THE KODUR SERVICE CO-OPERATIVE BANK LTD., V. THE COMMISSIONER OF INCOME TAX(TDS),

WP(C)/11560/2019

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The case revolves around a dispute concerning the applicability of Tax Deduction at Source (TDS) on interest payments from the Malappuram District Co-operative Bank to The Kodur Service Co-operative Bank Ltd. The Income Tax Department had advised that TDS should be applied, which the petitioner contested, citing an exemption under Section 194A(3)(v) of the Income Tax Act. This section exempts interest payments made by one co-operative society to another from TDS. The court, after considering the arguments and the relevant legal provisions, sided with the petitioner, acknowledging the exemption.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 695289 (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
• Assessee Lawyers: O D SIVADAS
• 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.11560 OF 2019(T) PETITIONER: THE KODUR SERVICE CO-OPERATIVE BANK LTD., F 1523, KODUR P.O., MALAPPURAM DISTRICT, REPRESENTED BY ITS SECRETARY. BY ADV. SRI.O.D.SIVADAS RESPONDENTS: 1 THE COMMISSIONER OF INCOME TAX(TDS), CENTRAL REVENUE BUILDING, I.S.PRESS ROAD, ERNAKULAM, PIN- 682 018. 2 THE ADDITIONAL COMMISSIONER OF INCOME TAX (TDS), KOZHIKODE, PIN- 673 001. 3 THE MALAPPURAM DISTRICT CO-OPERATIVE BANK LTD., DISTRICT CO-OPERATIVE BANK BUILDING, MALAPPURAM, PIN- 676 504. 4 THE BRANCH MANAGER, MALAPPURAM DISTRICT CO-OPERATIVE BANK LTD., KADAMPUZHA BUILDING, KADAMPUZHA, MALAPPURAM, PIN- 676 553. 5 THE REGISTRAR OF CO-OPERTIVE SOCIETIES, DEPARTMENT OF CO-OPERATION, JAWAHAR SAHAKARANA BHAVAN, DPI JUNCTION, THYCAUD P.O., THIRUVANANTHAPURAM, PIN- 695 014. R1 BY SRI.CHRISTOPHER ABRAHAM, INCOME TAX DEPARTMENT OTHER PRESENT: 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.11560 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 Ext.P1 communication received from the General Manager, Malappuram 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 Malappuram 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 Malappuram 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 the benefit of the exemption provided under Section 194A(3)(v) of the WP(C).No.11560 OF 2019 3 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 Malappuram to the petitioner. SD/- A.K.JAYASANKARAN NAMBIAR JUDGE SJ WP(C).No.11560 OF 2019 4 APPENDIX PETITIONER'S/S EXHIBITS: EXHIBIT P1 TRUE COPY OF THE LETTER ISSUED BY THE MALAPPURAM DISTRICT CO-OPERATIVE BANK PROPOSING TO LEVY TDS FROM DEPOSITS. "