No TDS on Payment of Interest by Co-operative Society to its Members prior to Amendment of Sec 194A: Madras HC [Read Judgment]

The Madras High Court recently ruled that payment of Interest by the co-operative society to its members would not attract tax deduction at source (TDS) prior to the amendment of such provision.

Justice T S Sivagnanam was hearing a petition filed by the LIC Employers Co-operative Bank Ltd., registered under the provisions of the Co-operative Societies Act, 1983.

The said petitioner formed as a co-operative society for the welfare of the Life Insurance Corporation. In this writ petition, the petitioner challenged the proceedings initiated against it on the ground they had not deducted tax at source on interest payments exceeding Rs.10,000/- as per Section 194(A)(1) read with Section 194A(i)(b) of the Act.

Eventually, the Madras High Court announced that no TDS can be deducted under section 194A on interest payment made by co-operative society to its members prior to the amendment of such provision.

The Court opined that the same issue was considered by Division bench and it appears that respondent has not gone through the decision, the copy of which was filed by the petitioner along with their reply to the show cause notice.

The Court further observed that “the Assessing Officer was bound by the decision rendered by the jurisdictional High Court. It is stated that as on date there is no appeal by the revenue as against the decision in the case of Coimbatore District Central Cooperative Bank Ltd. That apart, in the assessee’s own case for the previous assessment years, the Tribunal has held in favor of the petitioner-assessee”.

Accordingly, the Court directed to fresh orders by considering the CBDT circular Issued by the CBDT in Circular No.19/2015 and to revise the same by endorsing the decision of Division Bench in the case of Coimbatore District Central Cooperative Bank Ltd.