M/S. TELLICHERRY PUBLIC SERVANTS CO-OPERATIVE BANK LTD. vs. THE COMMISSIONER OF INCOME TAX

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ITA/136/2016HC KeralaKLHC01026935201618 February 2021Author: HONOURABLE MR.JUSTICE S.V.BHATTI,HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS4 pages
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What did the High Court hold?

The High Court held that the issues raised in the appeal were no longer res integra and were conclusively decided in favour of the assessee by the Supreme Court's judgment in Mavilayi Service Co-operative Bank Ltd. and others v Commissioner of Income Tax and another. By following this dictum, the High Court set aside the orders under appeal, which included the order of the ITAT, the order of the first appellate authority, and the order of assessment. The appeal was allowed accordingly. The court did not expressly leave any issue undecided. The ratio decidendi is that co-operative societies, including primary credit societies, engaged in banking with their members are entitled to the deduction under Section 80P(2)(a)(i), and the scope of Section 80P(4) further solidifies this position, as per the Supreme Court's ruling.

What were the facts?

The appellant, M/s. Tellicherry Public Servants Co-operative Bank Ltd., is a society registered under the Kerala Co-operative Societies Act, 1969, and classified as a Primary Credit Society. The appellant claimed exemption from income tax on income derived from providing credit facilities to its members, citing Section 80P(2)(a)(i) of the Income Tax Act, 1961, and also Section 80P(4) for primary agricultural credit societies. The Assessing Officer denied this claim for the assessment year 2010-2011. The appeal challenges the order of the Income Tax Appellate Tribunal (ITAT) which upheld the denial of exemption. The procedural history involves an order of assessment, an appeal to the ITAT, and the current appeal to the High Court against the ITAT's order.

What were the issues?

1. Whether the income of the appellant, a Primary Credit Society, derived from providing credit facilities to its members is exempt from income tax under Section 80P(2)(a)(i) of the Income Tax Act, 1961? 2. Whether Section 80P(4) of the Income Tax Act, 1961, provides for the total exclusion of the provisions of Section 80P in so far as Primary Agricultural Credit Societies are concerned, and if so, does it apply to the appellant? Assessee's Contention: The appellant contended that its income from banking activities with its members is exempt under Section 80P(2)(a)(i) and that Section 80P(4) further supports this exemption for primary agricultural credit societies. The appellant relied on the judgment of the Apex Court in Mavilayi Service Co-operative Bank Ltd. and others v Commissioner of Income Tax and another. Revenue's Contention: The revenue did not present any specific arguments, but their counsel acknowledged that the issues were covered by the Apex Court's judgment in Mavilayi Service Co-operative Bank Ltd. and others v Commissioner of Income Tax and another.

Which sections of the Income-tax Act were involved?

Section 80P(2)(a)(i),Section 80P(4)

AI-generated summary — verify with the full judgment below

I.T.Appeal No.136 of 2016 1 IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS THURSDAY, THE 18TH DAY OF FEBRUARY 2021 / 29TH MAGHA,1942 ITA.No.136 OF 2016 AGAINST THE ORDER IN ITA 329/2015 DATED 03-09-2015 OF I.T.A.TRIBUNAL,COCHIN BENCH APPELLANT: M/S. TELLICHERRY PUBLIC SERVANTS CO-OPERATIVE BANK LTD. M.G.ROAD, THALASSERY, KANNUR 670 001, REPRESENTED BY ITS SECRETARY SHRI.ANANDAPRASAD.M BY ADVS. SRI.T.M.SREEDHARAN (SR.) SMT.DIVYA RAVINDRAN SRI.V.P.NARAYANAN RESPONDENT: THE COMMISSIONER OF INCOME TAX 1ST FLOOR, AAYAKAR BHAVAN, NEW ANNEX BUIDING, NORTH BLOCK, MANANCHIRA, KOZHIKODE 673 001. OTHER PRESENT: SC - SRI. CHRISTOPHER ABRAHAM THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 18.02.2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

ITA No.136 of 2016 2 JUDGMENT Dated this the 18th day of February 2021 S.V.Bhatti, J. Heard Adv.Nisha holding for Adv.V.P.Narayanan for the appellant and Sri Christopher Abraham, learned Standing Counsel for the Income Tax Department.

2.

The appellant claims to be a Society established and registered under the provisions of the Kerala Co-operative Societies Act, 1969. The appellant is classified/categorised as a Primary Credit Society by the Joint Registrar of Co-operative Societies, Kannur under Act 1969. 3. The case of appellant is that the income of a Co-operative Society does the business of banking by providing credit facilities only to its members, and the income derived therefrom is exempt from the payment of income tax under Section 80P(2)(a)(i) of the Income Tax Act, 1961. Section 80(P)(4) provides for total exclusion of provisions of the Act in so far as Primary Agricultural Credit Societies are concerned. The instant appeal deals with the order of assessment made for the assessment year 2010-2011. The claim of appellant for exemption under Section 80(P)

I.T.Appeal No.136 of 2016 3 was denied by the Assessing Officer under the Act. Hence the appeal.

4.

The counsel appearing for the appellant as well as the respondent would state that the issues considered by the orders impugned in the appeal are no more res integra and are covered in favour of the assessee by the judgment of the Apex Court in Mavilayi Service Co-operative Bank Ltd. and others v Commissioner of Income Tax and another1. The statement is placed on record and accepted.

5.

By following the dictum of the Hon'ble Supreme Court in the decision referred to above, the orders under appeal in Ann.A dt.21.03.2013, Ann.B dt.17.03.2015 and Ann.C dt.3.9.2015 are set aside.

The appeal allowed accordingly. No order as to costs. S.V.BHATTI JUDGE BECHU KURIAN THOMAS JUDGE css/ 1 [2021] 431 ITR 1 (SC)

I.T.Appeal No.136 of 2016 4

Appendix — schedule of exhibits
APPENDIX PETITIONER'S EXHIBITS: ANNEXURE A TRUE COPY OF THE ASSESSMENT ORDER DATED 21.3.2013 PASSED U/S 143(3) OF THE ACT ALONG WITH COMPUTATION OF INCOME BY THE INCOME TAX OFFICER, WARD-2, KANNUR. ANNEXURE B TRUE COPY OF THE APPELLATE ORDER IN I.T.A.NO.127/KNR/CIT/CLT/2013-2014 DATED 17.3.2015 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)KOZHIKODE. ANNEXURE C TRUE COPY OF THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH IN I.T.A. NO.329/COCH/2015 DATED 3.9.2015.

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