2019 (12) TMI 775

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....NA ARIMBOOR SRI.T.T.BIJU SMT.T.THASMI SMT.ANJANA KANNATH FOR THE RESPONDENT : R3 BY SRI.CHRISTOPHER ABRAHAM, INCOME TAX DEPARTMENT, R4 BY SRI.THOMAS ABRAHAM SC THIRUVANANTHAPURAM DIST. CO.OP BANK JUDGMENT 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 sec....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....d or paid during the financial year by the person referred to in sub-section(1) to the account of, or to, the payee, [does not exceed------ (i) xxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxx (ii) xxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxx (iii) to such income credited or paid to- (a) Any banking company to which the Banking Regulation Act,1949(10 of 1949), applies, or any Co-operative Society engaged in carrying on the business of banking (including a co-operative land mortgage, bank), or xxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxx (v) to such income credited or[paid by a co-operative society(other than a co-operative bank) to a member thereof or to such in....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... the exemption under 194A(3)(iii)(v) is found in their favour and the writ petitions that impugn the circulars issued by the various District Cooperative Banks based on the instructions of the Income Tax Department are hereby quashed. 4. As regards the contention of the petitioners with regard to the entitlement to the exemption under 194A(3)(iii)(a), I find that the exemption from the requirement of deducting tax at source is available inter alia only to income credited or paid to any banking company to which the Bank Regulation Act 1949 applies, or to income credited or paid to any co-operative Society engaged in carrying on the business of banking (including a cooperative land mortgage bank). It is the contention of the learned counse....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....under the Banking Regulation Act, since the said definition is the one that is contained in a statute that regulates the business of banking in the country. It is stated that when there is no definition of the word banking under the Income Tax Act, one has to rely either on the dictionary meaning of the term or on the definition of the term as contained in the relevant regulatory statutes and on such interpretation, the petitioner societies cannot be seen as carrying on the business of banking. Reference is also made to the decision of the Bombay High Court in The Hooseini co-operative credit.. v. Assessee [(2015) 377 ITR 272] to suggest that even if the bye-laws of the petitioner societies permit them to accept deposits from persons other ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....r otherwise, and withdrawn by cheque, draft, order or otherwise. Section 3 of the said Act which deals with "The application of the Act to Co-operative Societies in certain cases" indicates that the Act will not apply to; (a) a primary agricultural credit society; (b) a co-operative land mortgage bank; (c) any other co-operative society except in the manner and the extent specified in part V. 8. Part V of the Banking Regulation Act comprises of Section 56 which deals with the circumstances, when the Act will apply to Co-operative Societies subject to modifications. The said Part also defines the terms "Cooperative Credit Society," "Primary Agricultural Credit Society", "Primary Credit Society" and "Primary Co-o....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....e engaged in carrying on a business that involves accepting deposits, for the purposes of investment or lending, from public as opposed to their own members. I therefore, find that in respect of the interest income earned on deposits made by the petitioners societies with the Treasury, the circulars issued by the Treasury department, based on like instructions received from the Income Tax Department, directing the deduction of tax at source on such interest income payments, cannot be legally faulted. The challenge in the writ petitions to the said circular issued by the Treasury Department is therefore rejected. Before parting with these cases, it must be pointed out that, in as much as the provisions of Section 194A(3)(iii)(a) provide for ....