• Notification Date: 15-11-2022
• Notification No: N/A

Co-operative Banks are not obliged to Deduct TDS on Interest Payments

The Income Tax Appellate Tribunal (ITAT) has ruled that cooperative banks are not obliged to deduct Tax Deducted at Source (TDS) on interest payments that are made to the members.  

The ruling has been made regarding a case where the assessee, Mahesh Urban Co-operative Bank Ltd, challenged the lower authorities’ action. The assessee invoked Section 40(a)(ia) interest payment of Rs.2,00,095/- regarding the matter of non-deduction of TDS related to the payments made to the members/non-members. The assessee filed this case taking reference to the decision made in the case of Mavilavi Service Cooperative Bank Ltd. V/s. CIT. in this case, the Supreme Court had settled the case regarding the distinction between the members and nominal members regarding the Section 80P deduction claim, against the department.   

The case went in favor of the assessee, and the ITAT held that the honorable jurisdictional high court had declined the CBDT’s circular dated 11.09.2022 as ultra vires in (2004) 134 taxmann.com 1 (BOM) Jalgaon District Central Co-operative Bank Ltd., V/s Union of India case, violating Section 119 of the Act. Taking reference from this case, and a few similar cases, the ITAT deletes the impugned section 194A r.w.s. 40(a)(ia) disallowance of Rs.2,00,095/- in very terms.