PUNALUR PRIMARY CO-OP AGRICULTURAL AND RURAL DEVELOPMENT BANK,KOLLAM V. THE ITO WARD 2, KOLLAM

ITA 400/COCH/2023

AI Insights

The case involves M/s. Punalur Primary Co-operative Agricultural and Rural Development Bank, which appealed against the order of the National Faceless Appeal Center (NFAC), Delhi, concerning the assessment year 2018-19. The primary issues were the disallowance of deductions under section 80P of the Income Tax Act, specifically the business income and interest income, and the disallowance of interest expenses due to non-deduction of TDS. The Tribunal considered the status of The Kerala State Co-operative Agricultural and Rural Development Bank Ltd. as a cooperative society and not a bank, which influenced the decision on the eligibility for deductions under section 80P(2)(d). The Tribunal also addressed the applicability of TDS on interest payments under section 194A, agreeing with the assessee's position that no TDS was required on payments to cooperative societies and their members.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 31211 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-11-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 10-05-2024
• Assessment Year: 2018-2019
• Appeal Filed On: 22-05-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GIRLY ALBERT; SNR
• Assessee Lawyers: JAIKRISHNAN
• Keywords: Business income; TDS; Source of fund
• Section: 143(3); 143(2); 143(1); 56; 194A; 13; 80P; 10; 40(a)(ia)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH : COCHIN BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI SOUNDARARAJAN K., JUDICIAL MEMBER S.P. No. 69/Coch/2023 (Arising out of ITA No. 400/Coch/2023) & ITA No. 400/Coch/2023 Assessment Year : 2018-19 M/s. Punalur Primary Co-operative Agricultural and Rural Development Bank, PPCard Bank Building, Punalur, Kollam – 691 305. PAN: AADAP6732A Vs. The Income Tax Officer, Ward – 2, Kollam. APPELLANT RESPONDENT Assessee by : Shri Jai Krishnan, Advocate Revenue by : Smt. Girly Albert, Snr. DR Date of Hearing : 26-09-2024 Date of Pronouncement : 19-11-2024 ORDER PER BENCH This is an appeal filed by the assessee challenging the order of the NFAC, Delhi dated 22/03/2023 in respect of the A.Y. 2018-19. 2. The brief facts of the case are that the assessee filed their return of income on 31/10/2018 declaring a Nil income after claiming deduction u/s. 80P of the act. Thereafter the case was selected for compulsory scrutiny under CASS and the AO made the assessment by adding a sum of Page 2 of 14 S.P. No. 69/Coch/2023 & ITA No. 400/Coch/2023 Rs. 25,13,759/- as business income by disallowing the deduction claimed u/s. 80P and disallowing the 30% of the interest paid to The Kerala State Co-operative Agricultural and Rural Development Bank Ltd. u/s. 40(a)(ia) of the Act for the reason that the assessee had not deducted the TDS u/s. 194A of the Act. The AO also disallowed deduction claimed on the interest received from the deposits made with the banks. The assessee challenged the said order before the Ld.CIT(A) and contended that the assessee is a co- operative society registered under the provisions of Kerala Co-operative Societies Act and its primary object is to provide financial assistance to its members for agricultural purposes or for rural development activities and therefore eligible for deduction u/s. 80P of the Act. The assessee also contended that the interest income was received from the Kerala State Co- operative Agricultural and Rural Development Bank Ltd. which is a co- operative society and therefore the interest income is eligible for deduction u/s. 80P(2)(d) of the Act. The assessee further contended that the interest was paid to the Kerala State Co-operative Agricultural and Rural Development Bank Ltd. for the loans availed by the assessee and the said bank being a co-operative society, are not liable to deduct the TDS u/s. 194A(3)(iii) of the Act. Insofar as the payment of interest to the members are concerned, the assessee contended that as per section 194A(3)(v) of the act, the assessee is not liable to deduct the TDS. The Ld.CIT(A) considered the grounds raised by the assessee and allowed the ground no. 1 in which the disallowance u/s. 80P(2)(a)(i) on the business income was made, by holding that the assessee is a co-operative society and therefore its business income is eligible for deduction u/s. 80P(2)(a)(i) of the Act. 3. Insofar as the ground no. 2 in which the AO had disallowed the interest income received from the Kerala State Co-operative Agricultural and Rural Development Bank Ltd, the ld CIT(A) confirmed the same on the ground that the assessee is not eligible for deduction on the interest income earned from the deposits made with coop banks. Page 3 of 14 S.P. No. 69/Coch/2023 & ITA No. 400/Coch/2023 4. In respect of other ground in which the disallowance was made u/s. 40(a)(ia) of the Act, the Ld.CIT(A) had confirmed the same on the ground that the assessee had not provided any reply or response to the notice given. As against the said order, the assessee is in appeal before the Tribunal with the following grounds of appeal: “1. This present appeal is with respect to AY 2018-2019 (PY 2017-2018) against order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Center (NFAC), New Delhi (hereinafter referred to as the First Appellate Authority) dated 22.03.2023 in Appeal no. NFAC/2017-18/10141296 which in turn arise from the assessment order issued by Additional / Joint / Deputy / Assistant Commissioner of Income Tax/Income-tax Officer, National Faceless Assessment Centre, New Delhi (hereinafter referred to as the Assessing Authority) under Section 143(3) of the Income Tax Act, wherein he had disallowed the deduction of a sum of Rs 2,64,91,132/- 2. The appellant is a co-operative society registered on 28.11.2015 before the Registrar of Co-Operative Societies with PAN AADAP6732A. As per the Certificate issued by Joint Registrar (General Kollam) No: Q.1644, the cooperative society have been registered as Primary Co- operative Agricultural and Rural Development Bank under Rule 15 of KCS Rule 1969 and is working under control of the Department of Co-operation, Government of Kerala. 3. As per the registered bye law, Society has been formed with the main object of providing short and medium term loan and credit facilities to its members, marketing of agricultural produce grown by its members, purchase of agricultural implements, seeds, lives tocks or other articles intended for agriculture for purpose of supplying them to its members. Society is also engaged in long term loan to rural development activities and accepts deposits from the members to facilitate the main objects. The deposit from the members is the main source of funds and which form the corpus for providing credit facilities to the members. 4. For the AY 2018-2019, the appellant has filed their return on income on 31.10.2018 declaring the total income as NIL after claiming deductions under Section 80P of the Income Tax Act. Thereafter the return was processed under Section 143(1) if the Income Tax Act based on which a notice under Section 143(2) was issued to the appellant. Page 4 of 14 S.P. No. 69/Coch/2023 & ITA No. 400/Coch/2023 In response to the said notice, the appellant submitted their replies along with statement of total income, copy of P & L account, balance sheet, audit report, and other relevant documents. Ignoring the submissions and the averments made by the appellant, the assessing authority on 22.9.2021 issued as assessment order under Section 143 of the Income Tax Act making the following additions: (a) Disallowance of Section 80P deduction on income from business to the tune of Rs 2513759/- (b)Disallowance of Section 80P(2)(d) deduction on interest income (income for other source) to the tune of Rs 2551339/- (c) Disallowance under Section 40(a)(ia) of Rs 2,39,39,793/- 5. Aggrieved by the assessment order the appellant filed appeal before the First Appellant Authority. The First Appellate Authority on 22.3.2023 passed an order, partly allowing the appeal. The First Appellate Authority allowed the Appellant's contention on his eligibility of Section 80P(2)(a)(i). However the First Appellate Authority sustained the disallowance of Section 80P(2)(d) deduction and disallowance under Section 40(a)(ia). 6. The first issue involved in the appeal is the disallowance of the interest income of Rs. 25,51,339/- received from Kerala State Cooperative Agricultural and Rural Development Bank Limited Bank for which the appellant has claimed exemption under section 80P(2)(d). The authorities below sustained the disallowance in light of the judgment of the Apex Court in Totgars Co-op Sale Society Ltd v/s ITO, {188 Taxman 282}[2010]. The issue is no more re integra in light of the judgment of the jurisdictional high court in in Pr.CIT Vs Peeroorkada Service Co-Operative Bank Ltd reported in 442 ITR 141 (Ker) held the interest income earned by the Society comes with the category of income from other sources and section 80P(2)(d) deals with the eligible deduction in this behalf. It has been held in the connected cases that the assessee is entitled to deduction of interest income earned from Co- operative Banks/Societies/Federation in section 80P(2)(d). The Court further held that, clause (d) deals with interest in respect of any income by way of interest or dividends derived by the Co-operative Societies from its investments with any other Cooperative Society, the whole of such interest income is eligible for deduction. It is upon plain construction inferable that clause (d) deals with income derived by a Co-operative Society, other than the income Page 5 of 14 S.P. No. 69/Coch/2023 & ITA No. 400/Coch/2023 covered by clauses (a) to (c) of section 80P(2). Clause (d) deals with yet another type of income earned by the Co- operative Society which is deducted while computing the total income of the assessee. However, to merit acceptance of deduction under clause (d) of section 80P(2) of the Act, the clause referring to interest or dividend derived from investments with any other Co-operative Society is satisfied. 7. In the instant case the appellant earned interest from Kerala State Cooperative Agricultural and Rural Development Bank (KSCARD Bank), the Apex body of the Primary Co-operative Agricultural and Rural Development Banks in the State of Kerala. KSCARD Bank was a cooperative society registered under Section 10 of the erstwhile Travancore-Cochin Co-operative Societies Act, 1951. Presently it is registered under Kerela State Co- operative Societies Act. The functions of which are governed by Kerala State Co-operative Agricultural Development Bank Act, 1984 and thereafter by Kerala State Co-operative Agricultural and Rural Development Bank Act in 1990. Therefore, KSCARD Bank being a cooperative society registered under the Kerala Cooperative Societies Act, the interest earned could be treated as meriting consideration under clause (d) of section 80P(2) of the Act. It is not in dispute that the District/State Cooperative Banks have licence from the Reserve Bank of India under the Banking Regulation Act and are registered Cooperative Societies under the Act. Since Society doing banking business such society will stand on par with a Co-operative Society registered under the Kerala Co-operative Societies Act would come within the purview of clause (d) of section 80P(2). 8. The second issue involved in the appeal is regarding the addition of Rs. 2,39,39,793/- by disallowing 30% of the interest expenses incurred by the appellant amounting to Rs: 7,97,99,312/-. The appellant has produced documentary evidences before the authorities below to show that the interest of Rs.7,81,18,938/- was paid to apex bank i.e KSCARD Bank towards the loans sanctioned by them. The authorities below failed to note that the appellant is eligible for exemption from TDS on the interest payments under Section 194A(3)(iii). The relevant provisions reads thus: Section 194A. (1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any income by way of interest other than income by Page 6 of 14 S.P. No. 69/Coch/2023 & ITA No. 400/Coch/2023 way of interest on securities, shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force : Provided that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed one crone rupees in case of business or fifty lakh rupees in case of profession during the financial year immediately preceding the financial year in which such interest is credited or paid, shall be liable to deduct income-tax under this section. Explanation.—For the purposes of this section, where any income by way of interest as aforesaid is credited to any account, whether called \"Interest payable account\" or \"Suspense account\" or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly. (2) ....... (3) The provisions of sub-section (I) shall not apply- (i)…………….. (ii)…………... (iii) to such income credited or paid to— (a) any banking company to which the Banking Regulation Act, 1949 (10 of 1949), applies, or any co- operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank), or (b) ............ (c) ............. (d) ………… (e) ………… (f) ……….... (iv) ............ (v) to such income credited or paid by a co-operative society (other than a co-operative bank) to a member thereof or to such income credited or paid by a co- operative society to any other co-operative society. Explanation.—For the purposes of this clause, \"co- operative bank\" shall have the same meaning as assigned to it in Part V of the Banking Regulation Act, 1949 (10 of 1949); (vi) ………… (vii)............. (viia) to such income credited or paid in respect of— (a) deposits with a primary agricultural credit society or a primary credit society or a co-operative land Page 7 of 14 S.P. No. 69/Coch/2023 & ITA No. 400/Coch/2023 mortgage bank or a cooperative land development bank; (b) deposits (other than time deposits made on or after the 1st day of July, 1995) with a co-operative society, other than a co-operative society or bank referred to in sub-clause (a), engaged in carrying on the business of banking; 9. As stated above KSCARD Bank was a cooperative society registered under Section 10 of the erstwhile Travancore-Cochin Co-operative Societies Act, 1951 and presently it is registered under Kerela State Cooperative Societies Act and therefore by opertation of the provision of Section 194A(3)(iii) the appellant has no obligation to deduct tax at source on the said interest payment in terms of Section 194A(1) of the Income Tax Act. 10. Likewise of the balance amount of Rs 16,80,374/- the same were paid to the members of the appellant society on the deposited maintained with them. Here also the authorities below failed to note that appellant is eligible for exemption from TDS on the interest payments under Section 194A(3)(v) and (viia) of the Income Act. The first appellant authority has not afforded any reason whatsoever, to sustain the additions based on disallowance under Section 40(a)(ia). The reasoning adopted in purely mechanical without application of mind.” 5. At the time of hearing, the Ld.AR submitted that the disallowance of the interest income received from Kerala State Co-operative Agricultural and Rural Development Bank Ltd. is not correct in view of the judgment of the Hon’ble Jurisdictional High Court reported in 442 ITR 141 (Kerala) in the case of PCIT vs. Peerookada Service Co-operative Bank Ltd. The Ld.AR further submitted that the disallowance of the interest u/s. 40(a)(ia) of the Act is not correct, since the necessary documentary evidences were produced before the authorities to show that the interest was paid to The Kerala State Co-operative Agricultural and Rural Development Bank Ltd. towards the loans sanctioned by them and therefore they need not deduct the TDS while making the interest payment as per section 194A(3)(iii) of the Act. In respect of the interest paid to the members, the Ld.AR also relied on the very same provision and contended that the assessee need not deduct Page 8 of 14 S.P. No. 69/Coch/2023 & ITA No. 400/Coch/2023 the TDS while making the payment to its members. The Ld.AR also filed a paper book consisting of the written arguments, copy of the registration certificate, copy of the byelaw and the Kerala State Co-operative Bank Act 1984. The Ld.AR also filed the judgements and orders of the Tribunal in the paper book. The Ld.AR also filed two copies of the audited accounts of the assessee and the statements showing the payment of interest to The Kerala State Co-operative Agricultural and Rural Development Bank Ltd. for the AY 2018-19 and prayed to allow the appeal. 6. The Ld.DR relied on the orders of the lower authorities and prayed to dismiss the appeal on the ground that the interest was received from The Kerala State Co-operative Agricultural and Rural Development Bank Ltd. and hence not eligible for deduction u/s. 80P(2)(d) of the Act. Insofar as the non-deduction of TDS, the Ld.DR submitted that no details were furnished before the Ld.CIT(A) and therefore prayed to dismiss the appeal. 7. We have heard the arguments of both sides and perused the materials available on record. 8. In this appeal, there are 2 disputes, one relates to the disallowance of interest income received from The Kerala State Co-operative Agricultural and Rural Development Bank Ltd. on the premise that the interest income received from the co-operative banks are not eligible for deduction. 9. The next dispute is with regard to the disallowance of 30% of the interest payment made to The Kerala State Co-operative Agricultural and Rural Development Bank Ltd. on the ground that no TDS was deducted by the assessee while making the interest payment. 10. We will take up the first issue i.e. the disallowance of interest income received from The Kerala State Co-operative Agricultural and Rural Development Bank Ltd. u/s. 80P(2)(a)(i) of the Act, the authorities below had Page 9 of 14 S.P. No. 69/Coch/2023 & ITA No. 400/Coch/2023 held that the interest income received from the banks are not eligible for deduction but in the assessment order the AO had given the break-up of the interest received by the assessee from the bank as well as on deposit. But it is the case of the assessee that the interest income has been received from The Kerala State Co-operative Agricultural and Rural Development Bank Ltd and also filed a statement of the interest payment made to KSCARD Bank. But the AO on the false notion held that interest received from banks on the deposit of surplus funds does not qualify for deduction under the provisions of the Act. Unfortunately, the Ld.CIT(A) also confirmed the said finding and proceeded that the interest income received from the bank is liable to be taxed under the head “Income from other sources”. Therefore both the authorities have accepted that the interest income was received from bank but alleged that it is from the cooperative bank. On the other hand the ld AR produced documents to show that the interest income was received from The Kerala State Co-operative Agricultural and Rural Development Bank Ltd. which is a Co-op society and therefore eligible for deduction u/s. 80P of the Act. 11. In these background, we have considered section 80P(2)(d) of the Act which reads as follows. “Deduction in respect of income of co-operative societies. 80P. (1) Where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub-section (2), in computing the total income of the assessee. (2) The sums referred to in sub-section (1) shall be the following, namely :— (a) in the case of a co-operative society engaged in— (i) carrying on the business of banking or providing credit facilities to its members, or (ii) a cottage industry, or (iii) the marketing of agricultural produce grown by its members, or (iv) the purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to its members, or Page 10 of 14 S.P. No. 69/Coch/2023 & ITA No. 400/Coch/2023 (v) the processing, without the aid of power, of the agricultural produce of its members, or (vi) the collective disposal of the labour of its members, or (vii) fishing or allied activities, that is to say, the catching, curing, processing, preserving, storing or marketing of fish or the purchase of materials and equipment in connection therewith for the purpose of supplying them to its members, the whole of the amount of profits and gains of business attributable to any one or more of such activities : Provided that in the case of a co-operative society falling under sub- clause (vi), or sub-clause (vii), the rules and bye-laws of the society restrict the voting rights to the following classes of its members, namely:— (1) the individuals who contribute their labour or, as the case may be, carry on the fishing or allied activities; (2) the co-operative credit societies which provide financial assistance to the society; (3) the State Government; (b) in the case of a co-operative society, being a primary society engaged in supplying milk, oilseeds, fruits or vegetables raised or grown by its members to— (i) a federal co-operative society, being a society engaged in the business of supplying milk, oilseeds, fruits, or vegetables, as the case may be; or (ii) the Government or a local authority; or (iii) a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956), or a corporation established by or under a Central, State or Provincial Act (being a company or corporation engaged in supplying milk, oilseeds, fruits or vegetables, as the case may be, to the public), the whole of the amount of profits and gains of such business; (c) in the case of a co-operative society engaged in activities other than those specified in clause (a) or clause (b) (either independently of, or in addition to, all or any of the activities so specified), so much of its profits and gains attributable to such activities as does not exceed,— (i) where such co-operative society is a consumers' co-operative society, one hundred thousand rupees; and (ii) in any other case, fifty thousand rupees. Explanation.—In this clause, \"consumers' co-operative society\" means a society for the benefit of the consumers; (d) in respect of any income by way of interest or dividends derived by the co-operative society from its investments with any other co- operative society, the whole of such income; Page 11 of 14 S.P. No. 69/Coch/2023 & ITA No. 400/Coch/2023 (e) in respect of any income derived by the co-operative society from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities, the whole of such income; (f) in the case of a co-operative society, not being a housing society or an urban consumers' society or a society carrying on transport business or a society engaged in the performance of any manufacturing operations with the aid of power, where the gross total income does not exceed twenty thousand rupees, the amount of any income by way of interest on securities or any income from house property chargeable under section 22. Explanation.—For the purposes of this section, an \"urban consumers' co- operative society\" means a society for the benefit of the consumers within the limits of a municipal corporation, municipality, municipal committee, notified area committee, town area or cantonment...........” 12. As seen from the said provision, the assessee is entitled for deduction on the interest derived from its investments with any other co-operative society. The authorities below on the wrong notion had treated the said Kerala State Co-operative Agricultural and Rural Development Bank Ltd. as a bank and therefore held that the assessee is not entitled for deduction u/s. 80P(2)(d) of the Act. Insofar as status of the The Kerala State Co- operative Agricultural and Rural Development Bank Ltd. is concerned, the issue came up for hearing before the Hon’ble Supreme Court and the Hon’ble Supreme Court after elaborately discussing the provisions, had categorically held that The Kerala State Co-operative Agricultural and Rural Development Bank Ltd. is a co-operative society and not a bank registered under the Banking Regulations Act. The said finding is given by the Hon’ble Supreme Court in its judgment reported in (2023) 154 taxmann.com 305 in the case of Kerala State Co-operative Agricultural & Rural Development Bank Ltd. vs. AO. Therefore the status of The Kerala State Co-operative Agricultural and Rural Development Bank Ltd. was decided by the Hon’ble Supreme Court and therefore we are applying the said judgment to the facts of the present case and held that the interest income received from the said The Kerala State Co-operative Agricultural and Rural Development Bank Ltd. is eligible for deduction u/s. 80P(2)(d) of the Act. The AO had given a statement about the interest incomes which is reproduced below. Page 12 of 14 S.P. No. 69/Coch/2023 & ITA No. 400/Coch/2023 Interest from loan to members as per sheet 9,18,97,020/- FDR interest from Bank 39,607/- Interest on deposit 25,11,732/- Total Interest Income 9,44,48,359/- Dividend 21,88,290/- 13. As seen from the said table, the assessee has received interest from The Kerala State Co-operative Agricultural and Rural Development Bank Ltd. amounting to Rs. 25,11,732/- and received a further FDR interest from bank Rs. 39,607/-. If the said statement is correct, the assessee is entitled for deduction on the interest income of Rs. 25,11,732/- received from the said The Kerala State Co-operative Agricultural and Rural Development Bank Ltd. being a co-operative society u/s. 80P(2)(d) of the Act. The balance Rs. 39,607/-, if received from the other banks, then the assessee is not entitled to claim deduction u/s. 80P(2)(d) of the Act as per the judgment of Hon’ble Supreme Court reported in (2021) 401 ITR 1 in the case of Mavilayi Service Co-operative Bank Ltd. In order to ascertain the correct figures, we are remitting this issue to the AO to verify the interest income received by the assessee and thereafter grant the deduction u/s. 80P(2)(d) of the Act if the interest income is received from The Kerala State Co-operative Agricultural and Rural Development Bank Ltd which is a Co-op society otherwise the assessee is liable to be assessed u/s. 56 of the Act as income from other sources. 14. Insofar as the second issue is concerned, it is the case of the assessee that they took loans from The Kerala State Co-operative Agricultural and Rural Development Bank Ltd. for which they are remitting interest and therefore as per section 194A(3)(iii) of the Act, they need not deduct the TDS if the payment of interest is made to the co-operative society. Even though, the assessee had relied on the Hon’ble Jurisdictional High Court, this issue was already decided by the Hon’ble Supreme Court in the case of Kerala State Co-operative Agricultural & Rural Development Bank Ltd. vs. AO in which the Hon’ble Supreme Court had declared the said bank as a co- Page 13 of 14 S.P. No. 69/Coch/2023 & ITA No. 400/Coch/2023 operative society and therefore, we accept the argument made by the Ld.AR. In respect of the interest payments made to the members of the assessee, we are also in agreement with the argument of the Ld.AR that as per section 194A(3)(v) & (viia) of the Act, if the interest is paid to the members, the assessee need not deduct the TDS. The AO is his order had extracted the entire provision of 194A and in the said provision, the section grants exemption from deducting the TDS when the interest is paid to any co- operative society engaged in carrying on the business of banking. As already discussed, the assessee paid interest to the The Kerala State Co- operative Agricultural and Rural Development Bank Ltd. which is a co- operative society registered under the provisions of the Kerala Co-operative Societies Act and therefore as rightly contended by the Ld.AR they need not deduct the TDS while making the interest payment. Similarly, it is the case of the assessee that they have paid interest of Rs. 16,80,374/- to their members and therefore they need not deduct the TDS as per section 194A(3)(v) & (viia) of the Act. We have perused the provisions and the audit report submitted for the A/Y 2018-19 and we are in agreement with the argument advanced by the Ld.AR and hold that the assessee need not deduct the TDS while making the payment to The Kerala State Co-operative Agricultural and Rural Development Bank Ltd. which is a co-operative society as well as to its members. 15. It seems that the assessee had not furnished any details about the payment of interest to the said bank as well as its members while the Ld.CIT(A) had decided the appeal and therefore we are of the opinion that this issue may also be remitted to the AO for verifying the said facts and if the AO find that the interest was paid to The Kerala State Co-operative Agricultural and Rural Development Bank Ltd. and also to the members, then the deduction of 30% u/s. 40(a)(ia) of the Act need not be made. We also made it clear that the assessee will also submit the necessary records in support of their case before the assessing officer before passing the order. Page 14 of 14 S.P. No. 69/Coch/2023 & ITA No. 400/Coch/2023 It is needless to say that the AO will grant a personal hearing to the assessee before passing the order. 16. In the result, the appeal filed by the assessee is allowed for statistical purposes and the stay petition is dismissed as infructuous. Order pronounced in the open court on 19th November, 2024. Sd/- Sd/- (WASEEM AHMED) (SOUNDARARAJAN K.) Accountant Member Judicial Member Bangalore, Dated, the 19th November, 2024. /MS / Copy to: 1. Appellant 2. Respondent 3. CIT 4. DR, ITAT, Cochin 5. Guard file 6. CIT(A) By order Assistant Registrar, ITAT, Cochin "