CHENNAI: The Madras High Court has suggested that any cash benefits, including flood relief aid, shall be credited to the bank accounts of beneficiaries since direct cash transfers would be hassle-free and prevent misappropriation of funds by personnel of cooperative societies or ration shops.
The suggestion was made by Justice Krishnan Ramasamy while disposing of the petitions filed by cooperative societies challenging the Income Tax (I-T) department’s action of deducting TDS on interest income and withdrawal of cash up to Rs. 1 crore.
“Any benefit, such as Pongal enam, flood relief etc., shall be made only through the bank accounts of the respective members or non-members of the Co-operative Societies,” he said in an order passed on Monday.
Pointing out that such a method, if adopted, would save valuable time of employees of the cooperative societies and ration shops, the judge said, “On the other hand, if the funds are transferred to the respective bank accounts of the beneficiaries, it would be hassle-free for the public and there will be no question of mishandling of cash.”
Saying that cash payments via distributing bodies would lead to misappropriation of funds, the judge said if there is a way available to eradicate corruption, the government and societies should follow it.
Citing how irregularities are committed, the judge further stated that he had personally experienced it in his village. When his relatives purchase only sugar in the ration shop, they would get a message on purchasing other items too, he said.
Hence, keeping all these aspects in mind, this court is of the considered view that if there is any relief, it has to be distributed directly to the members, he said, and deplored that otherwise, the persons who are working in the co-operative societies will always find some “innovative methods and swindle the money” from the poor.
The petitions were filed by five cooperative societies of Erode district challenging the order of the managing director of Erode district central cooperative bank to deduct TDS for the interest income if it exceeded Rs. 40,000 and deduction of 2% TDS for cash withdrawal exceeding Rs. 20,000 and up to Rs. 1 crore and 5% TDS for cash withdrawal for amount exceeding Rs. 1 crore.
The petitioner societies contended that they are doing the work of business correspondents to pass on cash benefits as mandated by the state government and are qualified for exemption under sections 194 A and 194 N of I-T Act.
However, senior standing counsel B Ramasamy, appearing for the I-T department, said that the limit of Rs. 1 crore was increased to Rs. 3 crore and it came into force from April 1, 2023.
He also said the limit hike was made only with the intention of granting benefits to the members of cooperative societies. Justice Krishnan Ramasamy held that the societies are not qualified for availing of the exemption since they are partly doing the work of business correspondents.
They are actively involved in distribution of cash benefits to members and non-members such as Pongal gift hampers, flood relief, Covid relief and other relief which are not a banking transaction, he concluded.