The department has raised s.201 demands on our co-operative bank for not deducting tax on time deposit interest paid to members in years before June 2015. Does the Finance Act 2015 amendment to s.194A(3)(v) apply to those years?
No. The Madras High Court held that the words 'other than a co-operative bank' were inserted in s.194A(3)(v) by the Finance Act 2015 with prospective effect from 1 June 2015, and that an amendment is prospective unless made retrospective by express language or necessary implication. For interest paid or credited to members before that date the exemption in s.194A(3)(v) was available, and the Court also held that no State or central enactment draws a distinction between a co-operative bank and a co-operative society carrying on banking business.
Decided by the High Court (V. Ramasubramanian J and T. Mathivanan J) on 2015-10-15, reported as Tax Case (Appeal) Nos. 588 to 643, 647 to 688, 744 to 750, 942 to 948 and 969 to 982 of 2015 (Madras High Court). It bears on section 194A(3)(v), section 194A(3)(viia), section 194A(3)(i), section 194A(1), section 2(19), section 201(1), section 260A of the Income Tax Act 1961, in TDS Defaults, Co-operative Societies and How Tax Law Is Read matters.
TDS survey demands on district central and urban co-operative banks routinely reach back over several years, and the department's standard argument is that the 2015 amendment merely clarified what had always been the position. This decision answers that argument head on. Its second holding — that there is no dichotomy between a co-operative bank and a co-operative society carrying on banking business — outlives the amendment and was applied by the Bombay High Court in August 2026 to the second limb of clause (v). Read the two together: this case protects the members' limb only up to 31 May 2015; the societies' limb is unaffected by the amendment altogether.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The appeals were filed under s.260A by branch offices of the Coimbatore District Central Co-operative Bank Ltd. against orders of the Income Tax Appellate Tribunal dated 30 April 2015 and 20 May 2015 holding the bank liable to deduct tax at source under s.194A on interest paid to members on time deposits. The bank contended that it was a co-operative society entitled to the exemption in s.194A(3)(v) and that the exclusion of a co-operative bank from that clause, introduced by the Finance Act 2015, operated only from 1 June 2015.
The tax case appeals were allowed and the connected miscellaneous petitions closed, with no order as to costs (para 67). On the second question, none of the State or central enactments considered — 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 NABARD Act 1981 — draws a distinction between a co-operative society engaged in carrying on banking business and a co-operative bank (para 45). On the first question, the amendment to s.194A(3)(v) operates prospectively from 1 June 2015, and the answer was given in favour of the assessee (paras 63 to 65).
The Court traced the legislative history of s.194A(3) from the 1970 amendment through the amendments effective 1 April 1971, 1 October 1991 and 1 June 1992, with the CBDT circulars explaining each, and noted that the exemption for co-operative societies had been enlarged in 1971 to cover both income paid in respect of deposits with a society carrying on banking business and income paid by a society to a member or to any other society. It then examined the definitions in Part V of the Banking Regulation Act 1949 — s.56 defining 'co-operative bank' as a State co-operative bank, a central co-operative bank and a primary co-operative bank, and clauses (cciv), (ccv) and (ccvi) defining a primary agricultural credit society, a primary co-operative bank and a primary credit society — together with s.7(1) of that Act, and concluded that for the purposes of the Banking Regulation Act there is no distinction between a co-operative bank and a co-operative society carrying on banking business (paras 31, 32, 41 and 42). On prospectivity, the Court relied on the note explaining the clause, which stated in terms that the amendment was to take effect from 1 June 2015, and held that an amendment made to remove an anomaly or a confusion can only be prospective unless made retrospective by express language or necessary implication (paras 63 and 64). CIT v Alom Extrusions Ltd was distinguished on the footing that the Supreme Court there was concerned with a benefit conferred upon the assessee and not with a levy (para 66).
we do not find anywhere a dichotomy created between a co-operative bank and a co-operative society engaged in carrying on banking businesses
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Handle my notice → Ask a CA on WhatsAppNo. The Madras High Court held that the words 'other than a co-operative bank' were inserted in s.194A(3)(v) by the Finance Act 2015 with prospective effect from 1 June 2015, and that an amendment is prospective unless made retrospective by express language or necessary implication. For interest paid or credited to members before that date the exemption in s.194A(3)(v) was available, and the Court also held that no State or central enactment draws a distinction between a co-operative bank and a co-operative society carrying on banking business. This was decided by the High Court (V. Ramasubramanian J and T. Mathivanan J) and bears on section 194A(3)(v), section 194A(3)(viia), section 194A(3)(i), section 194A(1), section 2(19), section 201(1), section 260A of the Income Tax Act 1961. It is reported as Tax Case (Appeal) Nos. 588 to 643, 647 to 688, 744 to 750, 942 to 948 and 969 to 982 of 2015 (Madras High Court). TDS survey demands on district central and urban co-operative banks routinely reach back over several years, and the department's standard argument is that the 2015 amendment merely clarified what had always been the position. This decision answers that argument head on. Its second holding — that there is no dichotomy between a co-operative bank and a co-operative society carrying on banking business — outlives the amendment and was applied by the Bombay High Court in August 2026 to the second limb of clause (v). Read the two together: this case protects the members' limb only up to 31 May 2015; the societies' limb is unaffected by the amendment altogether. If it applies to you, the first step is this: Date every payment. Interest on time deposits of members credited or paid on or after 1 June 2015 attracts deduction and this decision does not help.
The appeals were filed under s.260A by branch offices of the Coimbatore District Central Co-operative Bank Ltd. against orders of the Income Tax Appellate Tribunal dated 30 April 2015 and 20 May 2015 holding the bank liable to deduct tax at source under s.194A on interest paid to members on time deposits. The bank contended that it was a co-operative society entitled to the exemption in s.194A(3)(v) and that the exclusion of a co-operative bank from that clause, introduced by the Finance Act 2015, operated only from 1 June 2015. The matter was decided on 2015-10-15 by the High Court (V. Ramasubramanian J and T. Mathivanan J). On those facts the High Court held as follows. The tax case appeals were allowed and the connected miscellaneous petitions closed, with no order as to costs (para 67). On the second question, none of the State or central enactments considered — 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 NABARD Act 1981 — draws a distinction between a co-operative society engaged in carrying on banking business and a co-operative bank (para 45). On the first question, the amendment to s.194A(3)(v) operates prospectively from 1 June 2015, and the answer was given in favour of the assessee (paras 63 to 65).
The Court traced the legislative history of s.194A(3) from the 1970 amendment through the amendments effective 1 April 1971, 1 October 1991 and 1 June 1992, with the CBDT circulars explaining each, and noted that the exemption for co-operative societies had been enlarged in 1971 to cover both income paid in respect of deposits with a society carrying on banking business and income paid by a society to a member or to any other society. It then examined the definitions in Part V of the Banking Regulation Act 1949 — s.56 defining 'co-operative bank' as a State co-operative bank, a central co-operative bank and a primary co-operative bank, and clauses (cciv), (ccv) and (ccvi) defining a primary agricultural credit society, a primary co-operative bank and a primary credit society — together with s.7(1) of that Act, and concluded that for the purposes of the Banking Regulation Act there is no distinction between a co-operative bank and a co-operative society carrying on banking business (paras 31, 32, 41 and 42). On prospectivity, the Court relied on the note explaining the clause, which stated in terms that the amendment was to take effect from 1 June 2015, and held that an amendment made to remove an anomaly or a confusion can only be prospective unless made retrospective by express language or necessary implication (paras 63 and 64). CIT v Alom Extrusions Ltd was distinguished on the footing that the Supreme Court there was concerned with a benefit conferred upon the assessee and not with a levy (para 66). In the words reproduced by the source cited on this page: "we do not find anywhere a dichotomy created between a co-operative bank and a co-operative society engaged in carrying on banking businesses" The decision followed or applied Commissioner of Income Tax v. Alom Extrusions Ltd., (2009) 319 ITR 306 (SC) — distinguished at para 66.
It was decided by the High Court on 2015-10-15 and is reported as Tax Case (Appeal) Nos. 588 to 643, 647 to 688, 744 to 750, 942 to 948 and 969 to 982 of 2015 (Madras High Court). Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 194A(3)(v), section 194A(3)(viia), section 194A(3)(i), section 194A(1), section 2(19), section 201(1), section 260A, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The tax case appeals were allowed and the connected miscellaneous petitions closed, with no order as to costs (para 67). On the second question, none of the State or central enactments considered — 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 NABARD Act 1981 — draws a distinction between a co-operative society engaged in carrying on banking business and a co-operative bank (para 45). On the first question, the amendment to s.194A(3)(v) operates prospectively from 1 June 2015, and the answer was given in favour of the assessee (paras 63 to 65). It arises in TDS Defaults, Co-operative Societies and How Tax Law Is Read matters, on section 194A(3)(v), section 194A(3)(viia), section 194A(3)(i), section 194A(1), section 2(19), section 201(1), section 260A of the Income Tax Act 1961, and was decided by V. Ramasubramanian J and T. Mathivanan J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. For earlier years, plead the prospective operation of the Finance Act 2015 amendment and the note on clauses relied on by the Court, and resist any argument that the amendment was clarificatory. Do not rely on CIT v Alom Extrusions for retrospectivity — the Court distinguished it as a case about a benefit conferred on an assessee, not a levy. Where the payee is another co-operative society rather than a member, run the second limb of s.194A(3)(v) instead; the 2015 amendment did not touch it. Check whether s.194A(3)(viia)(a) independently protects the payer — deposits with a primary agricultural credit society, a primary credit society, a co-operative land mortgage bank or a co-operative land development bank are exempt without reference to membership.
Still good law. Paragraphs 45 and 46 were reproduced and applied by the Bombay High Court in Citizen Credit Co-operative Bank Ltd. v. ITO (TDS Ward), decided 6 August 2026, at its paragraphs 33 and 34. No decision doubting it was located; a full citator check was not carried out. Note the limit of the first holding: because the Court held the Finance Act 2015 amendment prospective, the exemption it upheld for interest on members' time deposits is available only for amounts paid or credited before 1 June 2015. It is not the case that the decision has been superseded — it construed the amendment and fixed its start date — but it gives no protection for later years on the members' limb. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The ?type=print rendering of this document came back as a compressed paraphrase with invented headings ('FINDINGS:', 'DECISION:'), so nothing in this entry is taken from it. Everything used here was pulled back paragraph by paragraph through /docfragment/ in raw form: paras 31, 32, 41, 42, 45, 63, 64, 65, 66 and 67. The judgment runs to 67 numbered paragraphs and paragraph 67 is the disposal. The framing of the two substantial questions in the print rendering is a paraphrase and has not been reproduced here as the Court's words. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The tax case appeals were allowed and the connected miscellaneous petitions closed, with no order as to costs (para 67). On the second question, none of the State or central enactments considered — 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 NABARD Act 1981 — draws a distinction between a co-operative society engaged in carrying on banking business and a co-operative bank (para 45). On the first question, the amendment to s.194A(3)(v) operates prospectively from 1 June 2015, and the answer was given in favour of the assessee (paras 63 to 65).
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