THE THATHAMANGALAM SERVICE CO-OPERATIVE BANK LTD vs. THE INCOME TAX OFFICER
What did the High Court hold?
The High Court allowed the appeals and set aside the impugned judgments of the Single Judge. The Court modified the interim orders of the Commissioner of Income Tax (Appeals) to grant an absolute stay on the realization of disputed tax amounts pending disposal of the appeals. The Court reasoned that the Full Bench decision in 'Mavilayi Society's case' necessitated a re-look at the factual aspects based on the nature of the appellant co-operative societies' activities. While acknowledging the revenue's contention that assessments might have been finalized in consonance with the Full Bench ruling, the Court noted that the power of remand is not vested with the Commissioner of Income Tax (Appeals). Therefore, a uniform insistence on 20% payment was deemed unjustified, especially considering the appellants are registered co-operative societies with substantial assets. The Commissioner of Income Tax (Appeals) was directed to dispose of the appeals at the earliest.
What were the facts?
The appellants are various Service Co-operative Banks and a Co-operative Urban Credit Society, represented by their Secretaries. They are challenging judgments of the High Court of Kerala dated July 1, 2019, in a batch of writ petitions. The respondents are the Income Tax Officer and the Commissioner of Income Tax (Appeals). The core issue revolves around the deductions permissible under Section 80P of the Income Tax Act, 1961, and the conditions imposed by the Commissioner of Income Tax (Appeals) for granting a stay pending appeal, specifically the insistence on payment of 20% of the disputed tax amount. The appellants argue that recent Full Bench decisions have altered the legal landscape concerning these deductions, necessitating a re-evaluation of their assessments.
What were the issues?
1. Whether the insistence on payment of 20% of the disputed amount of tax for granting a stay pending appeal is improper and unreasonable, given the subsequent Full Bench ruling on the allowability of deductions under Section 80P of the Income Tax Act, 1961? Assessee's Contention: The appellants contend that the Full Bench of the High Court in 'The Mavilayi Service Co-operative Bank v. Commissioner of Income Tax' (2019(2) KLT 597(FB)) held that the Division Bench judgment in 'Chirakkal Service Co-operative Bank Ltd. v. Commissioner of Income Tax' (2016(2) KLT 535) is no longer good law, following the Apex Court's ruling in 'Citizen Co-operative Society Ltd. v. Assistant Commissioner of Income Tax' (2017(4)KLT Online 2013(SC)). This reversal necessitates a re-look at their assessments, making the insistence on a 20% payment unreasonable. Revenue's Contention: The revenue argues that the Assessing Authority made specific findings that the major activities of the appellant societies were in the nature of banking business, and many loans did not fall within the scope of Primary Agricultural Credit Societies (PACS). They contend that the High Court should not interfere with the discretionary interim orders of the Appellate Authority.
Which sections of the Income-tax Act were involved?
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Heard together (12 matters)
Read from the judgment's own cause title. This page is filed under one of them.
Cause title — parties, addresses and appearances
J U D G M E N T C.K.ABDUL REHIM
, J. Since identical judgments of the Single Judge are under challenge in these writ appeals, all the cases were considered together and disposed of through this common judgment.
Ext.P4 orders of the Commissioner of Income Tax (Appeals) were challenged in the writ petitions. The appellants are Co-operative Societies registered under the Kerala Co-operative Societies Act, 1969. Assessments of income tax made against the societies were challenged claiming deductions allowable under Section 80P of the Income Tax Act, 1961(hereinafter referred to as 'the IT Act'). The interim applications filed seeking stay against realisation of the tax assessed was considered by the Appellate Authority and interim stay were granted in all the cases by insisting upon payment of 20% of the disputed amount, pending disposal of the appeals. When those orders were challenged in the writ petitions, the learned Single Judge found that the insistence for payment of 20% was made based on the directions issued by the Central Board of Direct Taxes(CBDT). It was found that there is sufficient consideration of merits and there is application of mind from the side of the Appellate Authority. Hence, by observing that no interference is warranted against the interim order in exercise of the power vested under Article 226 of the Constitution of India, the challenges were repelled. However, on the request of the appellants, instalment facility was granted by allowing payment of the amount insisted upon, in five equal monthly instalments.
In the writ appeals it is contended that, after finalisation of the assessments in all these cases, there occurred a change in the principle of law involved, with respect to the deductions permissible under Section 80P of the IT Act. It is pointed out that a Full Bench of this Court in The Mavilayi Service Co operative Bank v. Commissioner of Income Tax (2019(2) KLT 597(FB)) held that the Division Bench judgment in Chirakkal Service Co operative Bank Ltd. v. Commissioner of Income Tax (2016(2) KLT 535) is no more good law, in view of the ruling of the Apex Court in Citizen Co-operative Society Ltd. v. Assistant Commissioner of Income Tax (2017(4)KLT Online 2013(SC)). It was held therein that, by the reason of sub-section (4) of Section 80P, the Assessing Officer has to conduct an enquiry into the factual situations as to the activities of the Assessee society and to arrive at a conclusion whether the benefits can be extended or not, in the light of the said provision. Therefore the Full Bench found that the law laid down by a Division Bench of this Court in Perinthalmanna Co operative Bank Ltd. v. Income Tax Officer and Another (2014(1) KLT Online 1117) has to be affirmed.
Contention raised is to the effect that, in view of reversal of the principle settled in Chirakkal Society's case (supra) the assessments completed against the appellants requires a re-look. Therefore it was contended that the insistence for payment of 20% of the disputed amount of tax, for granting stay pending disposal of the appeal, was improper and becomes unreasonable.
On the contrary, learned standing counsel for Government of India (Taxes) contended that, in all these cases there are specific findings entered by the Assessing Authority that the major activities conducted by the Co-operative societies are in the nature of banking business and they have given majority of the loans which are not coming within the ambit and scope of the objective of the societies and such activities cannot be taken as one falling within the scope of a Primary Agricultural Credit Societies(PACS). Further, it is contended that there exists no legal grounds for this court to interfere with the interim orders passed by the Appellate Authority, which falls within the discretionary jurisdiction of such authorities.
As contended on behalf of the revenue, under normal circumstances, interference with respect to interim orders passed by statutory Appellate Authorities has to be restrained. Law remaining settled in this field is primarily that, the Appellate Authorities while considering the question of granting interim stay shall take into consideration of the prima facie merit in the appeals. This court as well as the Apex Court has deprecated the practice of insisting upon part payments without prima facie consideration of the merits and without proper application of mind. Decisions are mainly to the extent that, those aspects should also reflect in such interim orders. However, an analysis on the basis of these settled principle need not to be ventured in the cases at hand, because the grounds of challenge is mainly on the basis of the subsequent Full Bench ruling.
We take note of the fact that this Division Bench had already remanded certain Income Tax Appeals, which were filed challenging the orders of the Income Tax Appellate Tribunal, on the very same subject, in view of the Full Bench decision in Mavilayi Society's case (supra). We had also occasion to consider a batch of writ appeals which were filed challenging identical judgments of the Single Bench in the matter of conditional orders passed by the first Appellate Authorities, in W.A. No.1529 of 2019 and connected cases, dated 1st July, 2019. In all these matters we have taken the view that, in view of the law remaining settled through the Full Bench decision, the factual aspects needs a re-look, based on the nature of activities of the appellant Co-operative societies. However, contention of the learned standing counsel that the assessment orders, even though were finalised prior to the Full Bench decision, are in strict consonance with the principle contained therein assumes importance. This is a question which is for consideration of the Appellate Authority, probably upon calling for a report of the Assessing Authority, because there exists no power of remand vested with the Commissioner of Income Tax (Appeals). Taking note of such a situation, we are of the opinion that the ultimate finding with respect to the question of allowability of deductions under Section 80P is yet to be rendered by the Appellate Authority. Therefore a uniform insistence for payment of 20% of the amount, pending disposal of the appeals, cannot be held as justified. Further, we take note of the fact that all the appellants are registered Co-operative societies functioning with remarkable capital assets. Therefore it cannot be said that there will be any difficulty for realising the liabilities, if the ultimate decision goes against the appellants. Hence we are inclined to direct the Appellate Authority for an early disposal of the appeals and till then to grant an absolute stay without insisting upon payment of any portion of any disputed amounts. Under the above mentioned circumstances, all the above appeals are hereby allowed. The impugned judgments of the Single Judge are hereby set aside. Ext-P4 interim order impugned in all these cases are modified to the extent of granting absolute stay with respect to realisation of the disputed amount of tax in the respective appeals, pending disposal of such appeals. The Commissioner of Income Tax (Appeals) is hereby directed to dispose of the appeals itself, at the earliest possible, after affording opportunity to the appellants. C.K.ABDUL REHIM JUDGE R. NARAYANA PISHARADI JUDGE DST //// PA.To Judge
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- Shri Na vs Ari Khedut Sahkari Society Ltd…ITA 362/SRT/2025[2016-17]Status: Disposed9 Oct 2026AY 2016-17
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