VEMBAYAM SERVICE CO-OPERATIVE BANK LTD V. THE ASSISTANT COMMISSIONER OF INCOME TAX,

WP(C)/9578/2019

AI Insights

The case revolves around the interpretation of Section 194A(3)(v) of the Income Tax Act, concerning the tax deduction at source on interest payments between co-operative societies. The petitioner, Vembayam Service Co-operative Bank Ltd, contested the communications from the Thiruvananthapuram District Co-operative Bank, which indicated that tax would be deducted on the interest from fixed deposits. The petitioner argued that the interest income from the District Co-operative Bank should be exempt from TDS as both entities are co-operative societies. The court's decision, influenced by the concession from the Income Tax Department, affirmed the petitioner's stance, leading to the declaration of exemption from TDS on the said interest payments.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 768813 (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; THOMAS ABRAHAM
• Assessee Lawyers: T R HARIKUMAR; ARJUN RAGHAVAN
• 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.9578 OF 2019(V) PETITIONER: VEMBAYAM SERVICE CO-OPERATIVE BANK LTD NO. 3121, REPRESENTED BY ITS SECRETARY - IN - CHARGE, KONCHIRA P.O., VEMBAYAM, THIRUVANANTHAPURAM DISTRICT - 695 615 BY ADVS. SRI.T.R.HARIKUMAR SRI.ARJUN RAGHAVAN RESPONDENTS: 1 THE ASSISTANT COMMISSIONER OF INCOME TAX, OFFICE OF THE ASSISTANT COMMISSIONER OF INCOME TAX, TDS RANGE, IIIRD FLOOR, AAYAKAR BHAVAN, KOWDIAR P.O., THIRUVANANTHAPURAM DISTRICT - 695 003 2 THE CENTRAL BOARD OF DIRECT TAXES REPRESENTED BY ITS CHAIRPERSON, ROOM NO.143 E, NORTH BLOCK, DEPARTMENT OF REVENUE (CBDT)/MINISTRY OF FINANCE, GOVERNMENT OF INDIA, NEW DELHI - 110 001 3 UNION OF INDIA REPRESENTED BY THE SECRETARY TO GOVERNMENT OF INDIA, MINISTRY OF FINANCE, NORTH BLOCK, CABINET SECRETARIAT, RAISANA HILL, NEW DELHI - 110 001 4 THE REGISTRAR OF CO-OPERATIVE SOCIETIES THIRUVANANTHAPURAM - 695 001 5 THE THIRUVANANTHAPURAM DISTRICT CO-OPERATIVE BANK LTD., REPRESENTED BY ITS GENERAL MANAGER, HEAD OFFICE, EAST FORT, THIRUVANANTHAPURAM - 695 023 R1 BY SRI.CHRISTOPHER ABRAHAM, INCOME TAX DEPARTMENT R5 BY SRI.THOMAS ABRAHAM SC THIRUVANANTHAPURAM DIST. CO.OP BANK OTHER PRESENT: WP(C).No.9578 OF 2019 2 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.9578 OF 2019 3 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 Exts.P2 and P3 communications received from the General Manager, Thiruvananthapuram 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 Thiruvananthapuram 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 Thiruvananthapuram 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 WP(C).No.9578 OF 2019 4 the benefit of the exemption provided under Section 194A(3)(v) of the 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 Thiruvananthapuram to the petitioner. SD/- A.K.JAYASANKARAN NAMBIAR JUDGE SJ WP(C).No.9578 OF 2019 5 APPENDIX PETITIONER'S/S EXHIBITS: EXHIBIT P1 A TRUE COPY OF THE CERTIFICATE DATED 12-12- 20154, ISSUED BY THE ASSISTANT REGISTRAR OF CO-OPERATIVE SOCIETIES (GENERAL), NEDUMANGAD EXHIBIT P2 A TRUE COPY OF THE COMMUNICATION DATED 14/02/2019 ISSUED BY THE POTHENKODU BRANCH OF THE 5TH RESPONDENT ALONG WITH ENGLISH TRANSLATION EXHIBIT P3 A TRUE COPY OF THE COMMUNICATION DATED NIL ISSUED BY THE NEDUMANGAD MAIN BRANCH OF THE 5TH RESPONDENT BANK ISSUED TO THE PETITIONER ALONG WITH ENGLISH TRANSLATION EXHIBIT P4 A TRUE COPY OF THE CIRCULAR F NO.ADDL.CIT/TDS/TVM/CO-OP SOCIETY/2018-19 DATED 16/12/2018 ISSUED BY THE 1ST RESPONDENT EXHIBIT P5 A TRUE COPY OF ONE SUCH INTERIM ORDER IN WP(C) NO.9274/2019 DATED 26/03/2019 ISSUED BY THIS HON'BLE COURT "