MUNDELA SERVICE CO-OPERATIVE BANK LIMITED V. ADDITIONAL COMMISSIONER OF INCOME TAX

WP(C)/10369/2019

AI Insights

The case revolves around the interpretation of Section 194A(3)(v) of the Income Tax Act, which pertains to the tax deduction at source (TDS) on interest payments. The petitioner, Mundela Service Co-operative Bank Limited, contested the application of TDS on interest received from the Thiruvananthapuram District Co-operative Bank, arguing that as per Section 194A(3)(v), such payments between co-operative societies should be exempt from TDS. The Income Tax Department, represented by the Additional Commissioner of Income Tax (TDS), initially advised that TDS should be applied. However, during the proceedings, this position was conceded to be incorrect, leading to the court's decision in favor of the petitioner.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 763133 (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; THOMAS ABRAHAM
• Assessee Lawyers: MARY BENJEMIN
• 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.10369 OF 2019(U) PETITIONER: MUNDELA SERVICE CO-OPERATIVE BANK LIMITED NO.2433,REPRESENTED BY ITS SECRETARY RAHUL.P.S,AGED 27 YEARS,S/O SARACHANDRA KUMARAN,THIRUVANANTHAPURAM DISTRICT,KERALA,PIN-695543. BY ADV. SMT.MARY BENJEMIN RESPONDENTS: 1 ADDITIONAL COMMISSIONER OF INCOME TAX (TDS),DEPARTMENT OF INCOME TAX,AAYAKAR BHAVAN, KOWDIAR,THIRUVANANTHAPURAM-695003. 2 THIRUVANANTHAPURAM DISTRICT CO-OPERATIVE BANK, REPRESENTED BY ITS MANAGER,OFFICE OF THE DISTRICT CO OPERATIVE BANK,MAIN BRANCH,NEDUMANGAD,THIRUVANANTHAPURAM-695541. R1 BY SRI.CHRISTOPHER ABRAHAM, INCOME TAX DEPARTMENT R2 BY SRI.THOMAS ABRAHAM SC THIRUVANANTHAPURAM DIST. CO.OP BANK OTHER PRESENT: 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.10369 OF 2019 2 JUDGMENT The petitioner is a Primary Agricultural Credit Society registered under the provision of the Kerala Co-operative Societies Act. In the writ petition, the petitioner is aggrieved by Exts.P2 and P3 communications received from the General Manager, Thiruvananthapuram 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 petitioner that the interest income accruing to it is from the deposits made by the petitioner with the Thiruvananthapuram 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 Thiruvananthapuram 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 petitioner 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.10369 OF 2019 3 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 Thiruvananthapuram to the petitioner. SD/- A.K.JAYASANKARAN NAMBIAR JUDGE SJ WP(C).No.10369 OF 2019 4 APPENDIX PETITIONER'S/S EXHIBITS: EXHIBIT P1 TRUE COPY OF THE CIRCULAR DATED 26.12.2018 OF THE 1ST RESPONDENT. EXHIBIT P2 TRUE COPY OF CIRCULAR DATED NIL ISSUED BY THE MAIN BRANCH OF THE 2ND RESPONDENT WITH ITS ENGLISH TRANSLATION. EXHIBIT P3 TRUE COPY OF THE CIRCULAR DATED NIL ISSUED BY THE MORNING AND EVENING BRANCH OF THE 2ND RESPONDENT WITH ITS ENGLISH TRANSLATION. "