANAGER - C ODEGOWDA AGED ABOUT 59 YEARS NO.#1, 3RD STAGE, 3RD BLOCK BASAVESHWARANAGAR, BANGALORE 560079. 2. THE KARNATAKA STATE CO-OPERATIVE APEX BANK LTD., JAYANAGAR 9TH BLOCK BRANCH REP BY MANGER -N L KUMUDINI AGED ABOUT 52 YEARS, EAST END MAIN ROAD BANGALORE 560069. 3. THE KARNATAKA STATE CO-OPERATIVE APEX BANK LTD., PADMANABHANAGAR REP BY MANAGER - SUBHAS K ODUGOWDAR AGED ABOUT 54 YEARS , #67, RICM CAMPUS PADMANABHANAGAR, BANGALORE 560070. 4. THE KARNATAKA STATE CO-OPERATIVE APEX BANK LTD., VIYALIKAVAL BRANCH REP BY MANAGER - G THIMME GOWDA AGED ABOUT 50 YEARS , #29, ANUGRAHA COMPLEX 12TH MAIN ROAD, SUDHEENDRANAGAR 2 GUTTAHALLI, MALLESHWARAM BANGALORE 560003. 5. THE KARNATAKA STATE CO-OPERATIVE APEX BANK LTD., SHIVAJI NAGAR BRANCH REP BY MANAGER - USHA R AGED ABOUT 53 YEARS, 26/3, ANSARI BLDG BOWRING HOSPITAL ROAD, OPP MASZID SHIVAJINAGAR, BANGALORE 560011 6. THE KARNATAKA STATE CO-OPERATIVE APEX BANK LTD., VIJAYANAGAR BRANCH REP BY MANAGER - S B BUDANUR AGED ABOUT 50 YEARS ADHICHUNCHANAGIRI MUTT COMPLEX BLDG VIJAYANAGAR, BANGALORE 560040 7. THE KARNATAKA STATE CO-OPERATIVE APEX BANK LTD., LAKKASANDRA BRANCH REP BY MANAGER - S B KADUR AGED ABOUT 56 YEARS 259/1, 13TH CROSS, WILSON GARDEN HOSUR MAIN ROAD, BANGALORE 560027 8. THE KARNATAKA STATE CO-OPERATIVE APEX BANK LTD., L H BRANCH REP BY MANAGER - JAYA NARAYAN NAYAK AGED ABOUT 55 YEARS L H BR, NEAR VIDHANA SOUDHA, BANGALORE -01 9. THE KARNATAKA STATE CO-OPERATIVE APEX BANK LTD., MAGADI ROAD BRANCH REP BY MANAGER - K K RANGASWAMY AGED ABOUT 47 YEARS , #70,11TH CROSS MAGADI ROAD, BANGALORE 560023 3 10. THE KARNATAKA STATE CO-OPERATIVE APEX BANK LTD., INDIANAGAR BRANCH REP BY MANAGER - J M AHANA AGED ABOUT 50 YEARS #310, 100 FEET ROAD, 1ST STAGE INDIRANAGAR, BANGALORE 560038 11.THE KARNATAKA STATE CO-OPERATIVE APEX BANK LTD., ASHOKA PILLAR BRANCH REP BY MANAGER - VARADARAJU AGED ABOUT 58 YEARS #37/03(268), 100 FEET ROAD, 2ND BLOCK JAYANAGAR, BANGALORE 560 011 12. THE KARNATAKA STATE CO-OPERATIVE APEX BANK LTD., VIDHANA SOUDHA BRANCH REP BY MANAGER - B YASHODA AGED ABOUT 54 YEARS, VIDHANA SOUDHA BR BANGALORE 560001 [13. THE KARNATAKA STATE CO-OPERATIVE APEX BANK LTD., KENGERI BRANCH REP BY MANAGER - B SHIVAMALAIAH AGED ABOUT 59 YEARS #16, 1ST D MAIN, 80 FEET ROAD K S TOWN, BANGALORE 560060 14.THE KARNATAKA STATE CO-OPERATIVE APEX BANK LTD., GANDHINAGAR BRANCH REP BY MANAGER - V T KATTIMANI AGED ABOUT 59 YEARS JANATHA BAZAR BLDG, K G ROAD BANGALOE 560 009 [ 15. THE KARNATAKA STATE CO-OPERATIVE APEX BANK LTD., R.T. NAGAR BRANCH, 4 REP BY MANAGER - H M KHARVI AGED ABOUT 55 YEARS #19/4&3, DINNUR MAIN ROAD R T NAGAR BANGALORE 560032 16.THE KARNATAKA STATE CO-OPERATIVE APEX BANK LTD., JAYANAGAR 4TH BLOCK BRANCH REP BY MANAGER - B V HANAGANDI AGED ABOUT 54 YEARS JAYANAGAR SHOPPING COMPLEX BANGALORE 560011 17. THE KARNATAKA STTE CO-OPERATIVE APEX BANK LTD., GANGANAGAR BRANCH REP BY MANAGER - B M KRISHNAPPA AGED ABOUT 55 YEARS 18/2, 5TH MAIN ROD GANGANAGAR BANGALORE 560032 ... PETITIONERS (BY SRI. SHANKAR A, ADV., ) AND 1. THE COMMISSIONER OF INCOME TAX (TDS) OFFICE OF THE COMMISSIONER OF INCOME-TAX (TDS) 4TH FLOOR, HMT BHAVAN NO.59 BELLARY ROAD BANGALORE 560032 2. THE ADDITIONAL COMMISSIONER OF INCOME TAX (TDS) RANGE 18, NO.59, HMT BHAVAN 4TH FLOOR BELLARY ROAD BANGALORE 560032 5 3. THE DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-16(2) 4TH FLOOR, HMT BHAVAN 59, BELLARY ROAD BANGALORE 560032 4. THE COMMISSIONER OF INCOME TAX (APPEALS)-V NO.59, HMT BHAVAN BELLARY RAOD BANGALORE 560032 . ... RESPONDENTS (SRI. JEEVAN NEERALGI, STANDING COUNSEL) THESE W.PS. ARE FILED PRAYING TO STAY THE RECOVERY OF DIPUTED TAXES AND INTEREST AS THE AMOUNT MENTIONED IN THE NOTICE OF DEMAND ISSUED UNDER SECTION 156 OF THE ACT TO THE PETITIONER NO. 1 TO 17 VIDE DATED 19.03.2014 BY THE R-3 AS REFERRED AS ANN-A1 TO A17 TILL DISPOSAL OF THE APPEALS FILED BY THE PETITIONERS NO.1 TO 17 ETC., THESE PETITIONS ARE COMING ON FOR ORDERS REG. NON-COMPLIANCE OF OFFICE OBJECTIONS ALONG WITH ADV. SUBMISSION. O R D E R Petitioners who are co-operative societies in banking business are in joint writ action seeking writ in the nature of direction/stay of recovery of tax liability and interest in terms of the demand notices issued separately by the assessing officer under Section 156 of the Income Tax Act, 1961, (hereinafter referred to as the Act, for brevity) on the 6 file of the 3rd respondent-Deputy Commissioner of Income Tax, Ci8rcle 16(2), all dated 19.3.2014 marked as Annexures-A1 to A17. They also seek a declaration to quash the approval granted by the 2nd respondent to the 3rd respondent to reduce the time in terms of proviso to Section 220(1) of the Act dated 19.3.2014 vide Annexures-B1 to B17 respectively. 2. On preliminary hearing, notice was ordered to the respondents in response to which learned standing counsel, Mr.Jeevan Neeralgi has taken notice. The petitions are listed at 2.30 p.m. to hear further regarding preliminary hearing and interim relief. 3. From the contentions of the learned counsel on both sides, it could be noticed that the issues raised for consideration and ultimate relief sought falls in a narrow compass. In the circumstances, I have taken their consent for final disposal. 4. The contextual facts needing reference would show, petitioners 1 to 17 which are branches of Karnataka State 7 Co-operative Apex Bank Limited registered under the Co- operative Societies Act were established in the year 1914 and hold certificates of registration to carry on banking business. They are licensed by the Reserve Bank of India under Section 22(1) read with Section 56(o) of the Banking Regulation Act, 1949, to run the said business, and claim they have their own by-laws. The primary object of the petitioner is banking business as defined in clause (b) of Section 5 of the Banking Regulation Act is applicable to co- operative societies. 5. Petitioners’ grievance is, they have received notices dated 20.2.2014 served separately by the 3rd respondent calling upon them to show cause why they should not be held as assessee in default in view of his opinion that no tax has been deducted at source on payment of interest by the petitioners to their members under the provisions of Section 194A of the Act. One of the copy of the notice is produced and marked as Annexure-C. Petitioners claim to have sent their reply on 17.3.2014 questioning his jurisdiction to initiate proceedings as aforesaid on the ground that it does 8 come within the mischief of Section 194A as banking institution run by a society is exempt from deducting tax at source on payment of interest by the petitioners to their members. This is the issue in limine raised by the petitioners. 6. Mr.Shankar for the petitioners would submit, petitioners have filed objections which has not been considered by the 3rd respondent in the correct perspective resulting in unjustifiable conclusion that the grounds urged against such action is untenable. The petitioners have assailed it in appeal before the Commissioner of Income Tax (Appeals), Bangalore. 7. Petitioners have approached this court with a limited relief, viz., a direction to stay operation of the assessment order and demand notice vide Annexures A1 to A17 and B1 to B17 pending disposal of the appeals before the appellate authority. 8. Mr.Jeevan Neeralgi for the Department would submit, admission of facts by the petitioners that appeals are 9 pending before the appellate authority non-suits them from writ action, as the issues canvassed are sub judice and the petitioners can well seek the relief of stay in those proceedings rather than approaching this court. However, Mr.Shankar would submit, petitioners have approached this court firstly questioning the jurisdiction of the 3rd respondent to initiate such action and secondly, on the ground that the statutory period of 30 days is available which unjustifiably has been curtailed to 7 days. 9. In the circumstances, to balance the equation and safeguard the interest of the petitioners and the Revenue, it is desirable to dispose of the writ petitions, permitting the petitioners to move the appellate authority for stay of the demand notice, and to enable the petitioners to avail such benefit, till then proceedings pursuant thereto to impugned order and the demand notices needs to be stayed. 10. In the result, the petitions are disposed of with the following order: 10 I) Petitioners are permitted to move the appellate 5authority within three weeks from today in all the appeals filed by it seeking stay of the impugned demand notice at Annexures-A1 to A17. II) The Commissioner of Income Tax (Appeals) is further directed to dispose of the appeals filed by the petitioners on merit, preferably within an outer limit of three months from the date of receipt of a copy of this order. III) In the meantime, there shall be stay of recovery proceedings in pursuance to the demand notices at Annexures-A1 to A17. Mr.Jeevan Neeralgi, standing counsel, is permitted to file memo of appearance within three weeks. Sd/- JUDGE vgh* "