9911796707
TMI Blog2025 (3) TMI 726X X X X Extracts X X X X X X X X Extracts X X X X ..... 6/Valarchi 1, Dev.Circular No.12/2020-21 dated 01.04.2021. 2. Operative portion of the impugned order reads as under: "In the letter of Tamil Nadu State Chief Co-operative Bank found in Reference 2, details of the amendments made in the Finance Act - 2021 regarding the deduction and payment of TDS amount in connection with the income tax account have been given. In the above circular of Chief Co-operative Bank, details of Income Tax Rate Structures to be deducted from the bank in the financial year 2021-2022, Service Tax Charges and submission of Tax Accounts have been given. Chief Banking Divisional Manager and all Branch Managers of the Bank are hereby informed to strictly follow the instructions given in the circular of Chief Co-operative Bank attached hereto. Acknowledgement of receipt of this circular is requested to be sent by return post." 3. The specific case of the petitioners is that the petitioners are Weavers Cooperative Production and Sale Society engaged in utilizing the services of weavers by supplying yarn to weavers for making dhoties, sarees and bed etc. 4. The learned counsel for the petitioners submitted that the payments are made to the weavers for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that provisions of Section 194N is applicable only if there are cash withdrawals exceeding Rs. One Crore during a financial year. As long as these societies operate through banking channels and cash withdrawals, if any, do not exceed Rs. One Crore, question of TDS under Section 194N of the Act would not arise. Thus, there is no issue of the section adversely affecting the operations of Primary Agricultural Societies, as claimed in the affidavit. 15. It is submitted that as per the Income Tax Act section 197A(1), Form 15G/15H is only applicable to the case of individual taxpayer who is resident of India and not applicable to other tax payers such as company, firms, HUF, AOP, Local body and Artificial Judicial person. Here section 197A(1) clearly mentions "Individual", so it is not applicable to persons other than individuals. 16. It is submitted that if the loan amounts are directly transferred by the Societies to the bank accounts of the farmers the question of TDS under Section 194N would not arise. Almost all the farmers presently hold bank accounts and therefore, there is no difficulty in executing the loan transactions through banking channels and thereby avoiding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in cash exceeds twenty lakh rupees during the previous year but does not exceed one crore rupees; or (b) an amount equal to five per cent of the sum where the amount or aggregate of amounts, as the case may be, being paid in cash exceeds one crore rupees during the previous year: Provided further 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 first proviso shall not apply or apply at reduced rate, if such recipient satisfies the conditions specified in such notification: 4[Provided also that where the recipient is a co-operative society, the provisions of this section shall have effect, as if for the words "one crore rupees", the words "three crore rupees" had been substituted:] Provided also that nothing contained in this section shall apply to any payment made to- (i) the Government; (ii) any banking company or co-operative society engaged in carrying on the business of banking or a post office; (iii) any business correspondent of a banking company or cooperative society engaged in carrying on the business of banking, in accordance with the guidelines i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ediaries between the bank and agriculturists, who are beneficiaries of the withdrawals made by the petitioners. 5. In most instances, the amounts have been sanctioned by the State and the petitioner societies are mere conduits or facilitators. Thus, deduction of tax, in such a situation, would greatly prejudice the ultimate beneficiaries of the loans who are farmers and small traders. 6. That apart, the funds withdrawn by the petitioners for onward transmission to the farmers, even if construed to be the income of the petitioner societies together with other incomes earned by the societies, are entitled for deduction in terms of Section 80P of the Act. This would also support their stand that no tax is liable to be deducted at source from the withdrawals. 7. The petitioners additionally submit that, in the budget speech of the Hon'ble Finance Minister, while introducing Section 194N, the proposal for deduction of tax of cash withdrawals was restricted to business payments only. The avowed object was 'to discourage the practice of making business payments in cash- and it was proposed 'to levy TDS of 2% of cash withdrawal exceeding one crore in an year from a bank a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sel. The counter filed by the Kancheepuram Central Cooperative Bank Limited, R2 in W.P.No.21856 of 2022 states that there are 264 Primary Agricultural Societies (PACCS) functioning under it. Pursuant to the introduction of Section 194 N w.e.f. 01.07.2020, there was a wide ranging survey by the Income-tax Department where it was noticed that the bank had not deducted taxes for the cash payments exceeding, in aggregate, a sum of rupees one crore. 14. The bank was thus taken to task and its liability for non-deduction was determined at a sum of Rs. 9,58,77,590/-. This demand relates to the period 01.09.2019 to 31.03.2020, post introduction of Section 194 N as well as the period 2020-21. It is only thereafter, that the banks proceeded to apply the provisions of Section 194 N to insulate themselves from any liability in this regard. The impugned circulars have been issued, and must be seen, in the background of the aforesaid events. 15. The 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thority in the Government seeking relief from the application of Section 194N of the Act. 19. The submissions in relation to the grant of deduction under Section 80P are premature as is reliance upon the judgement in the matter of Eli Lilly. Eligibility to deduction must be tested by the authorities in the course of assessment as it involves the determination of several questions of fact. The society is always entitled to, in the return of income filed by it, seek credit of the taxes attributable to the income returned by it and any excess deduction, if the stand of the societies is accepted in assessment, would have to be refunded to them. 20. My attention is also drawn to an order passed by learned Judge in Madurai in Tirunelveli District Central Cooperative Bank Limited V. The Joint Commissioner of Income Tax (TDS) (W.P.(MD)Nos.6102 to 6125 of 2020 etc. batch, order dated 27.07.2020). 21. Those Writ Petitions have been allowed and the impugned assessments remitted to the file of the assessing officers to be redone afresh. Inter alia, a direction has been given to the assessing officers to exclude the Pongal cash gift distributed by the petitioner banks at the instance of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
