TDS on interest on time deposits deductible by co-operative banks only from 1.06.2015

Facts and Issues of the case

The assessee was registered under Tamil Nadu Cooperative Societies Act, 1983 and it had obtained license from RBI to carry out banking activities u/s 22(1) read with Section 56(6) of Banking Regulation Act, 1949. It has paid interest and submits that there is no requirement of deduction of tax at source in this year. However AO rejected the same on the ground that the assessee was not a cooperative society but a cooperative society engaged in the business of banking. Therefore, the assessee was obligated to deduct TDS on Time / Term deposits.

Observations by the Court

It was held by the Court that none of the State or Central enactments such as the Tamil Nadu Co-operative Societies Act, 1983, the Multi-State Co-operative Societies Act, 2002, the Reserve Bank of India Act, 1934, the Banking Regulation Act, 1949 and the National Bank for Agriculture and Rural Development Act, 1981 make any distinction between a co-operative society engaged in carrying on banking business and a co-operative bank. However, the amendment as brought in by Finance Act, 2015 was prospective in nature and applicable only from 01.06.2015. It is only on and from 01.06.2015, the assessee could be held liable for such TDS but not before that date. On the basis of this decision, it could be concluded that the co-operative banks have thus been taken out of the purview of beneficial exception only from 01.06.2015 and not before that, we order so.