Madras High Court
A 1160 Manjanaickanpatti Primary ... vs The Deputy Commissioner Of Income Tax on 1 April, 2025
W.P.(MD)No.8601 of 2025
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
DATED : 01.04.2025
CORAM:
THE HONOURABLE MR.JUSTICE VIVEK KUMAR SINGH
W.P.(MD)No.8601 of 2025
and
W.M.P.(MD)Nos.6432 and 6433 of 2025
A 1160 Manjanaickanpatti Primary Agricultural Cooperative
Credit Society Limited,
Rep. through its Secretary,
Manjanaickanpatti Post,
Oddanchatram Taluk,
Dindigul – 624 614. ... Petitioner
-vs-
1.The Deputy Commissioner of Income Tax,
O/o. the Deputy Commissioner of Income Tax,
Room No.1, Ground Floor, Income Tax Office,
No.2, V.P.Rathinasamy Nadar Road,
CR Building, Bibikulam,
Madurai – 625002.
2.The Managing Director/ Joint Registrar,
Dindigul Central Cooperative Bank,
Kootturavu Nagar, Trichy Salai,
Dindigul - 624 005. ... Respondents
PRAYER: Writ Petition filed under Article 226 of the Constitution of India, to
issue a Writ of Certiorari, calling for the records relating to the impugned order
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W.P.(MD)No.8601 of 2025
passed by the first respondent made in DIN and Order
No.ITBA/COM/F/17/2023-24/1063571019 (1) dated 28.03.2024 and the
consequential order of the second respondent made in Na.Ka.No.431/02-03/D1
dated 02.04.2024 and quash the same.
For Petitioner : Mr.Silambanan
Senior Counsel
for M/s.Kaavya Silambanan Associates
For R1 : Mr.N.Dilip Kumar
Senior Standing Counsel
For R2 : Mr.D.Shanmugaraja Sethupathi
ORDER
This Writ Petition has been filed seeking to quash the order passed by the
first respondent made in DIN and Order
No.ITBA/COM/F/17/2023-24/1063571019 (1) dated 28.03.2024 and the
consequential order of the second respondent made in Na.Ka.No.431/02-03/D1
dated 02.04.2024.
2. The learned Senior Counsel appearing for the petitioner submits that the
petitioner is a cooperative credit society constituted by its members as
shareholders, dedicated to serving their interests. The Government of India and
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the Government of Tamil Nadu implement their policies through such societies.
The Governments sanction funds through District Central Co-operative Banks to
primary cooperative societies and members benefit from loans, subsidies, waivers
and annual gifts like, Pongal gifts distributed through ration shops under the
control of these societies.
3. The learned Senior Counsel for the petitioner further contends that the
amendment to the Income Tax Act effected from 01.09.2009 exempts cooperative
societies engaged in banking activities from the purview of Section 194N of the
Income Tax Act, 1961. It has been consistently held by this Court that gifts like,
Pongal gifts and banking transactions are not subject to Section 194N of the
Income Tax Act, 1961. The learned Senior Counsel submits that the first
respondent violated the principles of natural justice by not issuing notices to the
petitioner or the second respondent and by failing to conduct proper inspections
before passing the impugned orders. Furthermore, the Hon'ble Supreme Court in
Civil Appeal No.8917 of 2022 affirmed that cooperative credit societies are
entitled to exemptions under Section 80P(2) of the Income Tax Act, 1961. The
learned Senior Counsel appearing for the petitioner emphasizes that deducting
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2% TDS on loans would severely impact the society's financial sustainability,
jeopardizing its purpose of serving marginalized agrarian members.
4. The learned Senior Standing Counsel appearing for the first respondent
submits that the deduction of TDS under Section 194N of the Income Tax Act,
1961 is in accordance with law and applicable to the petitioner society. The
petitioner's claim for exemption under Section 80P(2) of the Income Tax Act,
1961 is not valid, as the society's activities fall within the scope of tax deduction
provisions. The learned Senior Standing Counsel also submits that the
respondents have followed proper procedure while passing the impugned orders
and therefore, there is no need to interfere with the impugned orders. The learned
Senior Standing Counsel also submits that the Government has the authority to
enforce TDS provisions and to withhold exemptions based on policy directives
and that the petitioner's activities do not warrant any special exemptions.
5. In support of his submissions, the learned Senior Standing Counsel
appearing for the first respondent relied on the judgment passed by a Hon'ble
Division Bench of this Court in Income Tax Officer, TDS vs. Thanjavur
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District Central Co-operative Bank Ltd. reported in (2024) 158 taxmann.com
490 (Madras), wherein the challenge to the constitutional validity of Section
194N of the Income Tax Act, 1961, was rejected.
6. Heard the learned counsel appearing for the parties.
7. After considering the above said submissions, this Court finds that
Section 194N of the Income Tax Act, 1961 applies to the petitioner's transactions,
including loans and subsidies, irrespective of the cooperative society's nature.
This Court is of the view that the legal provisions and amendments are clear and
no exemption applies in this case as claimed by the learned Senior Counsel for
the petitioner. The respondents have followed the procedures properly and passed
the impugned orders in accordance with law.
8. Furthermore, this Court distinguishes the precedents cited by the learned
Senior Counsel for the petitioner, noting that the factual circumstances of those
cases differ from the present case. Therefore, this Court upholds the actions of the
respondents, including the deduction of TDS as lawful and procedurally correct.
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9. In view of the above, the challenge to the impugned orders lacks merit.
Accordingly, the Writ Petition is dismissed. There shall be no order as to costs.
Consequently, connected Miscellaneous Petitions are closed.
NCC : Yes / No 01.04.2025
Index : Yes / No
smn2
To:-
1.The Deputy Commissioner of Income Tax,
O/o. the Deputy Commissioner of Income Tax,
Room No.1, Ground Floor, Income Tax Office,
No.2, V.P.Rathinasamy Nadar Road,
CR Building, Bibikulam,
Madurai – 625002.
2.The Managing Director/ Joint Registrar,
Dindigul Central Cooperative Bank,
Kootturavu Nagar, Trichy Salai,
Dindigul - 624 005.
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VIVEK KUMAR SINGH, J.
smn2
01.04.2025
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