Madras High Court
The Income Tax Officer vs Aa 226 on 10 March, 2022
WA Nos. 2396 of 2021 etc. batch
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 10.03.2022
CORAM
THE HONOURABLE MR. JUSTICE R. MAHADEVAN
and
THE HONOURABLE MR. JUSTICE J.SATHYA NARAYANA PRASAD
Writ Appeal Nos. 2396, 2759, 2847, 2851, 2868 and 2884 of 2021
and 138, 165, 243, 252, 281, 314 and 491 of 2022
and
CMP Nos. 15277, 15280, 18116, 18947, 18974, 19346 & 19694 of 2021
and 1028, 1105, 1774, 1836, 1997, 2390 & 3545 of 2022
W.A. No. 2396 of 2021
The Income Tax Officer,
Ward -2 (1), Erode, Erode District
Income Tax Office
No.15, Gandhiji Road, Erode
Erode District .. Appellant
Versus
AA 226, Modakurichi Primary Agricultural
Cooperative Credit Society
represented by its President
P.V. Saravanan, M/52
Son of Venkatachalam
Perumapalayam, Modakurichi Post
Erode District .. Respondent
WA No. 2396 of 2021:-Appeal filed under Clause 15 of the Letters
Patent against the order dated 06.09.2019 passed in WP No. 769 of 2019 on
the file of this court.
https://www.mhc.tn.gov.in/judis
WA Nos. 2396 of 2021 etc. batch
For Appellant : Mr. A.N.R. Jayaprathap
Senior Standing counsel
in all the Writ Appeals
For Respondent : Mr. C. Prakasam
in all the Writ Appeals
COMMON JUDGMENT
(Judgment of the court was delivered by R. MAHADEVAN, J.)
These writ appeals are filed by the Revenue, questioning the validity of
the orders passed by the learned Judge in the writ petitions filed by the
respondents / co-operative societies.
2. The writ petitions have been filed by the respondents /
co-operative societies questioning the orders of assessment passed by the
Assessing Officer and demanding payment of tax.
3. For the purpose of appreciating the factual matrix of the case, the
averments made in WP No. 769 of 2019, corresponding to W.A. No. 2396 of
2021, are taken as the lead case.
4. According to the respondent/writ petitioner in WP No. 769 of
2019, they are the Agricultural Cooperative Credit Society registered under the
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WA Nos. 2396 of 2021 etc. batch
Tamil Nadu Cooperative Societies Act, 1983. They filed its return of income
for the assessment year 2016-2017 on 12.10.2016 declaring 'nil' income and
claimed deduction under Section 80-P of the Income-tax Act (in short, 'the
Act'). Such return filed by the respondent/writ petitioner was processed under
Section 143 (1) of the Act and the assessment was completed under section
143(3) of the Act on 28.12.2018, determining a total income of Rs.26,66,374/-
and demanded Rs.10,71,103/- towards tax, while disallowing the claim made
under Section 80P of the Act. Aggrieved by the order of assessment dated
28.12.2018, the respondent / writ petitioner has filed WP No. 769 of 2019.
5. The learned Judge, on consideration of the submissions made by
both sides, disposed of the said writ petition No. 769 of 2019 on 06.09.2019
along with other writ petition, after having found that the issue involved in the
writ petitions is covered by the judgment dated 02.08.2016 passed by the
Division Bench of this Court in Tax Case Appeal Numbers 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
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WA Nos. 2396 of 2021 etc. batch
Court and it is pending. Having regard to the same, the learned Judge directed
the appellant herein not to give effect to the orders of assessment, which are
impugned in the writ petitions 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.
6. Challenging the orders so passed by the learned Judge in the writ
petitions, the Revenue has come up with these writ appeals.
7. When these appeals are taken up for hearing today, the learned
Senior Standing Counsel appearing for the appellant contended that once the
orders of assessment are passed, the assessees ought to have filed statutory
appeals before the appellate authority, whereas in this case, the respondents/
co-operative societies filed both the writ petitions under Article 226 of the
Constitution of India and the statutory appeals before the CIT (Appeals)
simultaneously and hence, the learned Judge ought not to have entertained the
writ petitions. However, he fairly submitted that the Division Bench of this
Court, in the Judgment dated 02.08.2016 passed in Tax Case Appeal Numbers
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,
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WA Nos. 2396 of 2021 etc. batch
the assessees, which are the cooperative credit societies, 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
questions(s) of law open.”
The learned Senior Standing Counsel therefore submitted that the appeals filed
by the respondents / co-operative societies before the appellate authority have
to be examined in the light of the decision of the Division Bench of this Court
mentioned supra.
8. On the other hand, the learned counsel appearing for the
respondents/co-operative societies fairly submitted that as against the orders of
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WA Nos. 2396 of 2021 etc. batch
assessment, the respondents herein have also filed statutory appeals and they
are pending before the Appellate Authority. 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 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.”
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WA Nos. 2396 of 2021 etc. batch
Relying upon the above decision of the Honourable Supreme Court, the
learned counsel for the respondents / co-operative societies 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 appeals filed by the respondents herein.
9. Heard the learned Senior Standing Counsel appearing for the
appellant and the learned counsel for the respondents.
10. Admittedly, in all these cases, the Assessing Officer has passed
orders of assessment determining the income of the respective respondent/
Cooperative Society and demanded tax. Challenging the said orders of
assessment, the respondents have already filed appeals before the appellate
authority and they are pending. Therefore, it would be appropriate to direct the
respondents herein to raise all the contentions including the eligibility of their
claim under section 80P of the Act, in the appeals pending before the appellate
authority. The appellate authority is also directed to consider the claim of the
respondents/co-operative societies 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 orders
impugned herein, shall stand modified.
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WA Nos. 2396 of 2021 etc. batch
11. All the writ appeals stand disposed of in the above terms. No
costs. Consequently, the connected miscellaneous petitions are closed.
[R.M.D.,J.] [J.S.N.P.,J.]
10.03.2022
msr/rsh
Index : Yes/no
Internet:Yes/no
To
The Income Tax Officer,
Ward -2 (1), Erode, Erode District
Income Tax Office
No.15, Gandhiji Road, Erode
Erode District
https://www.mhc.tn.gov.in/judis
WA Nos. 2396 of 2021 etc. batch
R. MAHADEVAN, J.
and
J. SATHYA NARAYANA PRASAD, J.
msr/rsh
WA No. 2396 of 2021 etc. batch
10.03.2022
https://www.mhc.tn.gov.in/judis
