Wp(C)/10712/2019 Of Kaipuzha Service Co-Operative Bank Ltd v. The Commissioner Of Income Tax (Tds)

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, 1941WP(C).No.10712 OF 2019(L) PETITIONERS: 1KAIPUZHA SERVICE CO-OPERATIVE BANK LTD.NO.3793,KAIPUZHA (P.O), KOTTAYAM 686 602 REPRESENTED BY ITS SECRTARY JAYALAKSHMI P.S.KAIPUZHA (P.O), KOTTAYAM 686 602 REPRESENTED BY ITS SECRTARY JAYALAKSHMI P.S. 2NATTAKOM SERVICE CO-OPERATIVE BANK LTD NO. 3839,PAKKIL (P.O), KOTTAYAM 686 023. REPRESENTED BY ITS SECRTARY T.R SATHYADEVAN.PAKKIL (P.O), KOTTAYAM 686 023. REPRESENTED BY ITS SECRTARY T.R SATHYADEVAN. 3BRAHMAMANGALAM GRAMA SWARAJ SERVICE COP-OPERATIVE BANK LTD NO. 2966,BANK LTD NO. 2966, BRAHMAMANGALAM (P.O), THALAYOLAPARAMBU, KOTTAYAM 686 614 REPRESENTED BY ITS SECRETARY JAYALAKSHMI A.G614 REPRESENTED BY ITS SECRETARY JAYALAKSHMI A.G BY ADVS.SRI.T.A.SHAJI (SR.)SHRI.NIKHIL SUNNY MOOKENSRI.S.ABHILASH VISHNU RESPONDENTS: 1THE COMMISSIONER OF INCOME TAX (TDS),CENTRAL REVENUE BUILDING, IS PRESS ROAD, COCHIN 682 018CENTRAL REVENUE BUILDING, IS PRESS ROAD, COCHIN 682 018 2THE ADDL. COMMISSIONER OF INCOME TAX,TDS RANGE, 3RD FLOOR, AYAKAR BHAWAN, KAWADIAR, TRIVANDRUM 695 003TDS RANGE, 3RD FLOOR, AYAKAR BHAWAN, KAWADIAR, TRIVANDRUM 695 003 3INCOME TAX OFFICER,WARD-1, KOTTAYAM 686 001WARD-1, KOTTAYAM 686 001 4INCOME TAX OFFICER,WARD-2, KOTTAYAM 686 001WARD-2, KOTTAYAM 686 001 5INCOME TAX OFFICER,WARD-4, KOTTAYAM 686 001WARD-4, KOTTAYAM 686 001 6THE PRINCIPAL CHIEF COMMISSIONER OF INCIME TAX,KERALA REGION, MINISTRY OF FINANCE, GOVERNMENT OF KERALA REGION, MINISTRY OF FINANCE, GOVERNMENT OF 2 INDIA, CENTRAL REVENUE BUILDINGS, IS PRESS ROAD, KOCHI 682 018 7THE CENTRAL BOARD OF DIRECT TAXES,DEPARTMENT OF REVENUE, MINISTRY OF FINANCE, GOVERNMENT OF INDIA, NORTH BLOCK, NEW DELHI 110 001, REPRESENTED BY ITS CHAIRMAN. 8THE KOTTAYAM DISTRICT CO-OPERATIVE BANK LTD,DISTRICT CO-OPERATIVE BANK BUILDING, T.B ROAD, CENTRAL JUNCTION, KOTTAYAM 686 001 REPRESENTED BY ITS GENERAL MANAGER. 9STATE OF KERALA,REPRESENTED BY THE PRINCIPAL SECRETARY TO GOVT. CO-OPERATION (C) DEPARTMENT, THIRUVANANTHAPURAM 695 001 R1 BY SRI.CHRISTOPHER ABRAHAM, INCOME TAX DEPARTMENT OTHER PRESENT: GP MM JASMINE, SC CHRISTOPHER ABRAHAM THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON18.10.2019, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: 3 JUDGMENT The petitioners are Primary Agricultural Credit Society registeredunder the provision of the Kerala Co-operative Societies Act. In the writpetition, the petitioners are aggrieved by Exts.P1 and P3 communicationsreceived from the General Manager, Kottayam District Co-operative Bank,intimating them, based on the advice received from the Income TaxDepartment, that the interest payable to them on the Fixed Depositsmaintained with the Bank is not exempt from the procedure for taxdeduction at source (TDS) and that tax would be deducted at source andremitted to the Government on such interest payments. It is the case of thepetitioners that the interest income accruing to it is from the deposits madeby the petitioners with the kottayam 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 incases 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 interestfrom the Kottayam District Co-operative Bank to the petitioners have to beviewed as a payment of income by a Co-operative Society to another Co-operative Society and hence the provisions of Section 194A (3)(v) wouldapply to exclude the receipts of interest income by the petitioners from therequirement of tax deduction at source. Through a statement filed by the learned Standing Counsel appearingon behalf of the 1[st] respondent, it is conceded that the petitioners would get 4 Through a statement filed by the learned Standing Counsel appearingon behalf of the 1[st] respondent, it is conceded that the petitioners would get 4 the benefit of the exemption provided under Section 194A(3)(v) of theIncome Tax Act. Taking note of the statement, I allow the writ petition bydeclaring that there will be no requirement of deducting tax at source in thecase of payment of interest from the District Co-operative Bank Kottayam tothe petitioners. SD/- A.K.JAYASANKARAN NAMBIARJUDGE 5 APPENDIX PETITIONER'S/S EXHIBITS: EXHIBIT P1TRUE COPY OF THE COMMON LETTER DATED 14.1.2019 ISSUED TO PETITIONER BANKS, ALONGWITH ITS ENGLISH VERSION. EXHIBIT P2TRUE COPY OF THE LETTER DATED 26.12.2018 ISSUED BY THE 2ND RESPONDENT TO THE KOTTAYAM DISTRICT CO-OPERATIVE BANK.ISSUED BY THE 2ND RESPONDENT TO THE KOTTAYAM DISTRICT CO-OPERATIVE BANK. EXHIBIT P3TRUE COPY OF THE CIRCULAR NO.40/2018-19 DATED 14.2.2019 ISSUED BY THE KOTTAYAM DISTRICT CO-OPERATIVE BANK, ALONG WITH ITS ENGLISH VERSION.DATED 14.2.2019 ISSUED BY THE KOTTAYAM DISTRICT CO-OPERATIVE BANK, ALONG WITH ITS ENGLISH VERSION. EXHIBIT P4TRUE COPY OF THE LETTER DATED 31.1.2019 ISSUED BY THE IST RESPONDENT TO THE KOTTAYAM DISTRICT CO-OPERATIVE BANK.ISSUED BY THE IST RESPONDENT TO THE KOTTAYAM DISTRICT CO-OPERATIVE BANK. EXHIBIT P5TRUE COPY OF THE ORDER DATED 29.1.2018 OF THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH IN ITA NO.596/COCH/2017.THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH IN ITA NO.596/COCH/2017. EXHIBIT P6TRUE COPY OF THE ORDER DATED 25.10.2018 OF THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH IN ITA NO.420/COCH/2018.THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH IN ITA NO.420/COCH/2018.