Case Law Details
Chennimalai Siragiri Murugan Primary Handloom Weaver’s Cooperative Society Ltd. Vs ITO (Madras High Court)
Madras High Court held that circulars dated 16.03.2021, 05.08.2021 and 01.04.2021 mandating compliance of provisions of section 194A and 194N of the Income Tax Act by co-operative societies cannot be challenged under Article 226 of the Constitution of India.
Facts- Vide the present petition, the petitioners/Co-operative Societies have challenged the three circulars dated 16.03.2021, 05.08.2021 and 01.04.2021 issued by the 3rd respondent. The said circulars mandate the compliance of provisions of Sections 194A and 194N of the IT Act.
Conclusion- As far as the application of Section 194A of the IT Act is concerned, the petitioners are liable to deduct the TDS as provided thereunder. Whenever the deposits or investments are made with the societies, the societies are liable to deduct the tax on the interest payment. The eligibility for 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. Therefore, it would be a premature petition to challenge the circular issued by the Authority concerned.
This Court had also came across many cases, where the officers of the cooperative societies viz., Secretary or other Officials, in collusion with other officers, had opened hundreds of fictitious accounts and granted loans to those fictitious accounts. Thereafter, if there is any loan waiver or interest waiver granted by the Government, the same benefits will goes to the persons, who are all involved in the creation of those fictitious accounts. Hence, this is where the Societies are functioning in an unregulated manner. It is also due to the reason that the qualified Auditors had not been mandated to audit the accounts of the Societies and only the departmental audits have been conducted, which would pave the way for all sort of malpractices in those cooperative societies. Under these circumstances, Section 194N of the IT Act would be one of the ways to curb the malpractices in distribution of cash and encourage the cashless economy.
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