Madras High Court

The Income Tax Officer vs Aa.226 on 4 April, 2022

W.A.No. 845 of 2022

IN THE HIGH COURT OF JUDICATURE AT MADRAS

DATED : 04.04.2022

CORAM

THE HONOURABLE MR. JUSTICE R. MAHADEVAN
and
THE HONOURABLE MR.JUSTICE J. SATHYA NARAYANA PRASAD

Writ Appeal No. 845 of 2022
and
C.M.P. No. 5690 of 2022

The Income Tax Officer
Ward – 2 (1) Erode
Income Tax Office
No.15, Gandhiji Road, Erode
Erode District .. Appellant
Versus

AA.226, Modakurichi Primary Agricultural
Cooperative Credit Society
Rep. by its President
P.V.Saravanan,
S/o.Venkatachalam
Perumapalayam, Modakuruchi Post
Erode District .. Respondent

Writ Appeal filed under Clause 15 of the Letters Patent to set aside the

order dated 03.07.2019 passed in W.P. No. 18893 of 2019.

For Appellant : Mr. Srinivas Babu A.P.

For Respondent : Mr. C. Prakasam

https://www.mhc.tn.gov.in/judis

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W.A.No. 845 of 2022

JUDGMENT

(Judgment of the court was delivered by R. MAHADEVAN, J.)

This writ appeal is filed by the Revenue, questioning the validity of the

order dated 03.07.2019 passed by the learned Judge in W.P. No. 18893 of

2019.

2. The writ petition has been filed by the respondent / co-operative

society questioning the order of assessment passed by the Assessing Officer

and demanding payment of tax.

3. According to the respondent / writ petitioner, they are the

Cooperative Credit Society registered under the Tamil Nadu Cooperative

Societies Act, 1983. They did not file their return of income for the

assessment year 2012-13. While so, they received a notice dated 11.03.2019

under section 148, calling upon them to file their return for the said assessment

year. Pursuant to the same, the respondent filed its return of income on

25.03.2019 admitting 'nil' income. After issuance of notice under section

143(2) dated 25.05.2019, the assessment was completed on 17.06.2019

disallowing the deduction claimed under section 80P(2)(a)(i). Challenging the

said order of assessment, the respondent / writ petitioner filed a writ petition in

WP.No.18893 of 2019 under Article 226 of the Constitution of India. https://www.mhc.tn.gov.in/judis

W.A.No. 845 of 2022

4. The learned Judge, on consideration of the submissions made by both

sides, disposed of the said writ petition, after having found that the issue

involved in the writ petition is covered by the judgment dated 02.08.2016

passed by the Division Bench of this Court in Tax Case Appeal Nos.484 to

487 and 490 of 2016 wherein it was held that the exemption spelt out in

section 80P(4) of the Income Tax Act, 1961, is applicable to the credit society.

However, it was brought to the notice of the learned Judge by the counsel for

the revenue that as against the said order passed by the Division Bench of this

Court, an appeal in SLP(C) No.11745 of 2019 has been filed before the

Honourable Supreme Court and it is pending. Having regard to the same, the

learned Judge directed the appellant herein not to give effect to the order of

assessment, which was impugned in the writ petition and to keep them in

abeyance and further proceedings shall be taken up subject to the outcome of

the Special Leave Petition pending before the Honourable Supreme Court.

5. Challenging the order so passed by the learned Judge in the writ

petition on 03.07.2019, the Revenue has come up with this writ appeal.

6. When this appeal was taken up for hearing today, the learned Senior

Standing Counsel appearing for the appellant contended that once the order of https://www.mhc.tn.gov.in/judis

W.A.No. 845 of 2022

assessment is passed, the assessee ought to have filed statutory appeal before

the appellate authority, whereas in this case, the respondent/ co-operative

society, instead of filing statutory appeal, preferred the writ petition under

Article 226 of the Constitution of India and hence, the learned Judge ought not

to have entertained the writ petition. However, he fairly submitted that the

Division Bench of this Court, in the Judgment dated 02.08.2016 passed in Tax

Case Appeal Nos.484 to 487 and 490 of 2016 has held that in terms of Section

80P of the Act, which was inserted under the Finance Act, 2006 with effect

from 01.04.2007, the assessee, which is the cooperative credit society, would

be entitled to the benefit of Section 80P of the Act. It is further stated that

assailing the said order passed by the Division Bench of this Court, the

Revenue has carried the matter on appeal before the Honourable Supreme

Court in Special Leave to Appeal (c) No(s).17745/2019 [Prl. Commissioner

of Income Tax Vs. M/s.S.1308 Ammapet Primary Agricultural Cooperative

Bank Ltd] and the Honourable Supreme Court, by judgment dated 17.01.2020

permitted the Department to withdraw the appeal while keeping the question

of law open for consideration. The order dated 17.01.2020 passed by the

Honourable Supreme Court reads as follows:

“Permission granted, subject to just exceptions.” The special leave petition and pending applications are dismissed as withdrawn, leaving https://www.mhc.tn.gov.in/judis questions(s) of law open.”

W.A.No. 845 of 2022

Stating so, the learned Senior Standing Counsel prayed for appropriate

direction to the respondent / co-operative society in this writ appeal.

7. In view of the aforesaid submissions made on the side of the

appellant, the learned counsel appearing for the respondent / co-operative

society sought leave of this court to file statutory appeal before the appellate

authority, as against the order of assessment passed by the assessing officer.

The learned counsel also brought to the notice of this Court the judgment of

the Honourable Supreme Court in the case of Mavilayi Service Co-operative

Bank Ltd. v. Commissioner of Income Tax, Calicut (2021) 123

taxmann.com 161 (SC), wherein, in paragraph 45, it was observed as follows:

“ 45. 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 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 https://www.mhc.tn.gov.in/judis

W.A.No. 845 of 2022

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.”

Relying upon the above decision of the Honourable Supreme Court, the

learned counsel for the respondent / co-operative society submitted that

appropriate direction may be issued to the Appellate Authority to take note of

the aforesaid decision of the Honourable Supreme Court as well, at the time of

disposal of the statutory appeal to be filed by the respondent herein.

8. Having regard to the submissions made by the learned counsel on

either side, this court grants four weeks time from the date of receipt of a copy

of this judgment, to the respondent herein to file statutory appeal before the

appellate authority. On such filing, the appellate authority shall entertain the

same, without raising any issue relating to limitation aspect, consider the

claims of the respondent /co-operative society including their eligibility under

section 80P of the Act and pass orders, on merits and in accordance with law

and also in the light of the decision rendered by the Honourable Supreme

Court, mentioned supra. Accordingly, the order impugned herein, shall stand

modified.

https://www.mhc.tn.gov.in/judis

W.A.No. 845 of 2022

9. This writ appeal stand disposed of in the above terms. No costs.

Consequently, the connected miscellaneous petition is closed.

[R.M.D.,J.] [J.S.N.P.,J.] 04.04.2022 dhk/av

Index : Yes/No Internet: Yes/No

The Income Tax Officer Ward – 2 (1) Erode Income Tax Office No.15, Gandhiji Road, Erode Erode District

https://www.mhc.tn.gov.in/judis

W.A.No. 845 of 2022

R. MAHADEVAN, J.

and J. SATHYA NARAYANA PRASAD, J.

dhk/av