Madras HC Directs Finance Ministry & CBDT To Expedite Decision On TN Govt's Request For Exempting PACS From TDS U/s. 194N IT Act
|While disposing of the petitions of the Primary Agricultural Cooperative Credit Societies (Petitioners), the Madras High Court directed the Ministry of Finance and CBDT to act on the Tamil Nadu Government's request within six weeks with respect to exempting the Petitioners from TDS under Section 194N of the Income Tax Act on the withdrawal of cash received from the Central Cooperative Bank for further distribution to the beneficiaries.
A Single Judge Bench of Justice R. Suresh Kumar reiterated that since Section 194N has come into effect from Sep 2019 and the provisions of Section 194N so long as are made available, if at all the Societies want to get any relief, they must seek exemption from the said provision.
Advocates C. Prakasam and Kalaiselvam V.O.S appeared for the Petitioners, whereas Senior Central Government Standing Counsel Dr.B. Ramaswamy and Additional Government Pleader P. Gurunathan appeared for the Respondents.
The brief facts of the case were that the Petitioners are primarily engaged in lending money to the members of the Society for Agriculture and allied activities. The State Government implemented the Pongal welfare scheme through these Societies whereby the allotment for a district would be made to a Central Cooperative Bank which would be withdrawn by the Petitioners in bulk and distributed to the beneficiaries. Such withdrawal of money was considered to be the income of the Petitioners on 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 Cr. during the previous year. The Central Cooperative Bank issued a Circular to the Societies to strictly adhere to the provisions of Section 194N. However, as these societies merely acted as facilitators to pass on the welfare scheme, the said Circular was challenged in the present petitions.
After considering the submission, the Bench found that the co-ordinate bench in Molasi Primary Agricultural Cooperative had held that since Section 194N is a statutory provision, the Central Cooperative Banks had to act upon the Circular and withhold taxes.
Subsequently, the co-ordinate bench in Kuppammalpatti, Thirumohur and Podaturpet Venkateswara Primary Agricultural Cooperatives cases dismissed the petitions as withdrawn directing the Societies to wait for the decision of the request sent by the Tamil Nadu Government to the finance minister and CBDT for exemption of Cooperative Credit Societies from Section 194N, added the Bench.
The High Court found that even though earlier, a Mandamus was issued directing the Ministry of Finance, Government of India and the CBDT to immediately examine the representation of the Tamil Nadu Government for exemption of Societies from Section 194N after affording an opportunity of hearing to the Government and all stakeholders through public notice, however, no such exercise seems to have been conducted till date.
Since the Revenue Department assured that a decision would be taken within a reasonable period, therefore, considering the assurance of Revenue, the High Court directed that a further time of six weeks be granted within which the Ministry of Finance, 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 and accordingly pass orders.
Cause Title: Erode Mavatta Valamana Thodakka v. The Managing Director / Additional Registrar
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