2023 (7) TMI 87 - HC - Income Tax

TDS liability on payment of Cash exceeding prescribed limit - Seeking exemption u/s 194N to the primary agricultural cooperative credit societies - HELD THAT - CBDT directed to consider the representation of the Petitioners and decide the issue. Learned counsel for the petitioner relies on a judgment of the Hon'ble Supreme Court in the case of The Principal Commissioner of Income Tax 17, Mumbai v M/s Annasaheb Patil Mathadi Kamgar Sahakari Pathpedi Limited 2023 (5) TMI 372 - SC ORDER deciding the question of whether that petitioner was a cooperative society and not a bank for the purpose of Section 80 P(4) of the Act, in favour of the society and adverse to the Department. The petitioner is at liberty to cite this judgment and any other decisions that it places reliance upon, before the authority hearing the request for exemption.

Summary

Issues Involved:
1. Challenge to Circulars issued by District Central Cooperative Banks.
2. Applicability of Section 194N of the Income Tax Act, 1961.
3. Eligibility for exemption under Section 194N.
4. Maintainability of the writ petitions.

Summary:

1. Challenge to Circulars:
The petitioners, primary agricultural credit cooperative societies, challenged the circular dated 29.03.2021 issued by District Central Cooperative Banks in various districts. The circulars pertained to the statutory mandate of Section 194N of the Income Tax Act, 1961, which provides for the deduction of tax on cash withdrawals.

2. Applicability of Section 194N of the Income Tax Act, 1961:
The petitioners argued that no deduction should be effected from their withdrawals, as they are intermediaries between the bank and agriculturists, and the funds withdrawn are not their income. They contended that the funds are for onward transmission to farmers and are entitled to deduction u/s 80P of the Act. The respondents, including the Income Tax Department, emphasized the mandatory nature of Section 194N, which requires a 2% tax deduction on cash withdrawals exceeding one crore in a year.

3. Eligibility for Exemption under Section 194N:
The petitioners cited a CBDT Notification No.70 of 2019, which allows commission agents or traders under the Agricultural Produce Market Committee (APMC) to withdraw cash without tax deduction, arguing for similar treatment. The court noted that the petitioners could seek exemption through the statutory mechanism provided, by approaching the competent authority in the Government.

4. Maintainability of the Writ Petitions:
The respondents challenged the maintainability of the writ petitions, citing the decision in K.Marappan V. Deputy Registrar of Co-operative Society, which mandates invoking the statutory appeal mechanism u/s 153 of the Tamil Nadu Cooperative Societies Act, 1983. The court dismissed the writ petitions on the grounds of maintainability and merits, stating that the circulars merely reiterated statutory provisions and compliance with Section 194N is non-negotiable.

Conclusion:
The court dismissed the writ petitions, stating that the petitioners should approach the appropriate authority for exemption if they believe they qualify. The court also referenced an order dated 04.11.2022, which had attained finality, and directed that any representation for exemption should be considered by the appropriate authority in the CBDT. The petitioners were advised to follow the statutory mechanism for seeking relief from the application of Section 194N.