Madras High Court Directs FinMin, CBDT To Decide On Exempting Agricultural Cooperative Credit Societies From TDS Deduction

The Madras High Court has directed the Finance Ministry and Central Board of Direct Taxes (CBDT) to take action on exempting primary agricultural cooperative credit societies from TDS deduction on cash withdrawals received from the Central Cooperative Bank for distribution to the beneficiaries.

The bench of Justice R. Suresh Kumar has disposed of the writ petitions with a direction that a further time of six weeks be granted within which the Ministry of Finance, the Government of India, and the CBDT would decide the request made by the Government of Tamil Nadu for exemption of cooperative societies from Section 194N.

The petitioners/assessee are the primary agricultural cooperative credit societies and are in the business of lending money to the members of the Society for Agriculture and allied activities. The State Government implemented a Pongal welfare scheme through these societies, by which the allotment for a district would be made to a Central Cooperative bank, which would be withdrawn by the petitioners in bulk and distributed to the beneficiaries.

The withdrawal of money is considered to be income from which the Central Cooperative Bank is liable to deduct tax at source under Section 194N at 2% where the payment in cash exceeds Rs. 1 crore during the previous year.

The Central Cooperative Bank issued a Circular to the Societies to strictly adhere to the provisions of Section 194N.

The petitioners, while challenging the circular, contended that they were societies that merely acted as facilitators to pass on the welfare scheme.

"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," the court said.

Case Title: Erode Mavatta Valamana Thodakka Versus .The Managing Director / Additional Registrar Erode District Central Cooperative Bank

Citation: 2023 LiveLaw (Mad) 213

Case No.: W.P.No.6233 of 2020

Date: 18.07.2023

Counsel For Petitioner: C.Prakasam

Counsel For Respondent: L.P.Shanmugasundaram

Click Here To Read Order