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TMI Blog2024 (1) TMI 410X X X X Extracts X X X X X X X X Extracts X X X X ..... me to Ministry of Finance, Government of India and the CBDT, New Delhi to decide the request made by the Government of Tamil Nadu through the letter of the Chief Secretary to Government of Tamil Nadu dated 27-9- 2022, seeking exemption for all those Primary Co-operative Credit Societies functioning in the State of Tamil Nadu from the purview of Section 194N of the Income-tax Act and accordingly pass orders thereon and communicate the same to the State of Tamil Nadu. The issue of applicability of Sec. 194N to the PACCS has thus been directed to be considered by the appropriate organs of the Government of India. The bench has been made aware that the same is still pending for disposal. Thus bench is of the considered opinion that the aforesaid disposal by appropriate authorities would have direct bearing on the demand raised against the assessee and the issue of applicability of Sec. 194N to co-operative societies, itself, is under consideration by appropriate authorities. On this fact, the bench deem it fit to set aside the impugned orders passed by learned first appellate authority, in all the appeals, and restore all the appeals back to the file of Ld. CIT(A) keeping all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reas the assessee has effected Bank transfers to make the payments to PACCS and the PACCS withdraws and hands over the amounts to the beneficiaries of the State Government schemes. 6. The CIT(A) further failed to appreciate that the assessee had not withdrawn the amounts given by the State Exchequer and paid the PACCS in cash and treated to be in default for application of Sec. 201 and 201(1A) of the Act. 7. The CIT(A) further failed to appreciate that the PACCS withdrawing the cash for disbursement to beneficiaries, cannot be considered to be a default by the assessee of not effecting TDS and hence confirming the levy u/s. 201 and 201(1A) are totally misconceived and untenable in law. 8.The CIT(A) failed to appreciate that the Madras High Court in the case of Tirunelveli DCCB Ltd. had excluded Pongal gift from the purview of Sec. 194N on the footing that assessee acted as business correspondents of the banks and that the same principle also applies to agrarian loans distributed to farmers and hence there was no default warranting levy u/s. 201 and 201(1A). 9. The CIT(A) erred in placing reliance on the Madras High Court decision in the case of S.N.299 Molasi PACCS, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of a banking company or cooperative society engaged in carrying on the business of banking in accordance with prescribed authorization by RBI. 3.2 It transpired that the assessee made payment in cash in excess of prescribed threshold limit of Rupees One Crores in each case and therefore, it was obligated to deduct TDS u/s 194N. The failure to do so would make the assessee as assessee-in-default u/s 201(1) of the Act. It also transpired that the aforesaid amount was drawn exclusively for disbursement of Pongal Gift as announced by Government of Tamilnadu to family card holders. The Ld. AO also observed that the exclusion clause in Sec. 194N does not exclude co-operative societies (other than cooperate societies engaged in carrying on the business of banking) from the purview of the section. 3.3 It was further noted by Ld. AO that various cooperative societies were account holders of the assessee bank. The assessee could not establish that these societies were carrying on the business of banking and regulated by Banking Regulation Act, 1949 rendering them ineligible for exemption from the application of the aforesaid provisions. These account holders also did not furnish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6102 of 2020 on 27.07.2020 wherein Pongal Gifts were directed to be excluded from computation u/s 201. 4.2 The Ld. CIT(A) noted that the department preferred writ appeal against the aforesaid order dated 27.07.2020 passed by Hon ble Single Judge. The Madurai Division Bench in WA(MD) No.1137 of 2020, order dated 17.12.2020, granted interim stay of this order and the writ appeal was pending for adjudication. Therefore, this decision rendered in WP(MD) No.6102 of 2020 could not be relied upon. Similar stay was granted in WA(MD) No.1095 of 2020 by order dated 26.11.2020. 4.2 It was further noted that the assessee filed writ petition before Hon ble High Court of Madras in WP No.7409 of 2020 and Hon ble Court vide order dated 01.06.2020 referred to decision in WP No.7199 of 2020 dated 20.03.2020 on identical issue and granted interim stay of recovery. The WP filed by the assessee was pending for adjudication. 4.3 It was further noted that in related matter in the case of Molasi PACCS (WP No.171367 dated 04.11.2022), the Hon ble Court dealt with the impugned issue. In para 22 of the order, It was observed that the examination whether cash withdrawals by member societies constitut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , considering the directions given in all the other earlier orders, has directed as under: - 14. Therefore, at least four set of writ petitions have already been disposed of by four separate orders as cited supra. 15. Insofar as the order dated 3-3-2023 is concerned, the learned Judge has issued a Mandamus by way of directions in Para 5 of the order directing the Ministry of Finance, Government of India and the CBDT, New Delhi to immediately examine the representation given by the State Government written by the Chief Secretary, Government of Tamil Nadu dated 27-9-2022 and after affording an opportunity of hearing to the Government of Tamil Nadu and all stakeholders through public notice, a decision shall be taken with regard to the plea raised by them that whether these Co-operative Societies can be given exemption from the purview of section 194N of the Income-tax Act. 16. Though such a direction was given by this Court on 3-3-2023, even till date no such exercise seems to have been undertaken by the Ministry of Finance, Government of India or the CBDT. In this context, Dr. B. Ramasamy, learned Senior Central Government Standing Counsel appearing for the Income-tax Depar ..... 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