The Cochin bench of the Income Tax appellate Tribunal, recently ruled that TDS is not required on interest payment made by a primary agricultural credit society even if the society has not filed the returns within the time limit prescribed under the Income Tax Act, 1961. The decision of the Tribunal was based on the decision of the Kerala High Court, who remitted the instant case to the Appellate Tribunal in a petition filed by the assessee. While disposing the petition, the Court has categorically held that the benefit of section 80-P cannot be denied to the assessee for the reason that the return was not filed within the prescribed time.
In the instant case, the Assessing Officer has denied the benefit of section 80-P of the Income Tax Act to the assesse, a co-operative society, on ground that the assessee failed to furnish returns within the time limit prescribed under section 139 of the Income Tax Act. Further, the officer disallowed the claim of the assessee on account of interest payment on ground that no tax is deducted with regard to the said payment.On appeal, both the adjudicating authorities, i.e, the Commissioner of Income Tax (Appeals) and the ITAT confirmed the order. When the matter was brought before the High Court of Kerala, the court found that the assessee, being a primary agricultural credit society registered under the Kerala Cooperative Societies Act, 1969, cannot be denied the benefit of section 80-P merely on ground of belated returns. Further, the Court remitted the matter to the ITAT to decide the other issues.
The Appellate Tribunal while deciding the question, whether TDS is mandatory in case of interest payment, found that under section 194(3)(viiia) of the Income Tax Act, no tax deduction is required in case of interest payments made by a primary agricultural credit society or a primary credit society or a Cooperative Land Mortgage Bank or a Cooperative Land Development Bank.In this regard, it was held that “The AO, CIT(A) and the ITAT had decided the issue against the assessee mainly for the reason that the assessee is not a primary Agricultural Credit Society as claimed and is not entitled to exemption provided u/s 194(3)(viia) of the Income Tax Act. However, the latest judgment of the Hon’ble Kerala High Court, in the case of Chirakkal Service Cooperative Bank Ltd vs CIT reported in 384 ITR 490 (Ker) had held that a Cooperative Society registered as a primary agricultural society under the Kerala Cooperative Societies Act 1969, is entitled to the benefit of section 80P(2) of the Income Tax Act. The Hon’ble High Court had categorically held that the certificate issued the Registrar of Cooperative Socialites to the effect that the assessee is primary agricultural credit society, would suffice as regards the claim of deduction u/s 80P(2) of the Act. When the Hon’ble High Court categorically found that the assessee is a primary agricultural credit society, we see no reason as to why the benefit of exemption provided u/s 194(3)(viiia) of the Act cannot be extended to the assessee. Accordingly, the interest credited or paid in respect of the deposits with the assessee was not required for tax deduction at source and hence, the provisions of section 40a(ia) of the Income Tax Act has no application.”
Read the full text of the order below.
