Cooperative societies engaged in banking must deduct TDS for cash withdrawals exceeding prescribed limits under Section 194N of the IT Act.

Order

The challenge in this Writ Petition is to the notice issued by the second respondent against the petitioners, with regard to the deduction of

20% of the TDS for cash withdrawal from them by the petitioners.

2. Heard both sides and perused the materials on record.

3. This Court, in a similar Writ Petition, viz., in W.P.No.4679 of

2024, wherein, the challenge made to the notice issued by the second respondent to the petitioner therein, viz.,V.L.SPL.148, Mullandiram Primary Agricultural Cooperative Society was overruled by this Court by holding as under:-

'' 7. The challenge in this writ petition is to the notice issued in the form of information to the Petitioner Co- operative Society, wherein it has been stated that in the event, if the cash withdrawal exceeds the limit prescribed under the Act, they are bound to deduct TDS. At this juncture, it would be apposite to extract Section 194N of the IT Act, which reads as follows ''Every person, being- (i) a banking company to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act); (ii) a co-operative society engaged in carrying on the business of banking, or (iii) a post office, who is responsible for paying any sum, being the amount or the aggregate of amounts, as the case may be, in cash exceeding one crore rupees during the previous year, to any person (herein referred to as the recipient) from one or more accounts (SB/CA/CC/OD and All other Accounts) maintained by the recipient with it shall, at the time of payment of such sum, deduct an amount equal to two per cent of such sum, as income tax;”

8. From the aforesaid provision, it clear that the Co-

operative Societies engaged in carrying on business of banking and is responsible for paying any sum, being the amount or the aggregate of amounts, as the case may be, in cash exceeding one crore during the previous year, to any person from one or more accounts maintained by the recipient with it shall, at the time of payment of such sum, deduct an amount equal to two per cent of such sum, as income tax. In the present case, the amount to be paid by the 2nd respondent/Cooperative bank is liable to deduction of tax, if the said amount is exceeding Rs.1 Crore. Therefore, they are duty bound to deduct theTDS as stated above. 9. As long as provisions are not challenged, the 2nd respondent is liable for deduction of tax. It is also brought to the notice of this Court by the learned counsel appearing for the respondents that the provision of Section 194(N) was challenged before the Madurai Bench of this Court and the same was dismissed.

10. This Court in similar circumstances in a batch of writ petitions in W.P.Nos.3919 of 2022 etc., batch (Chennimalai Siragiri Murugan Primary Handloom Weaver's Cooperative Society Ltd.) passed an order dated 18.12.2023 rejecting the request of the Co-operative Societies. The relevant portion of the order is extracted hereunder:

“29. Further, the objects and reasons for the introduction of Section 194N of IT Act are as follows:

(i) To go for a cashless economy;

(ii) To discourage the dealings and payments of cash;

(iii) To control the circulation of illegal money in the economy;

(iv) To track the financial transaction easily at any point of time;

(v) To carry on the official transactions easily at any point of time from any place; 30.Further, in the cashless economy, the money will be safe, since once the money deposited or invested in the bank account, there is almost nil chance of being lost, stolen or damaged unless paper money.

31. It is also pertinent to note that due to the permission granted to the Co-operative Societies to deal with the cash and to distribute the same to the members under the different reliefs, there is a large number of malpractices and mishandling of the cash. Even when this Court posted a question to the learned counsel for the petitioner, since he had appeared on behalf of many delinquent officers o