ERAMALA SERVICE CO-OPERATIVE BANK LTD. F-1044 vs. THE CENTRAL BOARD OF DIRECT TAXES

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WP(C)/14532/2020HC KeralaKLHC01036860202017 July 2020Author: HONOURABLE DR. JUSTICE A.K.JAYASANKARAN NAMBIAR4 pages
AI SummaryRemanded

What did the High Court hold?

The High Court set aside the stay order (Ext.P5) passed by the 3rd respondent. The Court directed the 3rd respondent to consider and pass orders on the petitioner's appeal (Ext.P2) within six months from the date of receiving a copy of the judgment, after hearing the petitioner. Crucially, the Court ordered that recovery steps for the amounts confirmed by the assessment order (Ext.P1) shall be kept in abeyance until the 3rd respondent passes and communicates the order on the appeal. This implies that the condition of paying 20% was not upheld, and a complete stay of recovery was granted pending the appellate authority's decision. The ratio is that in cases involving substantial legal issues like Section 80P deductions for co-operative societies, and where similar matters have seen favorable treatment by the High Court, a stay of recovery pending appeal should be granted without onerous conditions.

What were the facts?

The petitioner, Eramala Service Co-operative Bank Ltd., is challenging an assessment order (Ext.P1) under the Income Tax Act. The petitioner filed an appeal (Ext.P2) and a stay petition (Ext.P4) before the Commissioner of Income Tax (Appeals), the 3rd respondent. The appellate authority, by Ext.P5, granted a stay of recovery of the disputed amount pending appeal, but imposed a condition that the petitioner must pay 20% of the confirmed amount. The petitioner contends that the core issue in the appeal relates to the permissibility of deduction under Section 80P of the Income Tax Act concerning co-operative societies. The petitioner also points out that this Court has previously granted stays of recovery in similar matters pending appeal disposal.

What were the issues?

1. Whether the condition imposed by the appellate authority for a stay of recovery, requiring payment of 20% of the confirmed amount, is legally sustainable, considering the nature of the dispute concerning the deduction under Section 80P of the Income Tax Act. Assessee's Contentions: The petitioner argues that the issue in appeal concerns the deduction under Section 80P of the Income Tax Act, which is a significant point for co-operative societies. They rely on previous High Court orders in similar cases where a complete stay of recovery was granted pending the disposal of the appeal by the appellate authority. They implicitly argue that the 20% condition is an undue burden in light of the arguable nature of the appeal. Revenue's Contentions: The judgment does not record any specific contentions made by the revenue.

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 A.K.JAYASANKARAN NAMBIAR FRIDAY, THE 17TH DAY OF JULY 2020 / 26TH ASHADHA, 1942 WP(C).No.14532 OF 2020 PETITIONER: ERAMALA SERVICE CO-OPERATIVE BANK LTD. F-1044 MAIN ROAD, ORKKATTERI, KOZHIKODE - 673542, REPRESENTED BY ITS SECRETARY VINODAN T.K, BY ADV. DR.K.P.PRADEEP RESPONDENTS: 1 THE CENTRAL BOARD OF DIRECT TAXES DEPARTMENT OF REVENUE, MINISTRY OF FINANCE GOVERNMENT OF INDIA, NORTH BLOCK, NEW DELHI-110001, REPRESENTED BY ITS ITS CHAIRMAN. 2 INCOME TAX OFFICER, WARD 2(2), AAYAKAR BHAVAN, INCOME TAX OFFICE, SOUTH BLOCK, MANANCHIRA, KOZHIKODE- 673001. 3 COMMISSIONER OF INCOME TAX (APPEALS) KOZHIKODE, AAYAKAR BHAVAN, INCOME TAX OFFICE, KOZHIKODE- 673001. BY ADV.SRI. CHRISTOPHER ABRAHAM,SC THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 17.07.2020, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C).No.14532 of 2020 2

JUDGMENT Against Ext.P1 assessment order under the Income Tax Act, the petitioner has preferred Ext.P2 appeal and Ext.P4 stay petition before the 3rd respondent. It is a case of the petitioner that by Ext.P5 stay order, the appellate authority directed the petitioner to pay 20% of the amount confirmed by the assessment order as a condition for stay of recovery of the balance amount pending disposal of the appeal. The learned counsel would submit that the issue involved in the appeal is the permissibility of the deduction under Section 80P of the Income Tax Act in its relation to Co-operative societies. It is pointed out that in similar matters this Court has granted a stay of recovery of the disputed amount pending disposal of the appeal by the Appellate Authority. Taking note of the said submission and finding that this Court has in similar cases granted a stay of recovery pending disposal of the appeal by the appellate authority, I set aside Ext.P5 stay order and direct the 3rd respondent to consider and pass orders on Ext.P2 appeal within an outer time limit of six months from the date of receipt of a copy of this judgment, after hearing the petitioner. It is made clear that till such time as orders are passed by the 3rd respondent as directed, and the order communicated to the petitioner, recovery steps for recovery of amounts confirmed against the petitioner by Ext.P1 assessment order shall be kept in abeyance. The petitioner shall produce a copy of the writ petition together with a copy of this judgment, before the 3rd respondent, for further action. A.K.JAYASANKARAN NAMBIAR

JUDGE mns/17.7.2020

Appendix — schedule of exhibits
APPENDIX PETITIONER'S/S EXHIBITS: EXHIBIT P1 TRUE COPY OF THE ASSESSMENT ORDER ITBA/AST/S/143(3)/2019-20/1022508087 (1) DATED 17.12.2019 ISSUED FOR THE YEAR 2017-18 BY THE 2ND RESPONDENT. EXHIBIT P2 TRUE COPY OF THE APPEAL DATED 07.01.2020 FILED BEFORE THE 3RD RESPONDENT FOR THE ASSESSMENT YEAR 2017-18. EXHIBIT P3 TRUE COPY OF THE DEMAND NOTICE NO. ITBA/AST/S/156/2019-20/1022508312(1) DATED 17.12.2019 FOR THE YEAR 2017-18 ISSUED BY THE 2ND RESPONDENT. EXHIBIT P4 TRUE COPY OF THE STAY APPLICATION FILED ON 07.01.2020 BEFORE THE 3RD RESPONDENT IN EXT P2 APPEAL. EXHIBIT P5 TRUE COPY OF THE ORDER NO ITA - 11073/CIT/ (A)/2019-20 DATED 13.03.2020 ISSUED FOR THE YEAR 2017-18 BY THE 3RD RESPONDENT.

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