The National Cooperative Bank Jayanagar Branch and The National Cooperative Bank Gandhi Bazaar Branch and The National Cooperative Bank Banashankari 2nd Stage and The National Cooperative Bank Koramangala Branch and The National Cooperative Bank Sadashivanagar Branch and The National Cooperative Bank A.D.Halli Branch and The National Cooperative Bank Banashankari 3rd Stage Branch 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/14999/2014

AI Insights

The case involves multiple branches of the National Cooperative Bank, which are petitioners, challenging the demand notices issued by the Deputy Commissioner of Income Tax, Circle 16(2), Bangalore, under Section 156 of the Income Tax Act, 1961. The notices demanded tax and interest for the assessment year 2011-12, based on the grounds that no tax was deducted at source on interest payments made to their members, which they argued was exempt under Section 194A of the Act. The petitioners contended that the Deputy Commissioner's actions were beyond his jurisdiction and that the statutory period for response was improperly curtailed from 30 days to 7 days. The court's decision focused on balancing the interests of both the petitioners and the revenue, allowing the petitioners to seek a stay on the demand notices while the appeals were pending.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 794208 (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; Demand notice; Disputed taxes; Interest; Jurisdiction challenge; Tax deduction at source; Stay recovery
• Section: 201(1); 5; 201(1A); 156; 22(1); 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. 14999-15005/2014 (T-IT) BETWEEN 1.THE NATIONAL CO OPERATIVE BANK JAYANAGAR BRANCH REP BY MANAGER- JANARDHAN G N AGED ABOUT 54 YEARS NO. 309/1, 9TH MAIN ROAD 39TH CROSS, JAYANAGAR 5TH BLOCK, BANGALORE-560041 2.THE NATIONAL CO-OPERATIVE BANAK GANDHI BAZAAR BRANCH REP BY MANAGER- SHRI K S SUBBARAYA AGED ABOUT 56 YEARS NO. 73/1, GANDHI BAZAAR MAIN ROAD, BANGALORE-560004 3.THE NATIONAL CO-OPERATIVE BANK BANASHANKARI 2ND STAGE REP BY MANAGER- MUKUND KRISHNAPUR AGED ABOUT 54 YEARS NO. 1998, 9TH MAIN ROAD BANASHANKARI 2ND STAGE BANGALORE-560070 2 4.THE NATIONAL CO-OPERATIVE BANK KORAMANGALA BRANCH REP BY MANAGER-SHANKARMURTHY B R, AGED ABOUT 59 YEARS NO.6, ROYAL ARCADE BUILDING 100 FEET ROAD KORAMANGALA INDUSTRIAL AREA BANGALORE-560095 5.THE NATIONAL CO-OPERATIVE BANK SADASHFIVANAGAR BRANCH REP BY MANAGER- RAMESH M V AGED ABOUT 49 YEARS NO.5, 9TH MAIN ROAD RAJMAHAL VILAS EXTENSION (NEAR BDA MARKET) BANGALORE-560080 6.THE NATIONAL CO-OPERATIVE BANK A.D.HALLI B RANCH REP BY MANAGER-SURESH B N AGED ABOUT 51 YEARS NO. 82/2, 1ST \"A\" MAIN ROAD M C LAYOUT,VIJAYANAGAR BANGALORE-560040 7.THE NATIONAL CO-OPERATIVE BANK BANASHANKARI 3RD STAGE BRANCH REP BY MANAGER-GIRIJA B N AGED ABOUT 58 YEARS NO. 13 & 14 1ST CROSS 1ST BLOCK ANJANEYA LAYOUT BANASHANKARI 3RD STAGE BANGALORE-560085 ... PETITIONER(S) (BY SRI. SHANKAR A, ADV.,) 3 AND 1.THE COMMISSIONER OF INCOME TAX (TDS) OFFICE OF THE COMMISSIONER OF INCOME TAX(TDS) 4TH FLOOR, HMT BHAVAN NO.59, BELLARY ROAD BANGALORE-560032 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 CIRCLE-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 (BY SRI. JEEVAN NEERALGI, STANDING COUNSEL) 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 4 NO.1 TO 7 VIDE DATED 19.3.2014 BY THE R-3 AS REFERRED AS ANN-A1 TO A7 TILL DISPOSAL OF THE APPEALS FILED BY THE PETITIONERS NO.1 TO 7 TILL DISPOSAL OF THE APPEALS FILED BY THE PETITIONERS NO.1 TO 7 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 18.3.2014 VIDE ANN-F BY THE R-3. THESE PETITION COMING ON FOR ORDERS THIS DAY, THE COURT MADE THE FOLLOWING: O R D E R Petitioners which are co-operative societies running banking business are in joint writ action seeking writ in the nature of direction to stay 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, Circle 16(2), all dated 19.3.2014 marked as Annexures-A1 to A7. They also seek a declaration to quash the approval granted by the 2nd respondent to the 3rd respondent to reduce the time in terms of proviso to Section 220(1) of the Act dated 19.3.2014 vide Annexure-B respectively. 5 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 7 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 held 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 Regulation Act, 1949, to run the said business, and claim they have their own by-laws. The primary object of the 6 petitioner is banking business as defined in clause (b) of Section 5 of the Banking Regulation Act as 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 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. Mr.Shankar for the petitioners would submit, petitioners have filed objections which has not been 7 considered by the 3rd respondent in the correct perspective resulting in unjustifiable conclusion declining the grounds 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 A7 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 ground that the statutory period of 30 days is available which unjustifiably has been curtailed to 7 days. 8 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 authority for stay of the demand notice, and to enable the petitioners to avail such benefit, till then proceedings pursuant thereto 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 A7. 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. III) In the meantime, there shall be stay of recovery proceedings in pursuance to the demand notices at Annexures-A1 to A7. 9 Mr.Jeevan Neeralgi, standing counsel, is permitted to file memo of appearance within three weeks. Sd/- JUDGE vgh* "