Wp(C)/9415/2019 Of Kallara Village 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.9415 OF 2019(B) PETITIONERS: 1KALLARA VILLAGE SERVICE CO-OPERATIVE BANK LTD NO.3123,NO.3123, KALLARA SOUTH P.O., KOTTAYAM DISTRICT, REPRESENTED BYITS SECRETARY A. MATHEW.ITS SECRETARY A. MATHEW. 2KURICHY SERVICE CO-OPERATIVE BANK LTD. NO.1538,KURICHY P.O., KOTTAYAM, REPRESENTED BY ITS SECRETARY N. VINOD.KURICHY P.O., KOTTAYAM, REPRESENTED BY ITS SECRETARY N. VINOD. 3MANGANAM SERVICE CO-OPERATIVE BANK LTD. NO.1920,MANGANAM P.O., KOTTAYAM, REPRESENTED BY SECRETARY MATHEW SCARIA.MANGANAM P.O., KOTTAYAM, REPRESENTED BY SECRETARY MATHEW SCARIA. 4ITHITHANAM JANATHA SERVICE CO-OPERATIVE BANK LTD. NO.1297,NO.1297, ITHITHANAM P.O., CHANGANASSERY, KOTTAYAM-686004, REPRESENTED BY ITS SECRETARY T.K. KUNJUMON.REPRESENTED BY ITS SECRETARY T.K. KUNJUMON. 5THE ARPOOKARA SERVICE SERVICE CO-OPERATIVE BANK LTD. NO.1931,NO.1931, VILLOONNI P.O., ARPOOKARA, KOTTAYAM, REPRESENTED BY ITS SECRETARY, HAREENDRAN NAIR M.S.ITS SECRETARY, HAREENDRAN NAIR M.S. 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-682018. 2THE ADDL. COMMISSIONER OF INCOME TAX,TRIVANDRUM-695003.TRIVANDRUM-695003. TDS RANGE, 3RD FLOOR, AYAKAR BHAWAN, KAWADIAR, 3INCOME TAX OFFICER, 2 WARD-1, KOTTAYAM-686001. 4INCOME TAX OFFICER,WARD-2, KOTTAYAM-686001.WARD-2, KOTTAYAM-686001. 5INCOME TAX OFFICER,WARD-3, KOTTAYAM-686001.WARD-3, KOTTAYAM-686001. 6INCOEM TAX OFFICER,WARD-4, THIRUVALLA-689101.WARD-4, THIRUVALLA-689101. 7INCOME TAX OFFICER,WARD-5, THIRUVALLA-689101.WARD-5, THIRUVALLA-689101. 8THE PRINCIPAL CHIEF COMMISSIONER OF INCOME TAX,KERALA REGION, MINISTRY OF FINANCE, GOVERNMENT OF INDIA, CENTRAL REVENUE BUILDINGS, IS PRESS ROAD, KOCHI-682018.KERALA REGION, MINISTRY OF FINANCE, GOVERNMENT OF INDIA, CENTRAL REVENUE BUILDINGS, IS PRESS ROAD, KOCHI-682018. 9THE CENTRAL BOARD OF DIRECT TAXES,DEPARTMENT OF REVENUE, MINISTRY OF FINANCE, GOVERNMENT OF INDIA, NORTH BLOCK, NEW DELHI-110001,REPRESENTED BY ITS CHAIRMAN.DEPARTMENT OF REVENUE, MINISTRY OF FINANCE, GOVERNMENT OF INDIA, NORTH BLOCK, NEW DELHI-110001,REPRESENTED BY ITS CHAIRMAN. 10THE KOTTAYAM DISTRICT CO-OPERATIVE BANK LTD.,DISTRICT CO-OPERATIVE BANK BUILDING, T.B. ROAD, CENTRAL JUNCTION, KOTTAYAM-6860001, REPRESENTED BY ITS GENERAL MANAGER.DISTRICT CO-OPERATIVE BANK BUILDING, T.B. ROAD, CENTRAL JUNCTION, KOTTAYAM-6860001, REPRESENTED BY ITS GENERAL MANAGER. 11STATE OF KERLA,REPRESENTED BY THE PRINCIPAL SECRETARY TO GOVT., CO-OPERATIVE (C) DEPARTMENT, THIRUVANANTHAPURAM-695001.REPRESENTED BY THE PRINCIPAL SECRETARY TO GOVT., CO-OPERATIVE (C) DEPARTMENT, THIRUVANANTHAPURAM-695001. 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 10THE KOTTAYAM DISTRICT CO-OPERATIVE BANK LTD.,DISTRICT CO-OPERATIVE BANK BUILDING, T.B. ROAD, CENTRAL JUNCTION, KOTTAYAM-6860001, REPRESENTED BY ITS GENERAL MANAGER.DISTRICT CO-OPERATIVE BANK BUILDING, T.B. ROAD, CENTRAL JUNCTION, KOTTAYAM-6860001, REPRESENTED BY ITS GENERAL MANAGER. 11STATE OF KERLA,REPRESENTED BY THE PRINCIPAL SECRETARY TO GOVT., CO-OPERATIVE (C) DEPARTMENT, THIRUVANANTHAPURAM-695001.REPRESENTED BY THE PRINCIPAL SECRETARY TO GOVT., CO-OPERATIVE (C) DEPARTMENT, THIRUVANANTHAPURAM-695001. 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 petitioners that the payment ofinterest from the Kottayam District Co-operative Bank to the petitioner hasto be viewed as a payment of income by a Co-operative Society to anotherCo-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 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 WP(C).No.9415 OF 2019 5 APPENDIX PETITIONER'S/S EXHIBITS: EXHIBIT P1 TRUE COPY OF THE COMMON LETTER DATED 14.1.2019 ISSUED TO PETITIONER BANKS14.1.2019 ISSUED TO PETITIONER BANKS EXHIBIT P2TRUE COPY OF THE LETTER DATED 26.12.2018 ISSUED BY THE 2ND RESPONDENT TO THE KOTTAYAM DISTRICT CO-OPERATIVE BANKISSUED 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 BANKDATED 14.2.2019 ISSUED BY THE KOTTAYAM DISTRICT CO-OPERATIVE BANK EXHIBIT P4TRUE COPY OF THE LETTER DATED 31.1.2019 ISSUED BY THE 1ST RESPONDENT TO THE KOTTAYAM DISTRICT CO-OPERATIVE BANKISSUED BY THE 1ST 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/2017THE 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/2018THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH IN ITA NO.420/COCH/2018