Section 194A(1)

Section 194A(1) — the law in short

What the courts have decided on section 194A(1), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Citizen Credit Co-operative Bank Ltd v ITO (TDS Ward), Mumbai High CourtHelps taxpayerValidity unconfirmed
  We are a co-operative bank. The TDS officer says we should have deducted tax under s.194A on fixed deposit interest paid to co-operative housing societies that are not our members, and has treated us as an assessee in default. Is he right?
  No, on the Bombay High Court's reading. Clause (v) of s.194A(3) has two limbs, and the words 'other than a co-operative bank' appear only in the first limb, which deals with interest paid by a society to its members; the second limb — interest 'credited or paid by a co-operative society to any other co-operative society' — carries no such exclusion, so a co-operative bank, which remains a co-operative society, is not obliged to deduct tax on interest paid to non-member co-operative societies. Paragraph 42.7 of CBDT Circular No. 19 of 2015 says the same thing in terms.
• Coimbatore District Central Co-operative Bank Ltd v ITO (TDS) High CourtHelps taxpayer
  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.
• Statutory position — s.194A(3)(v) and (viia): when a co-operative society or a co-operative bank must deduct tax on interest CBDT Circulars & InstructionsCuts both waysValidity unconfirmed
  Our co-operative society pays interest to members, to other co-operative societies and to outsiders. Which of these payments carry a TDS obligation under s.194A?
  Clause (v) of s.194A(3) exempts two things and must be read as two limbs: income credited or paid by a co-operative society, other than a co-operative bank, to a member thereof; and income credited or paid by a co-operative society to any other co-operative society. The words 'other than a co-operative bank' were inserted in the first limb by the Finance Act 2015 with effect from 1 June 2015, so from that date a co-operative bank must deduct tax on interest on time deposits of its members; the second limb was not amended and carries no exclusion of a co-operative bank, so interest paid by any co-operative society, including a co-operative bank, to another co-operative society remains outside sub-section (1).

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.