KUMARAKOM REGIONAL SERVICE CO-OPERATIVE BANK LIMITED V. THE ADDITIONAL COMMISSIONER OF INCOME TAX

WP(C)/10934/2019

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The case involves two petitioners, Kumarakom Regional Service Co-operative Bank Limited and Mannanam Service Co-operative Bank Limited, who challenged the tax deduction at source on interest payments from the Kottayam District Co-operative Bank. The dispute arose from a communication (Ext.P2) from the Kottayam District Co-operative Bank, which, based on advice from the Income Tax Department, stated that the interest on Fixed Deposits held by the petitioners would be subject to TDS. 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 submissions and the relevant legal provisions, agreed with the petitioners and ruled that the interest payments in question are exempt from TDS.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 754589 (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: ATHUL SHAJI; M M JASMINE; CHRISTOPHER ABRAHAM
• Assessee Lawyers: C A JOJO; JACOB CHACKO; MATHEWS JOSEPH
• 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.10934 OF 2019(N) PETITIONERS: 1 KUMARAKOM REGIONAL SERVICE CO-OPERATIVE BANK LIMITED N0.315 REPRESENTED BY ITS SECRETARY, KUMARAKOM P.O., KOTTAYAM DISTRICT, KERALA, PIN-686 563 2 MANNANAM SERVICE CO-OPERATIVE BANK LIMITED, NO.,3647 REPRESENTED BY ITS SECRETARY, MANNANAM P.O., KOTTAYAM DISTRICT, KERALA, PIN-686 561 BY ADVS. SRI.C.A.JOJO SRI.JACOB CHACKO SRI.MATHEWS JOSEPH RESPONDENTS: 1 THE ADDITIONAL COMMISSIONER OF INCOME TAX TDS RANGE,KOWDIAR, TRIVANDRUM-695 003 2 THE COMMISSIONER OF INCOME TAX, KERALA REGION, MINISTRY OF FINANCE, GOVERNMENT OF INDIA, CENTRAL REVENUE BLDG,IS PRESS ROAD ,KOCHI-682 018 3 STATE OF KERALA, REPRESENTED BY ITS SECRETARY (CO-OPERATION), SECRETARIAT, THIRUVANANTHAPURAM-695 001 4 THE KOTTAYAM DISTRICT CO-OPERATIVE BANK LTD, REPRESENTED BY ITS GENERAL MANAGER, HEAD OFFICE, KOTTAYAM-686 601 5 KADUTHURUTHY URBAN,CO-OPERATIVE BANK LTD, REPRESENTED BY ITS BRANCH MANAGER, VAIKOM, KADUTHURTHY, KOTTAYAM -686 604 R4 BY SRI.ATHUL SHAJI, SC, KOTTAYAM DISTRICT CO.OPERATIVE BANK LTD. OTHER PRESENT: WP(C).No.10934 OF 2019 2 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.10934 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 Ext.P2 communication 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 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 petitioner would get WP(C).No.10934 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.10934 OF 2019 5 APPENDIX PETITIONER'S/S EXHIBITS: EXHIBIT P1 A TRUE EXTRACT COPY OF THE CIRCULAR F.NO.ADDL.CIT/TDS/TVM/CO-OP SOCIETY 2018-19 DATED 26.12.2018 ISSUED BY 1ST RESPONDENT EXHIBIT P2 A TRUE COPY OF THE CIRCULAR NO.40/2018-19 DATED 14.02.2019 ISSUED BY 4TH RESPONDENT ALONG WITH ENGLISH TRANSLATION EXHIBIT P3 A TRUE COPY OF THE CIRCULAR ISSUED BY 2ND RESPONDENT TO THE 5TH RESPONDENT F.NO.CR- 35/CIT/(TDS)/2018-19/29 DATED 31.01.2019 "