Case Law Details
S.161 Podaturpet Venkateswara Primary Agricultural Co-operative Credit Society Ltd. Vs ITO (Madras High Court)
In a recent judgment, the Madras High Court dismissed a batch of writ petitions filed by Primary Agricultural Co-operative Credit Societies, challenging the circular dated March 2021 issued by District Central Cooperative Banks in various districts of Tamil Nadu. The circular pertained to the statutory mandate of Section 194N of the Income Tax Act, 1961, which mandates a deduction of 2% on cash withdrawals.
The petitioners, primarily functioning as intermediaries between banks and agriculturists, contested the circular, arguing that no deduction should be made on withdrawals made by them, as they act as facilitators for farmers and small traders. They contended that the funds withdrawn, even if considered as income, are entitled to deduction under Section 80P of the Act.
The petitioners also argued that the scope of Section 194N, as introduced in the budget speech, was intended to apply only to business payments. They referenced a CBDT Notification allowing certain entities to withdraw cash without deduction and claimed parity with Agricultural Produce Market Committee (APMC) agents.
The Income Tax Department and the Cooperative Banks defended the circular, emphasizing the mandatory nature of Section 194N. They highlighted the specific exceptions listed in the section and argued that if the petitioners believe they qualify for an exemption, they should seek redressal through the statutory mechanism provided.
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