The Sivagangai District Central Co-operative Bank Ltd., Represented by its Managing Director P.Uma Maheswari V. The Commissioner of Income Tax (Appeals)-II, Income Tax Department and The Income Tax Officer, Income Tax Department, TDS ward

WP(MD)/7073/2014

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The case involves The Sivagangai District Central Co-operative Bank Ltd., which filed a writ petition against the order of the Income Tax Officer demanding tax and interest for non-compliance with TDS provisions under Section 201(1) of the Income Tax Act for the Assessment Year 2012-2013. The bank argued that it was exempt from deducting tax at source on interest payments to its members under Section 194A(3)(v) of the Income Tax Act, supported by a decision from the Bombay High Court. The Income Tax Department contended that the matter should be resolved through the pending appeal before the Commissioner of Income Tax (Appeals)-II. The court decided to direct the payment of a portion of the demand to expedite the appellate process.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 810742 (HC-MISC)
• Appeal Type: Others
• Pronouncement Date: 29-04-2014
• Assessment Year: misc
• Other Referred Cases: Jalgaon District Central Co-operative Bank Ltd. vs. Union of India
• Laws Referred To: Article 226 of the Constitution of India, Section 201(1) of the Income Tax Act, Section 194A of the Income Tax Act, Section 194A(3)(v) of the Income Tax Act, Section 201(1A) of the Income Tax Act, Section 220(6) of the Income Tax Act, Tamil Nadu Co-operative Societies Act, 1983
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: R KRISHNAMOORTHY
• Assessee Lawyers: K RAVI
• Keywords: Assessment year 2012-2013; Banking Activities; Co-operative Society; Interest payment; TDS Provisions; Writ of Certiorari
• Section: 194A; 201(1); 201(1A); 194A(3)(v); 220(6)

Judgement Text

"1 BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT DATED: 29.04.2014 CORAM: THE HONOURABLE MR.JUSTICE R.SUBBIAH Writ Petition (MD) No.7073 of 2014 & M.P.(MD).No.1 of 2014 The Sivagangai District Central Co-operative Bank Ltd., Represented by its Managing Director P.Uma Maheswari D/o.S.Palanisamy Post Box No.3, 163, Gandhi Road, Sivagangai-630561, Sivagangai District. .. Petitioner Vs. 1.The Commissioner of Income Tax (Appeals)-II, Income Tax Department, V.P.R.Nadar Road, Madurai. 2.The Income Tax Officer, Income Tax Department, TDS ward, Railway Feeder Road, Virudhunagar, Virudhunagar District. .. Respondents Petition filed under Article 226 of the Constitution of India to issue a Writ of Certiorari to call for the records of the petitioner herein (in PAN No.AAAAS0659L) for the Assessment Year 2012-2013 and the order passed by the second respondent u/s.201 (1), vide C.No.TDS/VNR/MRIS03255A/2013-14 dated 20.03.2014 and quash the order passed by the second respondent. For Petitioner : Mr.K.Ravi For Respondents : Mr.R.Krishnamoorthy Senior Central Government Standing Counsel ORDER The petitioner has filed this writ petition for a Certiorari to call for the records of the petitioner herein (in PAN No.AAAAS0659L) for the Assessment Year 2012-2013 and the order passed by the second respondent u/s.201(1), vide https://hcservices.ecourts.gov.in/hcservices/ 2 C.No.TDS/VNR/MRIS03255A/2013-14 dated 20.03.2014 and quash the order passed by the second respondent. 2. In the petition, the petitioner has averred that the petitioner is a Co-operative Society under the Tamil Nadu Co- operative Societies Act, 1983 and obtained license to carry out banking activities. The petitioner had debited interest payment on deposits and borrowings to the tune of Rs.4,81,51,585/- for the Assessment year 2012-2013. But, the petitioner did not deduct tax at source under Section 194A of the Act on the interest paid to depositors, since the same was paid only to the members of the petitioner. The petitioner was guided in this regard by the provisions of the Act in Section 194 A(3)(v) and the decision of the Bombay High Court in Jalgaon District Central Co-operative Bank Ltd. vs. Union of India. The second respondent vide an order under Section 201(1) of the Income Tax Act, vide C.No.TDS/VNR/MRIS03255A/2013-14, dated 20.03.2014 for the assessment year 2012-2013 has raised a demand of Rs.4,81,51,585/- (Tax deductible/payable Rs.48,15,158/- and interest under Section 201(1A) Rs.10,59,333/-), alleging non compliance of TDS provisions. 3. It is the case of the petitioner that the petitioner is a Co-operative Society carrying on Banking business and governed by Tamil Nadu Co-operative Societies Act, 1983. The petitioner being aggrieved by the order under Section 201(1) dated 20.03.2014 of the second respondent preferred an appeal before the first respondent on 10.04.2014 which is pending adjudication. Being aggrieved by the order of demand under Section 201(1) of the Income Tax Act, the petitioner filed a petition for stay of collection of the tax demanded before the first respondent and not to treat the assessee as an assessee in default. Powers have been vested under Section 220 (6) of the Income Tax Act, on the first respondent to consider such application and to treat the Assessee as not in default. This application is yet to be disposed of. In the meanwhile, the present writ petition has been filed to quash the impugned order. 4. Learned counsel appearing for the Income Tax Department submits that already appeal has been filed by the petitioner and the same is pending before the first respondent. Therefore, the petitioner has to work out his remedy only in the pending appeal. 5. Learned counsel for the petitioner submits that as per Section 194A(3) of the Income Tax Act, the exemption is available to the interest payments made only to its members or to any other Co-operative Society. Since the petitioner is squarely covered by the above exemption provided under Section 194A(3) of the Income Tax Act, the impugned order is not legally sustainable. Therefore, the writ petition is maintainable. https://hcservices.ecourts.gov.in/hcservices/ 3 6. Irrespective of the submissions made on either side, I am of the opinion that since an appeal is pending before the first respondent, it would be appropriate for the petitioner to work out his remedy before the appellate authority by raising all the grounds. Hence, this Court is constrained to pass the following orders:- The petitioner is directed to pay 25% of the demand amount, within a period of eight weeks. On such payment, the first respondent is directed to take the appeal and dispose of the same, within a period of 8 weeks thereafter. The petitioner is at liberty to raise all the defence raised in this writ petition before the first respondent. The writ petition is disposed of accordingly. No costs. Consequently, connected miscellaneous petition is closed. Sd/- Assistant Registrar(Writs) /True Copy/ Sub-Assistant Registrar To 1.The Commissioner of Income Tax (Appeals)-II, Income Tax Department, V.P.R.Nadar Road, Madurai. 2.The Income Tax Officer, Income Tax Department, TDS ward, Railway Feeder Road, Virudhunagar, Virudhunagar District. Writ Petition (MD) No.7073 of 2014 & M.P.(MD).No.1 of 2014 jikr 29.04.2014 msm 02.05.2014 p3/3c https://hcservices.ecourts.gov.in/hcservices/ "