Turnover-Based TDS Threshold for Co-operative Societies Upheld as Constitutional | HC

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turnover-based TDS threshold

Case Details: Vellangallur Peoples Welfare Co-Operative Society Ltd. vs. Union of India [2025] 180 taxmann.com 412 (Kerala)

Judiciary and Counsel Details

  • Ziyad Rahman A.A., J.
  • C.A. Jojo, S. Jiji, Mathews Joseph, Smt. Swathy S., O.D. Sivadas, K.J. Manu Raj, Ravi Krishnan, Smt. K. Vinaya, Remya Murali, Hareesh M.R., Rasmi Nair T., T.T. Biju, Smt. T. Thasmi, Smt. M. J. Anoopa, Dr K.P. Pradeep, Sanand Ramakrishnan, Sanu S Malakeel, M.M. Monaye, M. Paul Varghese, K.S. Hariharan Nair, Rajath R Nath, Smt. G. Remadevi, Smt. Harima Hariharan, A. Chandra Babu, Avijith A. V, Smt. Prejitha S. Salim & Smt. Aparna Saraswati, Advs. for the Petitioner.
  • Vishnu Pradeep, ESM. Kabeer, K. Vidyasagar, Gilbert George Correya, P.R. Ajith Kumar, Praveen K. V., D. Somasundaram, Smt. Jayasree K.P., Devaprasanth P.J., John Joseph, Christopher Abraham, Shoby K. Francis, A.K. Haridas, K.M. Sathyanatha Menon, Smt. Kavery S. Thampi, Navaneeth. N. Nath, Thomas Abraham, M. Sasindran, Smt. Stinnie John & R. Muraleekrishnan (Malakkara), Advs. for the Respondent.

Facts of the Case

The petitioners were primary agricultural credit societies and were not required to deduct TDS on income received or credited as interest on deposits. However, as per Finance Act, 2020, an amendment was brought in respect of the co-operative societies, which was to the effect that, in case the total sales, gross receipts or turnover of the co-operative societies exceed 50 crores rupees, during the financial year immediately preceding to the financial year referred to sub-section (1) of Section 194A, such interest amount shall be subjected to TDS under section 194A.

The petitioners contended that the introduction of a Rs 50 crore criterion practically deprives them of the benefit originally granted to them. This is because all their deposits are to be compulsorily made with the Kerala Bank, being the Apex Society, and the gross turnover of the Kerala Bank exceeds Rs. 50 crores: all income received by the petitioners by way of deposits with the Kerala Bank is subject to TDS.

Thus, the said proviso introduces an unreasonable classification that violates the principles enshrined under Article 14 of the Constitution of India. Aggrieved by the introduction of the said proviso, the petitioner filed a writ petition before the Kerala High Court.

High Court Held

The High Court held that the petitioners’ claim of tax exemption was not absolute. Instead, it was a deduction permissible for such a Society upon submission of the returns. Since the benefit under Section 80P is not an exemption from paying tax but a benefit of deduction subject to the compliance of the terms and conditions, including filing of return, it cannot be held that there is no tax liability at all for the petitioners under the Act.

Therefore, the benefit of exemption from payment of TDS was not an absolute exemption from tax. It was a benefit of deduction subject to compliance with the terms and conditions, including the filing of the return. Thus, the argument that the amendment imposed a condition for collecting TDS on such income was found illegal and arbitrary and rejected.

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Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied