THANIYAM PANCHAYATH SERVICE CO OPERATIVE BANK LTD vs. INCOME TAX OFFICER

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WP(C)/8938/2021HC KeralaKLHC01023932202108 April 2021Author: HONOURABLE MR. JUSTICE A.M.BADAR7 pages
AI SummaryRemanded

What did the High Court hold?

The High Court noted that the claim for deduction under Section 80P was rejected in the assessment order. It referred to the Supreme Court's observations in Mavilayi Service Cooperative Bank Ltd. v. Commissioner of Income Tax, which emphasized that Section 80P is a benevolent provision to be read liberally and reasonably, and that Section 80P(4) specifically excludes cooperative banks engaged in banking business with an RBI license. The Court also noted its own previous judgments where it directed appellate authorities to decide appeals without insisting on pre-deposit or payment of tax pending assessment orders, relying on the Supreme Court's stance. Consequently, the Court directed the 2nd respondent (Commissioner of Income Tax (Appeals)) to decide the pending appeal expeditiously. Until the disposal of the appeal, recovery pursuant to the assessment order was deferred.

What were the facts?

The petitioner, Thaniyam Panchayath Service Co Operative Bank Ltd., is a Primary Agricultural Cooperative Society. The Assessing Officer (AO) disallowed its claim for deduction under Section 80P of the Income Tax Act, 1961, in an Assessment Order (Exhibit P1) passed under Section 143. The petitioner filed a statutory appeal (Exhibit P3) before the Commissioner of Income Tax (Appeals), the 2nd respondent. While the appeal was pending, the AO rejected the petitioner's stay petition (Exhibit P4) because the mandatory 20% of the demand had not been paid prior to filing the stay application. The petitioner filed a writ petition before the High Court of Kerala challenging the rejection of the stay petition and seeking directions for the disposal of the appeal.

What were the issues?

1. Whether the petitioner, a Primary Agricultural Cooperative Society, is entitled to deduction under Section 80P of the Income Tax Act, 1961, despite the disallowance in the assessment order. 2. Whether the appellate authority can be directed to decide the appeal without insisting on the payment of 20% of the demand as a pre-condition for stay. Assessee's contentions: The petitioner argued that it is a Primary Agricultural Cooperative Society entitled to deduction under Section 80P. It relied on the Supreme Court judgment in Mavilayi Service Co-operative Bank Ltd. v. Commissioner of Income Tax, Calicut, and numerous High Court judgments in similar cases that directed appellate authorities to decide appeals without insisting on the 20% pre-deposit for stay. Revenue's contentions: The revenue contended that the petitioner should have preferred a stay application within the pending appeal and could have insisted on a stay of the demand arising from the assessment order.

Which sections of the Income-tax Act were involved?

Section 80P,Section 143,Section 80P(2)(a)(i),Section 80P(4)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE A.M.BADAR THUR AY, THE 08TH DAY OF APRIL 2021 / 18TH CHAITHRA, 1943 WP(C).No.8938 OF 2021(N) PETITIONER: THANIYAM PANCHAYATH SERVICE CO OPERATIVE BANK LTD R/387, H.O KIZHUPPILLIKKARA, KATTUR, THRISSUR-680702 REPRESENTED BY ITS SECRETARY SRI. K.V.UNNIKRISHNAN. BY ADVS. SRI.ANIL D. NAIR SRI.SREEJITH R.NAIR SMT.TELMA RAJU SRI.SANGEETH JOSEPH JACOB SMT.CHRISTINA ANNA PAUL RESPONDENTS: 1 INCOME TAX OFFICER WARD-2(1) THRISSUR-680 001. 2 COMMISSIONER OF INCOME TAX (APPEALS) THRISSUR-680 001. SC-SRI. JOSE JOSEPH THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 08.04.2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

WP(C).No.8938 OF 2021 2 JUDGMENT Dated this the 8th day of April 2021 The learned Standing Counsel takes notice for respondents.

2.

Heard the learned counsel for the petitioner. She argues that the petitioner is the Primary Agricultural Cooperative Society which is entitled for deduction under Section 80P of the Income Tax Act, 1961. As the claim for such deduction was dis-allowed in the Assessment Order, Exhibit P1 passed under Section 143 of the Income Tax Act, 1961, the petitioner preferred statutory appeal, Exhibit P3 which is pending for adjudication before the 2nd respondent. However, during pendency of the appeal, the Assessing Officer had issued order at Exhibit P4, informing the petitioner that the petition for stay filed by the assessee is rejected since the mandatory sum of 20% of demand has not been paid by the WP(C).No.8938 OF 2021 3 assessee before filing the application for stay.

3.

The learned counsel for the petitioner argued that the issue is covered by judgment of the Honourable Supreme Court in the matter of Mavilayi Service Co-operative Bank Ltd. v. Commissioner of Income Tax, Calicut, reported in MANU/SC/0017/2021. It is further argued that this Court in series of judgments in similar matters have directed the appellate authority to decide

the appeal without insisting the petitioners to pay of 20% of the demand.

4.

The learned Standing Counsel appearing for the respondents submits that the petitioner ought to have preferred an application for stay in the pending appeal and the petitioner could have insisted for stay to the demand made in pursuant to the Assessment Order at Exhibit P1. 5. I have considered the submissions so advanced and also perused the materials produced before me. The claim for deduction under Section 80P of the Income Tax Act, 1961 is rejected while

WP(C).No.8938 OF 2021 4 passing the assesement order at Ext.P1. At this juncture observation of the Honourable Supreme Court in the Paragraph 45 of the judgment in Mavilayi Service Cooperative Bank Ltd. needs production and those reads thus. “ To sum up, therefore, the ratio decidendi of Citizen Cooperative Society Ltd.(supra), must be given effect to. Section 80P of the IT Act, being a benevolent provision enacted by parliament to encourage and promote the credit of the co-operative sector in general must be read liberally and reasonably, and if there is ambiguity, in favour of the Assessee. A deduction that is given without any reference to any restriction or limitation cannot be restricted or limited by implication, as is sought to be done by the Revenue in the present case by adding the word “agriculture” into Section 80P(2)(a)(i) when it is not there. Further, Section 80P(4) is to be read as a proviso, which proviso now specifically excludes co-operative banks which are co- operative societies engaged in banking business i.e. engaged in lending money to members of the WP(C).No.8938 OF 2021 5 public, which have a licence in this behalf from the RBI. Judged by this touchstone, it is clear that the impugned Full Bench judgment is wholly incorrect in its reading of Citizen Cooperative Society Ltd.(supra). Clearly, therefore, once Section 80P(4) is out of harm's way, all the assessees in the present case are entitled to the benefit of the deduction contained

in Section 80P(2)(a)(i), notwithstanding that they may also be giving loans to their members which are not related to agriculture. Also, in case it is found that there are instances of loans being given to non-members, profits attributable to such loans obviously cannot be deducted.”

6.

This Court by relying on the observation of the Honorable Supreme Court cited in the forgoing paragraph has in several such matters have directed the appellate authority to decide

the appeal without insisting for either pre- deposit or for payment of tax in pursuant to the Assessment Orders.

7.

In this view of the matter as the WP(C).No.8938 OF 2021 6 statutory appeal is pending for consideration before the 2nd respondent, the second respondent is directed to decide the appeal expeditiously and till disposal of the appeal, recovery in pursuant to the Assessment order at Exhibit P1 is deferred till disposal of the appeal by the 2nd respondent. Accordingly, the petition is disposed of. A.M.BADAR JUDGE SSK/08/04

WP(C).No.8938 OF 2021 7

Appendix — schedule of exhibits
APPENDIX PETITIONER'S EXHIBITS: EXHIBIT P1 TRUE COPY OF INTIMATION DATED 28.5.2020 ISSUED BY THE CENTRALISED PROCESSING CENTRE. EXHIBIT P2 TRUE COPY OF THE APPEAL FILED BEFORE THE 2ND RESPONDENT FOR THE A.Y. 2019-20. EXHIBIT P3 TRUE COPY OF THE STAY PETITION FILED BEFORE THE 2ND RESPONDENT FOR THE A.Y.2019-20. EXHIBIT P4 TRUE COPY OF THE ORDER DATED 12.3.2021 ISSUED BY THE IST RESPONDENT. //True Copy// P.A to Judge.

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