Recently the Madras High Court directed the Centre which includes the Finance Ministry and Central Board of Direct Taxes (CBDT) to take consider the exemption on primary agricultural cooperative credit societies from TDS deduction under Section 194N of the Income Tax Act, 1961.
The petitioners, Erode Mavatta Valamana Thodakka Velanmai Kotturavu Vangi Paniyalargal Sangam, herein are Primary Agricultural Cooperative Credit Societies and these societies deal with lending loans to the members of the concerned Society for agriculture and allied activities. The State Government, implemented the Pongal Welfare Scheme through these Primary Agricultural Cooperative Credit Societies spread across the State.
According to the Scheme, the bulk allotment for the district concerned, would be made to the District Central Cooperative Bank concerned and from the Central Cooperative Bank concerned, the Primary Agricultural Cooperative Credit Society would draw the money in bulk and would distribute the money to the beneficiaries.
For the purpose of distributing the money when the Primary Societies withdraw money from the Central Cooperative Bank of the district concerned, that was considered to be the income of the Society, where the Central Cooperative Bank was liable to deduct tax at source as per Section 194N of the Income Tax Act, 1961.
Under Section 194N of the Income Tax Act, 1961, it became obligatory on the part of those banking companies to make a deduction of tax at source at 2% of any payment in cash exceeding Rupees One Crore during the previous year to any person, from one or more accounts maintained by the recipient and that should be paid to the credit of the bank concerned as an assessee.
A Single Bench of Justice R Suresh Kumar noted that though such a direction was given by the High Court on 03.03.2023, even till date no such exercise seems to have been undertaken by the Ministry of Finance, Government of India or the CBDT.
In this context, Dr.B.Ramasamy, Senior Central Government Standing Counsel appearing for the Income Tax Department submitted that within a reasonable period, the request made by the Government of Tamil Nadu through the letter dated 27.09.2022 by the Chief Secretary to Government, Government of Tamil Nadu would be considered and a decision would be taken.
The Court issued the direction “That already a direction has been given by the order dated 03.03.2023 to decide on merits, the request made by the Government of Tamil Nadu through the Chief Secretary to the Government dated 27.09.2022 and since the learned Standing Counsel requested further time to decide the same on merits, I feel that further time of six weeks can be granted, within which the Ministry of Finance, Government of India and the CBDT, New Delhi would decide the request made by the Government of Tamil Nadu through the letter of the Chief Secretary to Government of Tamil Nadu dated 27.09.2022, seeking exemption for all those Primary Cooperative Credit Societies functioning in the State of Tamil Nadu from the purview of Section 194N of the Income Tax Act and accordingly pass orders thereon and communicate the same to the State of Tamil Nadu”.
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