Wp(C)/10934/2019 Of Kumarakom Regional Service Co-Operative Bank Limited v. The Additional Commissioner Of Income Tax

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.10934 OF 2019(N) PETITIONERS: 1KUMARAKOM REGIONAL SERVICE CO-OPERATIVE BANK LIMITEDN0.315 REPRESENTED BY ITS SECRETARY, KUMARAKOM P.O., KOTTAYAM DISTRICT, KERALA, PIN-686 563 2MANNANAM SERVICE CO-OPERATIVE BANK LIMITED,NO.,3647 REPRESENTED BY ITS SECRETARY, MANNANAM P.O.,KOTTAYAM DISTRICT, KERALA, PIN-686 561 BY ADVS.SRI.C.A.JOJOSRI.JACOB CHACKOSRI.MATHEWS JOSEPH RESPONDENTS: 1THE ADDITIONAL COMMISSIONER OF INCOME TAXTDS RANGE,KOWDIAR, TRIVANDRUM-695 003TDS RANGE,KOWDIAR, TRIVANDRUM-695 003 2THE COMMISSIONER OF INCOME TAX,KERALA REGION, MINISTRY OF FINANCE, GOVERNMENT OF INDIA, CENTRAL REVENUE BLDG,IS PRESS ROAD ,KOCHI-682 018KERALA REGION, MINISTRY OF FINANCE, GOVERNMENT OF INDIA, CENTRAL REVENUE BLDG,IS PRESS ROAD ,KOCHI-682 018 3STATE OF KERALA,REPRESENTED BY ITS SECRETARY (CO-OPERATION), SECRETARIAT, THIRUVANANTHAPURAM-695 001REPRESENTED BY ITS SECRETARY (CO-OPERATION), SECRETARIAT, THIRUVANANTHAPURAM-695 001 4THE KOTTAYAM DISTRICT CO-OPERATIVE BANK LTD,REPRESENTED BY ITS GENERAL MANAGER, HEAD OFFICE, KOTTAYAM-686 601REPRESENTED BY ITS GENERAL MANAGER, HEAD OFFICE, KOTTAYAM-686 601 5KADUTHURUTHY URBAN,CO-OPERATIVE BANK LTD,REPRESENTED BY ITS BRANCH MANAGER, VAIKOM, KADUTHURTHY, KOTTAYAM -686 604REPRESENTED BY ITS BRANCH MANAGER, VAIKOM, KADUTHURTHY, KOTTAYAM -686 604 R4 BY SRI.ATHUL SHAJI, SC, KOTTAYAM DISTRICT CO.OPERATIVE BANK LTD. OTHER PRESENT: 2 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 Ext.P2 communication receivedfrom the General Manager, Kottayam District Co-operative Bank, intimatingthem, based on the advice received from the Income Tax Department, thatthe interest payable to them on the Fixed Deposits maintained with the Bankis not exempt from the procedure for tax deduction at source (TDS) and thattax would be deducted at source and remitted to the Government on suchinterest payments. It is the case of the petitioners that the interest incomeaccruing to it is from the deposits made by the petitioners with theKottayam District Co-operative Bank and hence, as per the provisions ofSection 194A(3)(v), the provisions of sub section (1) thereof, whichcontemplate a deduction of tax at source would not apply in cases where theincome is paid by a Co-operative Society to any other Co-operative Society.It is the case of the petitioners that the payment of interest from theKottayam District Co-operative Bank to the petitioners have to be viewed asa payment of income by a Co-operative Society to another Co-operativeSociety and hence the provisions of Section 194A (3)(v) would apply toexclude 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 petitioner 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. SJ SD/- A.K.JAYASANKARAN NAMBIARJUDGE 5 APPENDIX PETITIONER'S/S EXHIBITS: EXHIBIT P1 A TRUE EXTRACT COPY OF THE CIRCULAR F.NO.ADDL.CIT/TDS/TVM/CO-OP SOCIETY 2018-19DATED 26.12.2018 ISSUED BY 1ST RESPONDENT EXHIBIT P2 Through a statement filed by the learned Standing Counsel appearingon behalf of the 1[st] respondent, it is conceded that the petitioner 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. SJ SD/- A.K.JAYASANKARAN NAMBIARJUDGE 5 APPENDIX PETITIONER'S/S EXHIBITS: EXHIBIT P1 A TRUE EXTRACT COPY OF THE CIRCULAR F.NO.ADDL.CIT/TDS/TVM/CO-OP SOCIETY 2018-19DATED 26.12.2018 ISSUED BY 1ST RESPONDENT EXHIBIT P2 A TRUE COPY OF THE CIRCULAR NO.40/2018-19 DATED 14.02.2019 ISSUED BY 4TH RESPONDENT ALONG WITH ENGLISH TRANSLATION EXHIBIT P3 A TRUE COPY OF THE CIRCULAR ISSUED BY 2ND RESPONDENT TO THE 5TH RESPONDENT F.NO.CR-35/CIT/(TDS)/2018-19/29 DATED 31.01.2019