2019 (12) TMI 538 - HC - Income Tax

TDS u/s 194A - payment of interest from the District Co-operative Bank Kottayam to the petitioner - Benefit of the exemption provided u/s 194A(3)(v) - case of the petitioner that the interest income accruing to it is from the deposits made by the petitioner 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 - HELD THAT - Through a statement filed by the learned Standing Counsel appearing on behalf of the 1st respondent, it is conceded that the petitioner would get the benefit of the exemption provided under Section 194A(3)(v) of the Income Tax Act. Taking note of the statement, I allow the writ petition by declaring that there will be no requirement of deducting tax at source in the case of payment of interest from the District Co-operative Bank Kottayam to the petitioner.

Summary

Issues:
Interpretation of Section 194A(3)(v) of the Income Tax Act regarding tax deduction at source on interest income paid by a Co-operative Society to another Co-operative Society.

Analysis:
The petitioner, a Primary Agricultural Credit Society, challenged a communication from the General Manager of Kottayam District Co-operative Bank stating that tax would be deducted at source on interest payments received by the petitioner based on advice from the Income Tax Department. The petitioner argued that as per Section 194A(3)(v) of the Income Tax Act, tax deduction at source should not apply when income is paid by a Co-operative Society to another Co-operative Society. The petitioner contended that the interest income received from the bank should be exempt from TDS under this provision.

The learned Standing Counsel representing the Income Tax Department conceded that the petitioner is entitled to the exemption under Section 194A(3)(v) of the Income Tax Act. In light of this concession, the court allowed the writ petition, declaring that there is no requirement to deduct tax at source on interest payments made by Kottayam District Co-operative Bank to the petitioner. This judgment clarifies the application of the specific provision of the Income Tax Act in the context of payments between Co-operative Societies, ensuring that the petitioner is not subjected to unnecessary tax deductions on interest income.