THE PRINCIPAL COMMISSIONER OF INCOME TAX vs. M/S.VAZHAPPALLY SERVICE CO-OPERATIVE BANK LTD.

PDF · subscribers
ITA/132/2019HC KeralaKLHC01007160201928 September 2022Bench: HONOURABLE MR.JUSTICE S.V.BHATTI,HONOURABLE MR.JUSTICE BASANT BALAJI8 pages
AI SummaryRemanded

What did the High Court hold?

The High Court addressed the substantial questions of law. For questions 1(a) to (d) concerning the eligibility of deduction under Section 80P(2), the Court noted that the central issue is no longer res integra in view of the principle laid down in Mavilayi Service Co-operative Bank Ltd. Consequently, these questions were answered in favour of the Revenue and against the assessee. The matter was remitted to the Assessing Officer. Regarding question 2, concerning whether interest from surplus funds is "Income from business" or "Income from other sources," the learned counsel for the parties submitted that this question need not be independently considered in light of the decision on the previous questions. Resultantly, the Tribunal's order, the Appeal order, and the Assessment Order were set aside, and the matter was remitted to the Assessing Officer for fresh disposal. The appeal was allowed as indicated.

What were the facts?

The appeal is filed by the Principal Commissioner of Income Tax (Revenue) against the order dated 04.09.2018 of the Income Tax Appellate Tribunal (ITAT), Cochin Bench, in ITA No.126/Coch/2018. The dispute pertains to the assessment year 2013-14 and concerns the eligibility of the assessee, M/s. Vazhappally Service Co-operative Bank Ltd., for deduction under Section 80P of the Income Tax Act, 1961. The assessee is a Primary Agricultural Credit Society registered under the Kerala Societies Registration Act. The High Court noted that the issue is no longer res integra, referencing the Supreme Court judgment in Mavilayi Service Co-operative Bank Ltd v. Commissioner of Income Tax.

What were the issues?

1. Whether on the facts and in the circumstances of the case, the assessee is entitled to the benefit of Section 80P of the Income Tax Act? a) Whether on the facts and in the circumstances of the case does the assessee satisfy the conditions to be qualified as a primary agricultural society? b) Are the functions of the society such as to qualify as a Primary Agricultural Society as defined under Banking Regulations Act? c) Whether on the facts and circumstances of the case, the assessee is entitled to the benefit of section 80P with reference to the transaction held to be contrary to the object? 2. Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that the interest from surplus fund is "Income from business" and not as "Income from other sources"? Assessee's arguments are not recorded. The Revenue argued that the assessment order focused on the entitlement to deduction under Section 80P(2) and did not consider consequential examinations. The Revenue contended that even if the assessee is a co-operative society entitled to deduction under Section 80P(2)(a), the deduction is restricted by the language of Section 80P(2). The Revenue further argued that the substantial questions of law in this appeal are covered by this Court's decision in ITA No.22/2017, applying the principles laid down by the Apex Court in Mavilayi Service Co-operative Bank Ltd and this Court in Peroorkada Service Co-operative Bank Ltd.

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 S.V.BHATTI & THE HONOURABLE MR.JUSTICE BASANT BALAJI WEDNESDAY, THE 28TH DAY OF SEPTEMBER 2022 / 6TH ASWINA, 1944 ITA NO. 132 OF 2019 AGAINST THE ORDER ITA 126/2018 OF I.T.A.TRIBUNAL,COCHIN BENCH APPELLANT/S:

THE PRINCIPAL COMMISSIONER OF INCOME TAX KOTTAYAM.

BY ADVS. NAVNEETH N NATH P.K.RAVINDRANATHA MENON (SR.) SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT/S:

M/S.VAZHAPPALLY SERVICE CO-OPERATIVE BANK LTD. VAZHAPPALLY, KOTTAYAM.

BY ADVS.MR RAJA KANNAN SRI.M.GOPIKRISHNAN NAMBIAR SRI.K.JOHN MATHAI; SRI.JOSON MANAVALAN SRI.KURYAN THOMAS; SRI.PAULOSE C. ABRAHAM THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 28.09.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

ITA No.132/2019

-2-

J U D G M E N T

S.V. Bhatti, J. Heard Adv Navneeth N Nath, holding for learned Senior Counsel Mr P K R Menon, and learned Counsel Mr Raja Kannan for parties.

2.

The Principal Commissioner of Income Tax/Revenue is the appellant. M/s. Vazhappally Service Co-operative Bank Ltd/assessee is the respondent. The appeal, at the instance of the Revenue, is directed against the order dated 04.09.2018 of the Income Tax Appellate Tribunal (for short ‘Tribunal’) Cochin Bench in ITA No.126/Coch/2018. The subject matter of appeal relates to the return filed by the assessee for the Assessment Year 2013-14.

ITA No.132/2019

-3-

3.

The controversy between the Revenue and the assessee is substantially centering around Section 80P of the Income Tax Act, 1961 (for short ‘the Act’). The Counsel appearing for the parties invited the attention of the Court to the judgment in Mavilayi Service Co-operative Bank Ltd v. Commissioner of Income Tax1, that the issue is no more res integra. The circumstances relevant for disposing of the appeal are stated in sufficient detail in the orders under appeal. Hence, are not reiterated. But a singular circumstance relevant for decision is noted viz. the assessee is a Primary Agricultural Credit Society, a Society registered under the Kerala Societies Registration Act. Therefore, deduction eligible under Section 80P(2) is the issue for consideration.

4 In the above background, the following substantial questions are considered:

1 (2021) 431 ITR 1 (SC)

ITA No.132/2019

-4-

1.

a) Whether on the facts and in the circumstances of the case, the assessee is entitled to the benefit of Section 80P of the Income tax Act? b) Whether on the facts and in the circumstances of the case does the assessee satisfy the conditions to be qualified as a primary agricultural society? c) Are the functions of the society such as to qualify as a Primary Agricultural Society as defined under Banking Regulations Act? d) Whether on the facts and circumstances of the case, the assessee is entitled to the benefit of section 80P with reference to the transaction held to be contrary to the object? 2. Whether on the facts and in the circumstances of the case and in law, Tribunal justified in holding that the interest from surplus fund is "Income from" business" and not as "Income from other sources"? 5. The learned counsel appearing for the Revenue argues that the order of assessment mainly concentrated on the entitlement of deduction under Section 80P(2) of the Act and has not considered the consequential examination i.e., assuming

ITA No.132/2019

-5-

that the assessee is a Co-operative Society and entitled to the deduction of Section 80P(2)(a) of the Act. But the deduction is restricted to the language of Section 80P(2) of the Act. In ITA No.22/2017, Revenue’s appeal, this Court has considered similar substantial questions of law in detail and the reasoning in ITA No.22/2017 squarely covers the question of law formulated in the instant appeal too. By applying the principle laid down by the Apex Court in Mavilayi Service Co-operative Bank Ltd and this Court in Peroorkada Service Co-operative Bank Ltd, the substantial questions raised in the appeal are answered thus: 6. Question nos.1(a) to (d): 1. a) Whether on the facts and in the circumstances of the case, the assessee is entitled to the benefit of Section 80P of the Income tax Act? b) Whether on the facts and in the circumstances of the case does the assessee satisfy the conditions to be qualified as a primary agricultural society? c) Are the functions of the society such as to qualify as a Primary Agricultural Society as defined under Banking Regulations Act? d) Whether on the facts and circumstances of the case, the assessee is entitled to the benefit of section 80P with reference to the transaction held to be contrary to the object?

ITA No.132/2019

-6-

6.1 A comprehensive issue on the eligibility of deduction under Section 80P(2) arises. The central issue is no more res integra in view of the principle laid down in Mavilayi Service Co- operative Bank Ltd. Hence, the questions are answered in favour of the Revenue and against the assessee. The matter is remitted to the Assessing Officer. 7. Question no.2: Whether on the facts and in the circumstances of the case and in law, Tribunal justified in holding that the interest from surplus fund is "Income from" business" and not as "Income from other sources"?

7.1 The learned counsel appearing for the parties submit that question no.2 need not be independently considered having regard to the view taken in questions answered above. 8. Resultantly, the Tribunal order, Appeal order and Assessment Order are set aside. The matter is remitted to Assessing Officer for disposal afresh.

ITA No.132/2019

-7-

The Income Tax Appeal is allowed as indicated above.

Sd/- S.V.BHATTI JUDGE

Sd/- BASANT BALAJI JUDGE

jjj

ITA No.132/2019

-8-

APPENDIX OF ITA 132/2019

PETITIONER ANNEXURES ANNEXURE A ASSESSMENT ORDER U/S.143(3) DATED 29.03.2016. ANNEXURE B CIT (A)'S ORDER NO.ITA NO.T-16/CIT(A)/KTM/16-17 DATED 31.01.2018. ANNEXURE C ITAT'S ORDER IN ITA NO.126/COCH/2018 CO.44/COCH/18 DATED 04.09.2018.

More judgments on Section 80P

All 5,069 judgments and leading authorities on Section 80P →

Recent GST High Court judgments

Search GST case law →