Sree Subramanyeswara Co Operative Bank Ltd Visveswarapuram Branch and Sree Subramanyeswara Co-Operative Bank Ltd Vijayanagara Branch and Sree Subramanyeswara Co-Operative Bank Ltd Subramanyanagar Branch and Sree Subramanyeswara Co-Operative Bank Ltd Avenue Road Branch and Sree Subramanyeswara Co-Operative Bank Ltd Padmanabhanagar Branch and Sree Subramanyeswara Co-Operative Bank Ltd V. The Commissioner of Income Tax (TDS) and The Additional Commissioner of Income-Tax (TDS) Range, 18 and The Deputy Commissioner of Income-Tax Circle-16(2) and The Commissioner of Income-Tax (Appeals)-V

WP/14991/2014

AI Insights

The case involves multiple branches of the Sree Subramanyeswara Co-operative Bank Ltd, which sought judicial relief against the demand notices issued by the Income Tax Department for non-deduction of tax at source on interest payments to their members. The petitioners argued that as banking institutions run by a society, they were exempt from such deductions under Section 194A of the Income Tax Act. The court's decision focused on procedural fairness, allowing the petitioners to contest the demand notices at the appellate level while staying the recovery proceedings in the interim.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 671641 (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; Disputed taxes; Interest; Jurisdiction; Stay of recovery; Tax deduction at source
• Section: 201(1); 201(1A); 156; 22(1); 5(b); 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. 14991-14996/2014 (T-IT) BETWEEN: 1. SREE SUBRAMANYESWARA CO OPERATIVE BANK LTD VISVESWARAPURAM BRANCH REP. BY MANAGER-SHRI K.V.RAVIPRASAD AGED ABOUT 55 YEARS NO.106, RAJATHA BAHVANA, R.V.ROAD V V PRUAM, BANGALORE-560004. 2. SREE SUBRAMANYESWARA CO-OPERATIVE BANK LTD VIJAYANAGARA BRANCH REP. BY MANAGER-NARASIMHA MURTHY AGED ABOUT 53 YEARS CA 10, NO.14, MAIN SERVICE ROAD, VIJAYANAGAR BANGALORE-560040. 3. SREE SUBRAMANYESWARA CO-OPERATIVE BANK LTD SUBRAMANYANAGAR BRANCH REP. BY MANAGER-R P VENKATESH KIRAN AGED ABOUT 44 YEARS NO.156/33, MAIN, MARUTHI EXTENSION SRIRAMPURAM, BANGALORE-560021. 4. SREE SUBRAMANYESWARA CO-OPERATIVE BANK LTD AVENUE ROAD BRANCH REP. BY MANAGER-B.R.NAGARAJA AGED ABOUT 52 YEARS NO.565, I FLOOR, ANANDARAM COMPLEX, OPPOSITE INDIAN BANK, AVENUE ROAD BANGALORE-560092. 2 5. SREE SUBRAMANYESWARA CO-OPERATIVE BANK LTD PADMANABHANAGAR BRANCH REP. BY MANAGER- K N KRISHNAIAH SETTY AGED ABOUT 47 YEARS NO.44, 100 FT ROAD, OPP, BUS DEPOT BSK III STAGE, BANGALORE-560021. 6. SREE SUBRAMANYESWARA CO-OPERATIVE BANK LTD REP. BY MANAGER-M KRISHNA AGED ABOUT 46 YEARS NO.12, JAI GANESHA PLAZA, KAMMANAHALLI MAIN ROAD R S PALYA, BANGALORE-560021 ... 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 BELALRY ROAD, 2. THE ADDITIONAL COMMISSIONER OF INCOME-TAX (TDS) RANGE, 18, NO.59, HMT BHAVAN, 4TH FLOOR BELLARY ROAD BANGALORE-560032. 3. THE DEPUTY COMMISSIONER OF INCOME-TAX CIRCEL-16(2), 4TH FLOOR, HMT BHAVAN 59, BELLARY ROAD BANGALORE-560032. 4. THE COMMISSIONER OF INCOME-TAX (APPEALS)-V NO.59, HMT BHAVAN, BELLARY ROAD BANGALORE-560032. ….RESPONDENTS 3 THESE W.Ps. ARE FILED PRAYING TO STAY THE RECOVERY OF DISPUTED 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 6 VIDE DATED 19.03.2014 BY THE R-3 AS REFERRED AS ANN-A1 TO A6 TILL DIPOSAL OF THE APPEALS FILED BY THE PETITIONERS NO.1 TO 6 BEFORE THE RESPONDENT NO.4 FOR THE ASSESSMENT YEAR 2011- 12 PURSUANT TO THE ORDER PASSED UNDER SECTION 201(1) AND 201(1A) OF THE ACT DATED 19.03.2014 BY THE R-3. THESE PETITIONS COMING ON FOR ORDERS THIS DAY, THE COURT MADE THE FOLLOWING 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 communicated in 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 file of the 3rd respondent-Deputy Commissioner of Income Tax, Ci8rcle 16(2), all dated 19.3.2014 marked as Annexures-A1 to A6. They also seek a declaration to quash the approval granted by the 2nd respondent to the 3rd respondent to reduce the time in 4 terms of proviso to Section 220(1) of the Act dated 19.3.2014 vide Annexure-B 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 matter is 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 6 which are branches of Karnataka State 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 5 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 not 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 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 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 rejected their objections as untenable, which the petitioners have assailed 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 A6 pending disposal of the appeals before the appellate authority. 8. Mr.Jeevan Neeralgi for the Department would submit, the very admission by the petitioners that appeals are 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 same relief 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 7 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 to impugned demand notices needs to be stayed. 10. In the result, the petitions are disposed of with the following order: 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 A6. 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. 8 III) In the meantime, there shall be stay of recovery proceedings in pursuance to the demand notices at Annexures-A1 to A6. Mr.Jeevan Neeralgi, standing counsel, is permitted to file memo of appearance within three weeks. Sd/- JUDGE vgh* "