Madras High Court
The Income Tax Officer vs Aa.226 on 4 April, 2022
Author: R. Mahadevan
Bench: R. Mahadevan, J. Sathya Narayana Prasad
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
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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 2/8 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 3/8 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.” 4/8 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 5/8 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.
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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 To 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 7/8 W.A.No. 845 of 2022 R. MAHADEVAN, J.
and J. SATHYA NARAYANA PRASAD, J.
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