Law: Income Tax Act, 1961

Section: 2,194A(3)

(a) Income-tax----Deduction of tax at source---Cooperative society---Exemption from liability to deduct tax at-source---Scope of subsection (3) of S. 194A--­Cooperative society is entitled to exemption--Indian Income Tax Act, 1961, Ss.2 & 194A. Section 194A of the Income Tax Act, 1961, provides that any person who is responsible for paying any income by way of interest other than income by way of interest on securities, shall at the time of credit of such income or payment thereafter deduct income-tax thereon at the rates in force. Subsection (3) of section 194A sets out certain, categories of persons who are exempted from section 194A. Income credited or paid to institutions like Life Insurance Corporation, Unit Trust of India or cooperative society carrying on business of insurance are exempted. The exemption clause in reference to the cooperative society, calls for a liberal interpretation. If one were to go by the plain meaning of the cooperative society as defined under the Income-tax Act, the provisions of subsection (1) of section 194A do not apply to a primary credit society. If the definition as set out in the Banking Regulation Act under section 56 were to be applied, there should have to be a further investigation as to the eligibility. Resort to a different provision of another Act may be relevant in the absence of a definition or of a technical nature. For the purpose of understanding the "cooperative- society" the meaning that can be given is only as per the definition under section 2(19) of the Income-tax Act and not otherwise. They are not controlled or governed by the Reserve Bank of India and they are registered and are bound by the provisions of the Cooperative Societies Act. Hence, cooperative societies are exempted and are not liable to make deduction of tax at source. (b) Interpretation of statutes--- ----Provision for exemption---Liberal interpretation---Resort to different provision of another Act. Alikunju (P.), M.A. Nazeer Cashew Industries v. CIT (1987) 166 ITR 804 (Ker.); Broach Dist. Cooperative Cotton Sales, Ginning and Pressing Society Ltd. v. CIT (1989) 177 ITR 418 (SC); CIT v. Bagyalakshmi & Co. (1965) 55 ITR 660 (SC)…

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