2015 (12) TMI 1756 - HC - Income Tax

TDS u/s 194A - Co-operative Bank requirment 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 o f its members paid or credited on or before 1.7.2015.

Summary

Issues involved: Whether a Co-operative Bank was required to deduct tax while paying interest to its members on time deposits under Section 194-A of the Income Tax Act.

Analysis:
The High Court of Karnataka addressed the issue of whether a Co-operative Bank was obligated to deduct tax while disbursing interest to its members on time deposits under Section 194-A of the Income Tax Act. The Ministry of Finance, Government of India, through Circular No.19/2015, clarified that Co-operative Banks were not mandated to deduct tax at source on time deposits paid or credited to members on or before 1.7.2015. The circular explicitly stated that the exemption from tax deduction under section 194A(3)(v) of the Income-tax Act did not apply to interest on time deposits paid by Co-operative Banks to their members. The amendment, effective from 1st June 2015, required Co-operative Banks to deduct tax from interest payments on time deposits to members made on or after the said date. Consequently, the Court ruled that in light of the circular, the appeal by the Revenue did not hold merit and was dismissed. No costs were awarded in this matter.