2017 (6) TMI 1218 - HC - Income Tax

TDS u/s 194A - Co-operative Bank required to deduct tax while paying interest to its members on time deposits - Held that - The Ministry of Finance, Government of India vide Circular No.19/2015 in F.No.142/14/2015-TPL, has held that the Co-operative Banks are not required to deduct tax at source on time deposits of its members paid or credited on or before 1.7.2015. - Decided in favour of assessee.

Summary

Issues:
1. Whether cooperative banks are required to deduct tax on time deposits of members under Section 194-A of the Income Tax Act.

Analysis:
The judgment in question pertains to the issue of whether cooperative banks are obligated to deduct tax on time deposits of its members under Section 194-A of the Income Tax Act. The learned counsel for the department, Mr. Y.V. Raviraj, argued that the matter is settled based on a decision by a Co-ordinate Bench in a previous case involving The Commissioner of Income Tax and another Vs. The Ilkal Co-Operative Bank Ltd. The Co-ordinate Bench had ruled on the necessity of tax deduction by cooperative banks on interest paid to members on time deposits. Subsequently, the Ministry of Finance, Government of India, through Circular No.19/2015, clarified that cooperative banks are not mandated to deduct tax at source on time deposits of members paid or credited before 1st July 2015. The circular explicitly stated that cooperative banks should deduct tax on interest payments made on or after 1st June 2015. Consequently, the appeal made by the Revenue was deemed unnecessary and dismissed based on the circular's provisions.

In conclusion, the judgment affirmed that cooperative banks were not required to deduct tax from interest payments on time deposits made to members before 1st June 2015. The appeal by the Revenue was consequently dismissed in line with the circular's directives. The decision was based on the clarification provided by the Ministry of Finance, Government of India, through Circular No.19/2015, which outlined the tax deduction obligations of cooperative banks concerning interest payments on time deposits to members. The judgment provided a clear interpretation of the applicable provisions of the Income Tax Act in relation to cooperative banks and tax deduction requirements, thereby settling the controversy surrounding the issue.