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TMI Blog2019 (12) TMI 775X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. Alternatively, the petitioners societies also have the option of approaching the Income Tax Department for a certificate u/s 197. Stating that, in view of their non-liability to tax under the Act, there need be no deduction of tax effected at the time of making payments to them. This aspect has been made clear in the circular of the Treasury department impugned in these writ petitions. In the result, these writ petitions are disposed by declaring that, in the case of deposits made by the petitioner societies with the Co-operative Banks, they would be entitled to the benefit of exemption under Section 194A(3)(iii)(v) and, in respect of the deposits made by the petitioner societies with the Treasury, they will not be entitled to the benefit of exemption under Section 194A(3)(iii)(a) - WP(C).No.7795 OF 2019 & CONNECTED CASES - - - Dated:- 3-12-2019 - THE HONOURABLE MR. JUSTICE A.K.JAYASANKARAN NAMBIAR FOR THE PETITIONER: : DR.K.P.PRADEEP SRI.SANAND RAMAKRISHNAN SMT.NEENA ARIMBOOR SRI.T.T.BIJU SMT.T.THASMI SMT.ANJANA KANNATH FOR THE RESPONDENT : R3 BY SRI.CHRISTOPHER ABRAHAM, INCOME TAX DEPARTMENT, R4 BY SRI.THOMAS ABRAHAM SC THIRUVANANTHAPURAM DIS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome credited or paid to- (a) Any banking company to which the Banking Regulation Act,1949(10 of 1949), applies, or any Co-operative Society engaged in carrying on the business of banking (including a co-operative land mortgage, bank), or xxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxx (v) to such income credited or[paid by a co-operative society(other than a co-operative bank) to a member thereof or to such income credited or paid by a co-operative society] to any other co-operative society;] 2. It is the case of the petitioners herein that as Primary Agricultural Credit Societies, they are co-operative societies inter alia engaged in carrying on the business of banking and they are therefore entitled to receive the interest amounts earned by them from deposits made with the State Treasuries and the District Co-operative Banks respectively without deduction of tax at source. They contend that in respect of the amounts deposited with the State Treasury, they would be exempted from the requirement of suffering tax deduction at source on an account of the provisions of Section 194A(3)(iii)(a), and in respect of the interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y rate, the provisions of the Banking Regulation Act do not apply to Primary Agricultural Credit Societies by virtue of Section 3 of the Banking Regulation Act 1949, and hence, the definition of banking under the said Act cannot be of any relevance to decide the entitlement of the petitioner societies to the benefit of exemption under section 194A(3)(iii)(a) of the Income Tax Act. 5. Per contra, it is the submission of the learned Standing Counsel for the respondent Income Tax Department that the meaning to be given to the term banking under Section 194A(3)(iii)(a) has necessarily to be in line with the definition of banking under the Banking Regulation Act, since the said definition is the one that is contained in a statute that regulates the business of banking in the country. It is stated that when there is no definition of the word banking under the Income Tax Act, one has to rely either on the dictionary meaning of the term or on the definition of the term as contained in the relevant regulatory statutes and on such interpretation, the petitioner societies cannot be seen as carrying on the business of banking. Reference is also made to the decision of the Bombay High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Agricultural Credit Society , Primary Credit Society and Primary Co-operative Bank . It can be seen from a comparison of the definitions referred above that there is a distinction made between societies, the primary object and principal business of which is to provide financial accommodation to its members in connection with various activities, and those societies, the primary object and principal business of which, is the transaction of banking business. When viewed against the back drop of the definition of banking noticed above, it is apparent that it is the criteria of accepting deposits of money from the public, as opposed to members of the society, that serves to categorize a Co-operative Society as one engaged in the business of banking. In my view, in the absence of a definition of banking under the Income Tax Act, it would be safe for this Court to adopt the definition of banking as contained in the statute that regulates the business of banking in our Country, for the purpose of interpreting the word banking and the phrase business of banking under the Income Tax Act. On such an interpretation, the benefit of exemption under Section 194A(3)(iii)(a) would apply ..... X X X X Extracts X X X X X X X X Extracts X X X X
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