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TMI Blog2025 (3) TMI 726X X X X Extracts X X X X X X X X Extracts X X X X ..... ounded to deduct tax on payments to be made to the petitioners. Even if tax was deducted on sources by the 2nd respondent Bank, if no tax was payable by the petitioners, the amount will have to be refunded back to the petitioners after assessments are completed pursuant to returns filed u/s 139 of the IT Act. Therefore, there is no merits in the case of petitioners.
It is pertinent to state that under similar circumstances, this Court in Molasi Primary Agricultural Cooperative Credit Society Ltd. [2022 (11) TMI 1213 - MADRAS HIGH COURT] as held provisions of Section 194 N provide for a mandatory deduction of 2% of cash withdrawals and the object is to discourage, and drive the move toward a cashless or cash-free economy. The scheme of tax deduction also allows, by way of an application under Section 197, for a payee to seek the remedy of deduction at nil/lower rate under various provisions of the Act. However, Section 194N is conspicuous by its absence therein, and does not figure in the list of such provisions. X X X X Extracts X X X X X X X X Extracts X X X X ..... the counter affidavit filed by the 1st respondent, wherein, it has been stated as follows: "11. Further, as per the 2nd proviso to Sec.198 of the Income Tax Act, 1961, the sum deducted in accordance with Sec.194N for the purpose of computing the income of an assessee, is not deemed to be income received. Whereas in respect of TDS made under other sections of the Act, the TDS amount is considered as the income of the deductee. Sec.194N of the Act introduced TDS on amount which may not form part of the income of the deductee and this law has been duly approved by the Parliament. Therefore, the provisions of Sec.194N will have to be followed in word and spirit. 12. It is reiterated that Sec.194N has been inserted with an avowed object of phasing out black money through cashless transactions and encourage transactions through banking channels. 13. The provision of law introduce in Section 194N is intended to promote digital economy and curtail cash transactions. In any case of the deduction, if any made u/s. 194N in the case of the petitioner is made available as tax credit to the petitioner and can be claimed as refund by the petitioner while filing Return of Income. Hence, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 49 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act); (ii) a co-operative society engaged in carrying on the business of banking; or (iii) a post office, who is responsible for paying any sum, being the amount or the aggregate of amounts, as the case may be, in cash exceeding one crore rupees during the previous year, to any person (herein referred to as the recipient) from one or more accounts maintained by the recipient with it shall, at the time of payment of such sum, deduct an amount equal to two per cent of such sum, as income-tax: Provided that in case of a recipient who has not filed the returns of income for all of the three assessment years relevant to the three previous years, for which the time limit of file return of income under sub-section (1) of section 139 has expired, immediately preceding the previous year in which the payment of the sum is made to him, the provision of this section shall apply with the modification that- (i) the sum shall be the amount or the aggregate of amounts, as the case may be, in cash exceeding twenty lakh rupees during the previous year; and (ii) the deduction shall be- ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turns filed under Section 139 of the IT Act. Therefore, there is no merits in the case of petitioners. 9. It is pertinent to state that under similar circumstances, this Court vide its order dated 04.11.2022 in W.P.Nos.17136 of 2022 etc. batch dismissed a batch of writ petitions in the case of S.N.299 Molasi Primary Agricultural Cooperative Credit Society Ltd. Vs. The Income Tax Officer, Namakkal. Relevant portion of the said order reads as under: "3. The impugned Circulars refer to the statutory mandate of Section 194 N of the Income Tax Act, 1961 (in short 'Act') providing for deduction of tax on cash withdrawal. The provisions of Section 194 N coming under Chapter XVII dealing with 'collection and recovery - deduction at source' provides for deduction of an amount equal to 2% of any cash withdrawal made by persons from (i) a banking company to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act); (ii) a co-operative society engaged in carrying on the business of banking; or (iii) a post office. 4. It is the case of the petitioners that there should be no deductio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommittee (APMC) have been permitted to withdraw cash in excess of one crore without deduction of tax at source, upon them establishing that such withdrawals were for the purpose of making payments to the farmers for purchase of agricultural produce as well as satisfaction of other allied conditions. They would claim parity with the APMCs and thus argue that there would be no liability to tax and consequently no necessity to deduct tax at source. 11. The respondents contest the writ petitions vehemently. The Income tax department reiterates the mandatory nature of Section 194 N. Only the Kanchipuram Central Cooperative Bank Ltd has filed a counter in W.P.No.21856 of 2022 challenging the maintainability of the Writ Petitions in light of the decision of this Court in K.Marappan V. Deputy Registrar of Co-operative Society (2006 (4) MLJ 641). 12. The Full Bench of this Court has in the above decision, held that under the scheme of the Tamil Nadu Cooperative Societies Act, 1983, it is only the alternative and statutory appeal mechanism, particularly appeal provision under Section 153 that must be invoked by the Cooperative Societies. The Banks also point out that the Circulars merely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the authorisation issued by the Reserve Bank of India under the Payment and Settlement Systems Act, 2007 (51 of 2007): Provided also that the Central Government may specify in consultation with the Reserve Bank of India, by notification in the Official Gazette, the recipient in whose case the provision of this section shall not apply or apply at reduced rate, if such recipient satisfies the conditions specified in such notification. 17. There is thus, an avenue provided for a recipient falling outside the scope of the exceptions, to seek exemption from the application of Section 194N and hence, if at all the petitioners believe that they qualify for the exemption, they may seek redressal under the in-built statutory mechanism provided as above, if they so choose. 18. To a query from the Court, as to who would constitute the specific authority before whom such prayer was to be made, the respondents have reported written instructions from the Commissioner of Income Tax (TDS), Coimbatore stating thus: 'As per business allocation rule, Central Government for tax purposes is Finance Minister of India. Hence, any request may be in the name of the Finance Minister with cop ..... X X X X Extracts X X X X X X X X Extracts X X X X
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