Ministry of Finance and CBDT to Decide on Tamil Nadu's Exemption Request Under Income Tax Act's Section 194N.

The HC concluded that the Ministry of Finance and CBDT must decide on the exemption request from the Government of Tamil Nadu regarding Section 194N of the Income Tax Act, 1961, within six weeks. All writ petitions filed by the Primary Agricultural Cooperative Credit Societies were disposed of with this directive, emphasizing compliance with existing legal provisions while awaiting a decision.

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Issues Involved:
1. Implementation of Section 194N of the Income Tax Act, 1961.
2. Deduction of tax at source for cash withdrawals exceeding specified limits.
3. Exemption requests for Primary Agricultural Cooperative Credit Societies from Section 194N.

Summary:

Implementation of Section 194N of the Income Tax Act, 1961:
The petitioners, Primary Agricultural Cooperative Credit Societies, challenged the circulars issued by District Central Cooperative Banks mandating adherence to Section 194N of the Income Tax Act, 1961. This section requires banking companies or post offices to deduct tax at source at 2% on cash withdrawals exceeding one crore rupees in a previous year.

Deduction of Tax at Source:
The provision was introduced through the Finance Act No.2 of 2019 and became effective from 01.09.2019. The limit for cooperative banks was later amended to three crores effective from 01.04.2023. The respective Central Cooperative Banks issued circulars to Primary Societies to comply with Section 194N, which led to the filing of writ petitions by these societies.

Exemption Requests:
The societies argued that they were merely facilitators for state welfare schemes and should be exempt from the provisions of Section 194N. Previous judgments by the Madras High Court dismissed similar petitions, stating that the societies should seek exemption from the Ministry of Finance. The Chief Minister of Tamil Nadu and the Chief Secretary had already requested exemptions from the Central Board of Direct Taxes (CBDT).

Judgment Details:
1. Initial Judgment (04.11.2022): The court dismissed the petitions, stating that the Central Cooperative Banks were correct in enforcing Section 194N and that the societies should seek exemption from the appropriate authority.
2. Madurai Bench Judgment (24.02.2023): The court dismissed another batch of petitions, noting that the societies should await a decision on the exemption request sent by the state government.
3. Subsequent Judgment (03.03.2023): The court directed the Ministry of Finance and CBDT to examine the exemption request and refrain from coercive actions until a decision was made.
4. Final Judgment (26.06.2023): The court reiterated the need for the CBDT to consider the exemption request and directed the Ministry of Finance to decide within six weeks.

Conclusion:
The court concluded that the Ministry of Finance and CBDT should decide on the exemption request by the Government of Tamil Nadu within six weeks and communicate the decision. All writ petitions were disposed of with this directive.

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