{"id":64314,"date":"2026-09-04T16:54:10","date_gmt":"2026-09-04T11:24:10","guid":{"rendered":"https:\/\/itatonline.org\/digest\/vellangallur-peoples-welfare-co-operative-society-ltd-v-uoi-2026-485-itr-686-kerhc\/"},"modified":"2026-09-04T16:54:10","modified_gmt":"2026-09-04T11:24:10","slug":"vellangallur-peoples-welfare-co-operative-society-ltd-v-uoi-2026-485-itr-686-kerhc","status":"publish","type":"post","link":"https:\/\/itatonline.org\/digest\/vellangallur-peoples-welfare-co-operative-society-ltd-v-uoi-2026-485-itr-686-kerhc\/","title":{"rendered":"Vellangallur Peoples Welfare Co-Operative Society Ltd. v. UOI (2026) 485 ITR 686 (Ker)(HC)."},"content":{"rendered":"<p><strong>\u00a0<\/strong><\/p>\n<p>Held that the proviso to section 194A(3) of the Income-tax Act, 1961, (by which, based on the gross receipts or turnover of co-operative societies, a restriction is imposed in the matter of exemption from the obligation to deduct tax at source from the income as the interest on deposits) is valid.The criteria of Rs. 50 crores cannot be treated as an unreasonable classification. This is particularly because the liability to pay income-tax itself is based on the income received by the assessee and the scheme of the Act itself is to apply different rates of tax upon different groups, which are created based on the income they receive. Thus, the classification based on the total income or the taxable income forms the basic structure of the Act. Even in respect of the provision that contemplates deduction of tax at source, several exemptions are provided based on the income criteria and various ceiling limits are<\/p>\n<p>prescribed in respect of various categories, based on the income or the amount included in the transaction. Thus, this being in tune with the statutory structure of the Act, unless it is shown that the classification in the proviso created separate classes among persons having equal status, it cannot be disturbed. In other words, the difference in the income or the quantum of the amount involved itself is the classification that determines the liability of tax or the amount to be paid as tax. Since the very concept involved is, &#8220;the liability is higher when the income is higher&#8221;, fixing a criterion in similar lines, in the matter of tax deduction at source, cannot be treated as an unreasonable classification. The tax liability of co-operative societies depends upon the income that they receive, as well as its source, nature, etc., and it is not merely because of their status as a society. Therefore, when it comes to the question of tax deduction at source and the exemption from making deduction towards tax at source, there is no illegality in creating a classification based on the income they receive. The proviso to section 194A(3) was introduced by way of an amendment by the Finance Act, 2020 ((2020) 422 ITR (Stat) 25), bringing in some conditions restricting the operation of the main provision. Thus, it is evident that it was intended to alter the scope of the main provision, i. e., sub-section (3) of section 194A, it cannot be interfered with merely because it is a proviso. Hardships or inconvenience of the party subjected to a law, by itself, cannot be a good reason for judicial interference in a statute. What is contemplated in section 194A(3)(iii)(a) is with respect to banking companies to which the Banking Regulation Act, 1949 applies or any co-operative society engaged in the business of banking, including a co-operative land mortgage bank. Where the operation of co-operative societies is mainly confined to providing financial assistance to members for agricultural purposes, where the concept of mutuality exists, they would not fall within the definition of banking in section 5(b) of the Banking Regulation Act, 1949, and cannot be treated as institutions that fall within section 194A(3)(iii) of the Income-tax Act as well.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>S. 194A: Deduction at source-Interest other than interest on securities-Co-operative society-Constitutional validity-Deduction of tax at source-Provision making it obligatory for co-operative societies to deduct tax on payments of interest where total sales, gross receipts or turnover of assessee exceeds Rs. 50 crores-Provision valid-Interpretation of taxing statutes-Proviso-Statutory stipulation in the form of a proviso. Proviso introduced, bringing in conditions restricting operation of main provision. Permissible-hardships or inconvenience of the party subjected to law, by itself not a ground for judicial interference.[S.194A(3)(iii), Banking Regulation Act, 1949, S. 5(b), Art. 14, 226] <\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_post_was_ever_published":false},"categories":[21],"tags":[],"class_list":["post-64314","post","type-post","status-publish","format-standard","hentry","category-income-tax-act"],"acf":[],"jetpack_shortlink":"https:\/\/wp.me\/p9S2Rw-gJk","jetpack-related-posts":[],"jetpack_sharing_enabled":true,"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/64314","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/comments?post=64314"}],"version-history":[{"count":1,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/64314\/revisions"}],"predecessor-version":[{"id":64315,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/64314\/revisions\/64315"}],"wp:attachment":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/media?parent=64314"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/categories?post=64314"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/tags?post=64314"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}