Vellangallur Peoples Welfare Co-Operative Society Ltd Vs Union of India (Kerala High Court)
Kerala High Court held that proviso to Section 194A(3) of the Income Tax Act which requiring co-operative society to deduct TDS on interest amount is constitutionally valid. Accordingly, writ petitions are dismissed.
Facts- In all these cases, the petitioners are Co-operative Societies registered under the provisions of the Kerala Co-operative Societies Act, 1969 and are classified as Primary Agricultural Credit Societies under the said Act and the Rules. In all these cases, the challenge is raised against the Constitutional validity of the proviso to section 194A(3) of the Income Tax Act, 1961, by which, a restriction was imposed, based on the gross receipts or turnover of the Societies, in the matter of exemption from the obligation to make TDS from the income as the interests on deposits.
Conclusion- That, what is contemplated therein, is with respect to the banking companies to which the Banking Regulation Act, 1949 applies or any co-operative society engaged in the business of banking, including a co-operative land mortgage bank. Evidently, the petitioners are not engaged in the business of banking and their operation is mainly confined to providing financial assistance to its members for agricultural purposes, where the concept of mutuality exists. In this regard, it is profitable to examine the definition of banking, as defined section 5(b) of the Banking Regulation Act, 1949. Evidently, the petitioners are not coming within the said definition. Therefore, the petitioners cannot be treated as the institutions that fall within Section 194A(3 (iii) of the Income tax Act as well.




