SOORANAD GRAMODHARANA SERVICE COOPERATIVE BANK LTD NO.3947 vs. THE CENTRAL BOARD OF DIRECT TAXES

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WP(C)/29102/2023HC KeralaKLHC01063664202305 September 2023Author: HONOURABLE MR. JUSTICE D. K. SINGH6 pages
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What did the High Court hold?

The High Court directed the appellate authority (3rd respondent) to decide the appeal (Ext.P2) within a period of three months. Crucially, the Court ordered that the appeal be decided without insisting upon the pre-deposit of 20% of the assessed tax. The demand notice (Ext.P3) shall not be enforced until the appeal is decided. The petitioner was directed to cooperate in the expeditious disposal of the appeal. The Court did not record any finding on the substantive legal issue regarding the entitlement to deduction under Section 80P, leaving it for the appellate authority to decide. The ratio is that in cases where the petitioner's claim is strongly supported by a Supreme Court judgment, the appellate authority may be directed to decide the appeal expeditiously without insisting on a pre-deposit, especially when the recovery is stayed pending appeal.

What were the facts?

The petitioner, Sooranad Gramodharana Service Co-operative Bank Ltd., a Primary Agricultural Credit Society, filed its return for assessment year 2020-21 claiming deduction under Section 80P of the Income Tax Act, 1961. The Assessing Officer rejected this claim, passing an assessment order (Ext.P1). The petitioner also received a demand notice in penalty order (Ext.P3) for the year 2021 and a condition for a conditional stay requiring payment of 20% of the demand. The petitioner contends their case is covered by the Supreme Court judgment in Mavilayi Service Co-operative Bank's case. They are challenging the demand notice and the 20% pre-deposit requirement for the stay.

What were the issues?

1. Whether the petitioner, a co-operative society, is entitled to a deduction of its income under Section 80P(2)(d) of the Income Tax Act, 1961, including interest earned from a District Co-operative Bank? Assessee's Contention: The petitioner society is entitled to the deduction under Section 80P(2)(d) as their case is squarely covered by the Hon'ble Supreme Court's judgment in Mavilayi Service Co-operative Bank's case. The interest earned is also from a co-operative society. The demand of 20% assessed tax for conditional stay is highly prejudicial. Revenue's Contention: For staying the recovery, the petitioner has to deposit 20% of the assessed tax. The Court should not record any finding on the legal contentions as it would prejudice the revenue's case before the appellate authority.

Which sections of the Income-tax Act were involved?

Section 80P

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE DINESH KUMAR SINGH TUESDAY, THE 5TH DAY OF SEPTEMBER 2023 / 14TH BHADRA, 1945 WP(C) NO. 29102 OF 2023 PETITIONERS: SOORANAD GRAMODHARANA SERVICE COOPERATIVE BANK LTD NO.3947 AGED 37 YEARS SOORANAD NORTH, ANAYADI P.O, KOLLAM- REPRESENTED BY ITS SECETARY DIVYA D.L., PIN - 690561 BY ADVS. K.P.PRADEEP T.T.BIJU HAREESH M.R. SANAND RAMAKRISHNAN T.THASMI M.J.ANOOPA RESPONDENTS: 1 THE CENTRAL BOARD OF DIRECT TAXES DEPARTMENT OF REVENUE MINISTRY OF FINANCE GOVERNMENT OF INDIA, NORTH BLOCK NEW DELHI REPRESENTED BY ITS CHAIRMAN, PIN - 110001 2 ASSESSMENT UNIT INCOME TAX DEPARTMENT NATIONAL FACELESS ASSESSMENT CENTRE, DELHI ROOM NO. 401, 2ND FLOOR, E-RAMP, JAWAHARLAL NEHRU STADIUM, DELHI-110003, PIN - 110003 3 COMMISSIONER OF INCOME TAX (APPEALS) NATIONAL FACELESS APPEAL CENTRE (NFAC), DELHI, ROOM NO. 401, 2ND FLOOR, E-RAMP, JAWAHARLAL NEHRU STADIUM, DELHI, PIN - 110003 4 INCOME TAX OFFICER, KOLLAM CIRCLE AAYAKKAR BHAVAN, INCOME TAX OFFICE, NEAR KARBALA JUNCTION, RAILWAY STATION ROAD, KOLLAM- KERALA, PIN - 691001 ADV.CHRISTOPHER ABRAHAM - SC THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 05.09.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

JUDGMENT Dated this the 5th day of September, 2023

1.

Heard Sri.K.P Pradeep, learned counsel for the petitioner as well as Sri.Christopher Abraham, learned Standing Counsel appearing for the respondents.

2.

The present writ petition has been filed impugning Ext.P3 demand notice in penalty order issued for the year 2021 as well as 20% of the demand for conditional stay.

3.

The petitioner is a co-operative society classified as Primary Agricultural Credit Society. Learned counsel for the petitioner submits that the petitioner society is entitled for a deduction of the income under Section 80(P) (2) (d) of the Income Tax Act, 1961. For the assessment year 2020-21, the petitioner had filed return after claiming deduction under Section 80P of the Income Tax Act. On the reason that the petitioner being a co-operative society, their income is exempted under the provisions of Section 80P. However, the assessing authority have rejected the claim of the petitioner and passed the assessment order Ext.P1. Learned counsel further submits that the petitioner’s case is covered by the judgment of the Hon’ble Supreme Court in Mavilayi Service Co-operative Bank’s case, [2021 (1) KHC 303]. He further submitted that even the interest which has been earned by the petitioner is from the District Co-operative Bank, which is run by the Co-operative Society. Learned counsel for the petitioner submits that the demand of 20% assessed tax for conditional stay is highly prejudicial in the interest of justice. The case of the petitioner is squarely covered by the judgment of the Hon’ble Supreme Court as mentioned above. He

therefore submits that the appellate authority ie., the 3rd respondent be directed to decide the appeal without insisting upon the payment of 20% of the tax as assessed by Ext.P1. 4. However, learned counsel for the respondents submits that for staying the recovery, the petitioners have to deposit 20% of the assessed tax and without making payment of the 20% of the demand, the stay cannot be granted in appeal. He further submits that so far as legal contentions of the learned counsel for the petitioner is concerned, this Court may not record any finding inasmuch as that would prejudice the case of the revenue before the appellate authority.

5.

Considering the aforesaid submissions made above and also taking note of the fact that this Court has stayed the recovery of tax for the assessment year 2020-21 pending appeal, I find that this writ petition to be disposed of with a direction to the appellate authority to decide the appeal Ext.P2, within a period of three months without insisting upon pre-deposit of 20% of the assessed tax. The petitioner should co-operate in deciding the appeal expeditiously. Till the appeal is decided, the demand notice, Ext.P3 shall not be enforced. DINESH KUMAR SINGH JUDGE AP

Appendix — schedule of exhibits
APPENDIX OF WP(C) 29102/2023 PETITIONER EXHIBITS Exhibit P1 TRUE COPY OF THE PENALTY ORDER NO ITBA/PNL/F/270A/2022-23/1050909759(1) DATED 17-03-2023 ISSUED FOR THE YEAR 2020-21 BY THE 2NDRESPONDENT TO THE PETITIONER Exhibit P2 TRUE COPY OF THE APPEAL DATED 14-04-2023 AGAINST THE PENALTY ORDER FILED FOR THE YEAR 2020-21 BEFORE THE 3RD RESPONDENT Exhibit P3 TRUE COPY OF THE DEMAND NOTICE NO ITBA/PNL/S/156/2022-23/1050904824(1)DATED 17-03-2023 IN PENALTY ORDER ISSUED FOR THE YEAR 2020-21 BY THE 2ND RESPONDENT Exhibit P4 TRUE COPY OF THE LETTER NO ITBA/COM/F/17/2023-24/1055270336(1) DATED 21-08-2023 ISSUED BY THE 4TH RESPONDENT TO THE PETITIONER Exhibit P5 TRUE COPY OF THE JUDGMENT DATED 24-07-2023 IN WPC NO 21407 OF 2023 Exhibit P6 TRUE COPY OF THE JUDGMENT DATED 23-02-2022 IN WPC NO 6109 OF 2022

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