2019 (7) TMI 1446 - HC - Income Tax

Alternate remedy - Deduction u/s 80P - whether Primary Agricultural Societies carrying on the business of providing credit facilities to its members are entitled to claim deductions? - HELD THAT - This Court is of the considered view that this is a fit case to relegate the writ petitioners to the alternate remedy by way of a statutory appeal. This Court is informed that remedy of filing statutory appeal to the Commissioner (Appeals) is available for the writ petitioners under Section 246A of IT Act. This Court is informed that in some of these writ petitions, writ petitioners have already preferred statutory appeals. If that be the case, it is open to the writ petitioners to pursue their appeals and obviously this order can be pressed into service before the Appellate Authority. With regard to exercise of writ jurisdiction on the teeth of alternate remedy, this Court reminds itself that alternate remedy is a rule of discretion. This Court disposes of these writ petitions leaving open all questions including the questions/grounds raised in the instant writ petitions to be canvassed in statutory appeals before Commissioner (Appeals) under Section 246-A. At his juncture, learned counsel for writ petitioners submit that writ petitioner would opt for the alternate remedy (obviously in cases where appeals have not already been filed) and this Court may consider condonation of delay. Condonation of delay - the relevant provision is Section 249(3) of IT Act and power vests with the Appellate Authority, namely Commissioner (Appeals) to condone the delay. Therefore, this Court considers it appropriate to exclude the time spent in the instant writ petitions i.e, the time from the date of presentation of instant writ petitions to the date on which instant order copy is made available in computing the time within which statutory appeals under Section 246A of IT Act have to be preferred. This course is adopted by placing reliance on Section 14 of Limitation Act. However, it is made clear that notwithstanding such exclusion, if there is delay, it is open to the writ petitioners to seek condonation of such delay inter alia under Section 249(3) of IT Act and the Appellate Authority shall deal with such prayers for condonation of delay on their own merits and in accordance with law.

Summary

Issues Involved:
1. Eligibility of Cooperative Societies for deductions under Section 80P of the Income Tax Act.
2. Distinction between Cooperative Banks and Primary Agricultural Credit Societies for Section 80P deductions.
3. Classification of interest income from surplus funds as operational income or income from other sources.
4. Applicability of alternative remedy rule in tax-related writ petitions.

Issue-wise Detailed Analysis:

1. Eligibility of Cooperative Societies for Deductions under Section 80P of the Income Tax Act:
The core issue revolves around whether the petitioners, being Cooperative Societies registered under the Tamil Nadu Cooperative Societies Act, 1983, are entitled to deductions under Section 80P of the Income Tax Act, 1961. The court noted that the entire matter hinges on Section 80P, which pertains to the deduction in respect of income of cooperative societies. The petitioners relied on a Division Bench judgment dated 06.12.2018 in Tax Case Appeal Nos. 882 and 891 of 2019, which was decided in favor of the assessee, affirming that cooperative societies are entitled to benefits under Section 80P.

2. Distinction between Cooperative Banks and Primary Agricultural Credit Societies for Section 80P Deductions:
The court highlighted that Section 80P(4) of the Income Tax Act, inserted by the Finance Act, 2006, creates a distinction between a Cooperative Bank and a Primary Agricultural Credit Society or a Primary Cooperative Agricultural and Rural Development Bank. While Section 80P deductions are not applicable to Cooperative Banks, they are available to Primary Agricultural Credit Societies and Primary Cooperative Agricultural and Rural Development Banks. This principle was supported by the Supreme Court judgment in Citizen Cooperative Society Limited Vs. ACIT.

3. Classification of Interest Income from Surplus Funds as Operational Income or Income from Other Sources:
The court examined whether the interest income derived from surplus funds invested by the petitioners should be classified as operational income eligible for deduction under Section 80P(2)(d) or as income from other sources taxable under Section 56. The impugned assessment orders had denied the deductions on the grounds that the interest income from surplus investments was not operational income but income from other sources. This classification was supported by the Supreme Court judgment in The Totgars' Cooperative Sale Society Limited Vs. Income Tax Officer, which stated that interest income from surplus funds not required for immediate business purposes falls under "other income" and is taxable under Section 56.

4. Applicability of Alternative Remedy Rule in Tax-related Writ Petitions:
The court emphasized the principle of alternative remedy, noting that while it is a rule of discretion and not compulsion, it should be applied with utmost rigor in fiscal matters. The court referred to the Satyawati Tandon principle and the K.C. Mathew case, which underline that writ petitions should not be entertained if an effective alternative remedy is available, particularly in matters involving recovery of taxes. Consequently, the court relegated the petitioners to pursue their statutory appeals under Section 246A of the Income Tax Act, allowing them to raise all questions and grounds in the appeals.

Conclusion:
The court disposed of the writ petitions, directing the petitioners to pursue alternative remedies through statutory appeals. It also provided for the exclusion of the time spent in the writ petitions from the limitation period for filing appeals and allowed for the condonation of any delay under Section 249(3) of the Income Tax Act. The court concluded that all questions raised in the writ petitions could be canvassed in the statutory appeals before the Commissioner (Appeals).