Kerala HC stays demand Notice issued by Income Tax Deputy Commissioner asking State Co-operative Bank to pay outstanding amount [Read Order]

The Kerala High Court has stayed the demand notice issued by Income Tax Deputy Commissioner asking State Co-operative Bank to pay outstanding amount.

The Primary Agricultural Credit Societies (PACS) and Urban Co-operative Banks (UCBS) are Class A members of the petitioner, the Kerala State co-operative societies under Rule 15 of the Kerala Co-operative Societies Rules, 1969 and they receive interest income for the deposits they maintain their accounts mainly with the petitioner.

At present, the PACS are not deducting the TDS and providing the amount to the petitioner. In such a scenario, the petitioner cannot be made liable to pay the amount as demanded in the demand notice, since that would cause undue prejudice to the petitioner.

The petitioner has argued that the demand notice could not have been issued by the respondents and that by doing so, they have completely erred and tried to indirectly flout the orders of the Court. It has also been contended that by sending the demand notice, the respondents deliberately attempted to take undue advantage of the petitioner.

It was also argued that since the matter relating to the deduction of TDS on interests by the Co-operative Banks is sub-judice, the respondents cannot cannot serve demand notice to that effect. In fact, it was pointed out that in some petitions, the constitutionality of Section 194N itself has been challenged.

The single bench of Justice Bechu Kurian Thomas has issued the interim order considering that the matter relating to the collection of Tax Deduction at Source (TDS) on interests by the Co-operative Bank is sub-judice before the Court.

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