Case Law Details
Chirayinkeezhu Service Co-operative Bank Ltd. Vs. Central Board of Direct Taxes (Kerala High Court)
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 earned from deposits with the District Co-operative Banks, they would be entitled to a similar exemption on account of Section 194A(3)(iii)(v).
High Court held 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) of the Income Tax Act 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 taxguru.in 194A(3)(iii)(a) of the Income Tax Act.
FULL TEXT OF THE HIGH COURT ORDER / JUDGEMENT
The issue that arises for consideration in these writ petitions is the entitlement of the petitioners, who are Primary Agricultural Credit Societies registered under the provisions of the Kerala Co-operative Societies Act 1969, to the benefit of an exemption from the provisions of Section 194A of the Income Tax Act (‘the Act’ for short). The said provision mandates a deduction of tax at source, whenever any person, who is responsible for paying to a resident any income by way of interest other than income by way of interest on securities, effects payment thereof in cash or by issue of cheque or draft or by any other mode. The provisions of Section 194A do not apply in cases specified under Section 194A(3)(iii) of the Act. In these writ petitions, we are concerned with the exemptions provided under Sections 194A(3)(iii)(a) and 194A(3)(iii)(v) taxguru.in of the Act. The said provisions read as under;
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