The Hon’ble AAR, Tamil Nadu in the matter of M/s. Tamil Nadu Cooperative Silk Products Federation Ltd. [Advance Ruling No. TN/49/AAR/2019 decided on October 22, 2019] held that Tax Deducted at Source (“TDS”) provisions are not applicable to a Co-operative society, registered under Tamil Nadu Co-operative Societies Act, 1983 (“TN Cooperative Societies Registration Act”) which is not owned or controlled by the Government.
M/s. Tamil Nadu Cooperative Silk Products Federation Ltd. (“the Applicant” or “the Society”) is a Co-operative society registered under TN Cooperative Societies Registration Act and they are also filing Income Tax returns claiming deduction under Section 80P of Income Tax Act, 1961. It is neither a statutory corporation nor state government undertaking. It is also not a Society under the Societies Registration Act, 1860 (“Societies Registration Act”). It was established by the Industries Department of Government of Tamil Nadu based on the G.O. of State Government of Tamil Nadu to develop Co-operative silk twisters, reelers, etc. The G.O. specifies that the Government’s share contribution will constitute 51% of the total share capital of the Federation. However, the equity share holding of the Government at the maximum had been at 38.86% in 1980 and currently at 30%.
Its management is governed by a board of Directors consisting of 27 persons, of which 21 directors are elected by the A Class members who are members of boards of affiliated co-operative societies affiliated to the Applicant, One Co-opted Member having experience in the field of reeling and twisting industry and Five Functional Directors of whom one representative of the Kancheepuram Central Co-operative Bank, Kancheepuram; One representative of the Director of Handlooms and Textiles, Chennai; One representative of the Tamil Nadu Khadi and Village Industries Board, Chennai; the Joint Director of Sericulture, Office of the Director of Sericulture, Salem and the Managing Director of the Federation, appointed by the Government.
Applicability of Notification No. 33/2017- Central Tax dated September 15, 2017 (“Notification No. 33”) relating to the TDS provision under Central Goods and Services Tax Act, 2017 (“CGST Act”)/ Tamil Nadu Goods and Services Tax Act, 2017 (“TNGST Act”) is applicable to the Co-operative Society since it is registered under TN Cooperative Society Act and not under Societies Registration Act.
The Hon’ble AAR, Tamil Nadu in Advance Ruling No. TN/49/AAR/2019 decided on October 22, 2019 held as under:
- The Applicant is not a body with 51% or more participation of the Government by way of equity. It is seen from Section 33(4)(b) of TN Co-operative Societies Act, the management of the registered society vests with the board of Directors. In this case, it is governed by a board of Directors consisting of 27 persons, of which 21 directors are elected by the A Class members who are members of boards of affiliated co-operative societies affiliated to the Applicant. Section 33(4)(b) of the TN Co-operative Societies Act stipulates that the elected members have voting rights while the functional directors and the Co-Opted member do not have any voting right though they may participate in meetings. Therefore, it is seen that though the Managing Director is appointed by Government of Tamil Nadu and a few of the other Functional Directors are also employees of Government of Tamil Nadu, the control of the Board or management vests with elected members who are elected by the member silk cooperative societies. Hence, the Government of Tamil Nadu does not control the Applicant.
- In view of the above circumstances and facts of the case, it is seen that the Applicant was established by the Government of Tamil Nadu as a Cooperative Society registered as Apex Society under the TN Co-operative Societies Act but the equity ownership at present or in the past never beyond 51%, nor is it under the control of the Government as the management do not have any voting rights as stipulated in its by-laws and by the TN Co-operative Societies Act. Therefore, the Applicant is not a person or category of person stipulated under Notification No. 33 as amended and Notification No. II(2)/CTR/783(C-3)/2017 vide G.O. (Ms) No.107 dated September 15, 2017 as amended.
Section 33(4)(b) of the TN Co-operative Societies Act
“33. Constitution and meetings of the board.-
- (b) Notwithstanding anything contained in this Act, the co-opted members and functional directors shall have the right to participate and vote at the meetings of the board but shall not be entitled to vote at, or contest for, any election in the registered society in their capacity as such members;”