THE VETTAKKAL SERVICE CO-OPERATIVE BANK LTD vs. INCOME TAX OFFICER

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WP(C)/34530/2022HC KeralaKLHC01073688202227 February 2023Author: HONOURABLE MR. JUSTICE T.R.RAVI4 pages
AI SummaryRemanded

What did the High Court hold?

The High Court allowed the writ petition. It quashed the assessment order (Ext.P2) and the demand notice (Ext.P3). The Court directed the 2nd respondent (Income Tax Officer, National Faceless Assessment Centre) to pass fresh assessment orders in accordance with the law. The reasoning was based on the High Court's previous decisions in similar circumstances, specifically relying on the judgments in Peroorkada Service Co-operative Bank Ltd., Mavilayi Service Co-operative Bank Ltd., and M/s. Poonjar Service Co-operative Bank Ltd. v. Income Tax Officer. The ratio decidendi is that co-operative banks are entitled to deductions under Section 80P on their interest income, and assessment orders denying such deductions, contrary to Supreme Court and High Court precedents, are liable to be quashed and reconsidered.

What were the facts?

The petitioner, The Vettakkal Service Co-operative Bank Ltd., is challenging an assessment order for the assessment year 2020-21. The Assessing Officer denied the bank a deduction for interest income under Section 80P of the Income Tax Act, 1961. The petitioner argues that this denial is contrary to established judicial precedents. The assessment order and a subsequent demand notice are under challenge. The case has proceeded to the High Court via a writ petition.

What were the issues?

1. Whether the Assessing Officer was justified in denying deduction of interest income under Section 80P of the Income Tax Act, 1961, to the assessee, a co-operative bank? The assessee contends that such deductions are permissible and have been allowed in similar cases. The assessee relies on the High Court's judgment in PCIT v. Peroorkada Service Co-operative Bank Ltd. (442 ITR 141) and the Supreme Court's decision in Mavilayi Service Co-operative Bank Ltd. and others v. Commissioner of Income Tax and another (431 ITR 1). The revenue's contentions are not explicitly recorded in the judgment, but their action of denying the deduction implies disagreement with the assessee's claim.

Which sections of the Income-tax Act were involved?

Section 80P

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE T.R.RAVI MONDAY, THE 27TH DAY OF FEBRUARY 2023 / 8TH PHALGUNA, 1944 WP(C) NO. 34530 OF 2022 PETITIONER: 1 THE VETTAKKAL SERVICE CO-OPERATIVE BANK LTD NO.1812 VETTAKKAL P.O, CHERTHALA, ALAPPUZHA, PIN - 688531 REPRESENTED BY ITS SECRETARY BY ADV C.A. JOJO RESPONDENTS: 1 INCOME TAX OFFICER WARD-5, ALAPPUZHA, ALAPPUZHA, PIN - 688011 2 INCOME TAX OFFICER NATIONAL FACELESS ASSESSMENT CENTRE, NORTH BLOCK, NEW DELHI, PIN - 110001 3 THE COMMISSIONER OF INCOME TAX (APPEALS) OFFICE OF THE COMMISSIONER OF INCOME TAX, KOTTAYAM, PIN - 686002 SRI. JOSE JOSEPH, STANDING COUNSEL THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 27.02.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WPC No.34530 of 2022 2 T.R. RAVI, J. ------------------------------------ W.P.(C.) No.34530 of 2022 ------------------------------------ Dated this the 27th day of February, 2023

JUDGMENT The petitioner in this case has been assessed under the provisions of the Income Tax Act, 1961 for the assessment year 2020-21. The Assessing Officer has denied deduction in respect of the interest income under Section 80P of the Income Tax Act. It is contended that this Court has in the judgment in PCIT v. Peroorkada Service Co-operative Bank Ltd.; 442 ITR 141 held that such deductions are to be allowed. Moreover, the Assessing Officer is bound to consider the effect of the judgment of the Hon'ble Supreme Court in Mavilayi Service Co-operative Bank Ltd. and others v. Commissioner of Income Tax and another; 431 ITR 1. 2. This Court has in similar circumstances in the judgment dated 28.11.2022 in W.P.(C.) No.34316 of 2022 and other cases, relying on the decision in Peroorkada (Supra), Mavilayi (Supra) and M/s.

Poonjar Service Co-operative Bank Ltd. v.

Income Tax Officer (W.A. No.753 of 2021), quashed the assessment orders and directed the Assessing Officer to reconsider and pass fresh assessment orders. I do not find any reason to take a different view.

In the result, the writ petition is allowed. Ext.P2 assessment order and Ext.P3 demand notice are quashed. There will be a direction to the 2nd respondent to pass fresh assessment orders in accordance with law. T.R.RAVI JUDGE SKP/27-02

Appendix — schedule of exhibits
APPENDIX OF WP(C) 34530/2022 PETITIONER’S EXHIBITS: EXHIBIT P1 A TRUE COPY OF THE ASSESSMENT ORDER U/S 143(3) WITH NIL INCOME FOR AY 2015-16 DATED 19.12.2017 ISSUED BY THE 1ST RESPONDENT. EXHIBIT P2 A TRUE COPY OF THE ASSESSMENT ORDER U/S 143(3) FOR AY 2020-21 DATED 20.09.2022 ISSUED BY THE SECOND RESPONDENT EXHIBIT P3 A TRUE COPY OF THE DEMAND NOTICE U/S 156 FOR AY 2020-21 DATED 20.09.2022 ISSUED BY THE SECOND RESPONDENT. EXHIBIT P4 A TRUE COPY OF THE STAY ORDER IN WP(C)NO.33413/2022 DATED 20.10.2022 RESPONDENTS' EXHIBITS:NIL TRUE COPY P.A. TO JUDGE

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