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2025 Supreme(Online)(Kar) 31930
KARNATAKA HIGH COURT
MR S.R.KRISHNA KUMAR, J
M/S. UDAYA SOUHARDHA CREDIT CO-OPERATIVE SOCIETY LTD. – Appellant
Versus
THE INCOME TAX OFFICER, TDS, WARD-3(3) – Respondent
WRIT PETITION NO. 24591 OF 2022 (T-IT)
For the Appellants/Petitioners: SRI. ANNAMALAI S.
For the Respondents: SRI. E.I. SANMATHI
Co-operative societies registered under the Karnataka Souharda Sahakari Act are recognized under Income Tax regulations and are entitled to TDS exemptions.
Headnote:(A) Income Tax Act, 1961 - Sections 201(1), 201(1A), 194A(3)(v) - Quashing of show cause notice - Petitioner seeking exemption from TDS requirements under Section 194A(3)(v) due to being a registered co-operative society under the Karnataka Souharda Sahakari Act, 1997 - Previous ruling upheld that exemption applies and show cause notice is erroneous as it claims otherwise based on misinterpretation of the Act - No jurisdictional error found in lower court findings. (Paras 7-9)
(B) Co-operative Societies - Definition under Income Tax Act does not exclude societies registered under Karnataka Souharda Sahakari Act - The court discusses inclusion of such co-operatives in the definition of 'Co-operative Society' under Section 2(19) of the Income Tax Act, emphasizing coherence of the laws governing cooperative societies. (Paras 23-34)
Facts of the case:
The petitioner challenges the show cause notice under Section 201(1) and 201(1A) regarding TDS for financial years 2015-16 to 2018-19 believing to be exempt under Section 194A(3)(v), underlining its status as a co-operative society.
Findings of Court:
Court orders to quash the show cause notice as it lacks jurisdiction and does not adhere to statutory provisions that recognize the petitioner’s status as a co-operative society eligible for TDS exemption.
Issues: Primarily concerns application of TDS exemptions to co-operative societies under various provisions of Tax Law and jurisdiction of the notice issued.
Ratio Decidendi: Court reiterates that co-operative societies registered under the Souharda Act are included in the definition of 'Co-operative Society' following the provisions of Section 2(19) and affirms statutory benefits should not be denied due to strict interpretations.
Result: Petition allowed.
| Table of Content |
|---|
| 1. petitioner challenges notice under income tax provisions. (Para 1) |
| 2. discussion on co-operative status and exemptions. (Para 2) |
ORAL ORDER
In this petition, the petitioner seeks for the following reliefs:
(i) Issue a writ of Certiorari or direction in the nature of a writ of certiorari quashing the show cause issued under section 201(1) and 201(1A) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) dated 14.03.2022 for the financial years 2015-16, 2016-17, 2017-18 and 2018-19 by the Respondent bearing DIN No.KAR/WT/185/3/ 14032022/00431 herein marked as Annexure-A.
(ii) Issue a writ of Mandamus or direction in the nature of a writ of mandamus directing the Respondent to drop the present proceedings in the light of the decision of this Hon’ble Court in the petitioner’s own case in ITA No.869/2018 and ITA No.330/2019 along with other connected matters dated 20.12.2021.
(iii) Declare that the petitioner is a co-operative society as per the provisions of the Act and consequently it is not required to deduct tax at source on the interest payments made to its member as per the provisions of section 194A(3)(v) of the Income Tax Act, 1961 .
(iv) And pass such other orders as this Hon’ble Court deems fit and proper in the interest of justice and equity.”
2. A perusal of the material on record would indicate that the present petition relates to the financial years 2015-16, 2016-17, 2017-18 and 2018-19. Further, in relation to the very same petitioner herein and in response to the financial year 2014-15 under identical circumstances, this Court, in W.P.No.6660/2022 disposed of on 19.03.2024 held as under:
“ORDER
In this petition, petitioner seeks quashing of the impugned show cause notice at Annexure – A dated 11.02.2022 issued by the respondent to the petitioner for the FY 2014-15 and for other reliefs.
2. Heard learned counsel for the petitioner and learned counsel for the respondent and perused the material on record.
3. In addition to re-iterating the various contentions urged in the petition and referring to the material on record, learned counsel for the petitioner invited my attention to the impugned show cause notice issued by the respondent under Section 201 (1) and 201(1A) in order to point out that the respondent has come to the erroneous conclusion that since the petitioner is a Co-operative Society registered under The Karnataka Souharda Sahakari Act, 1997, which was not a society as envisaged under Karnataka Cooperative Societies Act, 1959, the exemption available in terms of Section 2(19) of the Income Tax Act exemption available under 194 A(3)(V) of the Income Tax was not admissible for non deductible TDS of the petitioner society. In this context, learned counsel for the petitioner points out that definition clause contained in Section 219 of the IT Act is wide enough to encompass a Co- operative Society including societies registered under Karnataka Cooperative Societies Act, 1959 as well as The Karnataka Souharda Sahakari Act, 1997, as held by the Hon’ble Division Bench in the case ofGovt. of India Vs Karnataka State Souharda Federal Co- operative Ltd., WA.No.378/2020 and connected matters dated 20.12.2021 which includes the case of petitioner also in the different Assessment Year. It is therefore submitted that the impugned show cause notice issued by the respondent apart from being illegal and arbitrary was also without jurisdiction or authority of law and contrary to the provisions of the Act as well as the dictum of the Hon’ble Division Bench and the same deserves to be quashed.
4. Per contra, learned counsel for the respondent submits that the petitioner would be entitled to raise all such contentions by submitting suitable reply to the show cause notice and the respondent may be directed to consider all the contentions and pass appropriate orders in accordance with law.
5. It is therefore submitted that there is no merit in the present petition which is premature and the same is liable t
