TMI Blog2018 (12) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... s 40(a)(ia) - TDS liability - Held that:- The issue is covered in favour of the assessee by the ITAT order in case of Kadachira Service Co-op Bank Ltd. [2013 (2) TMI 208 - ITAT COCHIN] as held for the purpose of understanding the cooperative society, the meaning that is given in section 2(19) of the Income-tax Act has to be considered and not otherwise. The co-operative societies are not controlled and governed by RBI and they are registered under the provisions of the State Co-operative Societies Act. Therefore, the Kerala High Court found that the co-operative societies are exempt from provisions of section 194A - addition u/s 40(a)(ia) is deleted - Decided in favour of assessee. - ITA No.467/Coch/2018, CO No.77/Coch/2018, ITA No.468/Coc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which was inserted with effect from 01.04.2007, the assessees are not entitled to deduction u/s. 80P of the I.T.Act. The A.O. also disallowed interest expenditure u/s 40(a)(ia) of the I.T.Act, since assessees did not deduct tax at source u/s 194A of the I.T.Act. 4. Aggrieved by the orders of the assessments, the assessees preferred appeal before the first appellate authority. The CIT(A), following the judgment of the Jurisdictional High Court in the case of Chirakkal Service Co-operative Bank Ltd. (384 ITR 490) held that the assessees are entitled to deduction u/s. 80P(2) of the I.T. Act and directed the Assessing Officer to allow deduction u/s. 80P of the Act. As regards the disallowance of interest expenditure u/s 40(a)(ia) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Court was considering the following substantial question of law: a) Whether on the facts and in the circumstances of the case under consideration, the Tribunal is correct in law in deciding against the assessee, the issue regarding entitlement for exemption under section 80P, ignoring the fact that the assessee is a primary agricultural credit society? 6.1 In considering the above question of law, the Hon'ble High Court rendered the following findings: 15. Appellants in these different appeals are indisputably societies registered under the Kerala co-operative societies Act 1969, for short KCS Act, and the bye-laws of each of them, as made available to this court as part of the paper books, clearly show that they have be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of law being as above with reference to the statutory provisions, the appellants had shown to the authorities and the Tribunal that they are primary agricultural credit societies in terms of clause (cciv) of section 5 of the BR Act having regard to the primary object or principal business of each of the appellants. It is also clear from the materials on record that the bye-laws of each of the appellants do not permit admission of any other co-operative society as member, except may be, in accordance with the proviso to sub-clause 2 of section 5(cciv) of the BR Act. The different orders of the Tribunal which are impeached in these appeals do not contain any finding of fact to the effect that the bye- laws of any of the appellant or its clas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s co-operative societies under the Kerala Co-operative Societies' Act and classified as primary agricultural co-operative societies. We find that this issue was considered by the Kerala High Court in the case of Moolamattom Electricity Board Employees 'Co-operative Bank Ltd., In Re [1999] 238 ITR 630/ 106 Taxman 242 (Ker). The Kerala High Court, after considering the provisions of section 194A of the Income-tax Act found that for the purpose of understanding the cooperative society, the meaning that is given in section 2(19) of the Income-tax Act has to be considered and not otherwise. The co-operative societies are not controlled and governed by RBI and they are registered under the provisions of the State Co-operative So ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Employees Cooperative Bank Ltd. others (supra) and Thodupuzha Urban Co-operative Bank Ltd. and another (supra). In these cases, it was an admitted fact that the assesses are co-operative societies. Hence, the Jurisdictional High Court came to the conclusion that subclause( a) of clause (viia) of sub-section (3) of section 194A was applicable. But in the present case, the assessees are not cooperative society but co-operative bank carrying on banking business with the approval of the Reserve Bank of India and as such, the assessees are not liable to deduct TDS under section 194A of the I.T. Act on the interest paid to its own members. On the other hand, the present assessees are liable to deduct TDS on the interest payments to its non me ..... X X X X Extracts X X X X X X X X Extracts X X X X
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