2021 (5) TMI 555 - HC - Income Tax

Deduction u/s 80P(2)(a)(i) denied - appellant claims to be a society established and registered under the provisions of the Kerala Co-operative Societies Act, 1969 - The case of the appellant is that the income of a co-operative society does the business of banking by providing credit facilities only to its members, and the income derived therefrom is exempt from the payment of Income-tax under section 80P(2)(a)(i) - HELD THAT - The counsel appearing for the appellant as well as the respondent would state that the issues considered by the orders impugned in the appeal are no more res integra and are covered in favour of the assessee by the judgment of the apex court in Mavilayi Service Co-operative Bank Ltd. v. CIT 2021 (1) TMI 488 - SUPREME COURT . The statement is placed on record and accepted. - Decided against revenue.

Summary

Issues:
1. Applicability of section 80P(2)(a)(i) of the Income-tax Act, 1961 for exemption.
2. Denial of exemption under section 80P for the assessment year 2010-11.
3. Interpretation of provisions related to primary credit societies under the Kerala Co-operative Societies Act, 1969.
4. Relevance of the judgment in Mavilayi Service Co-operative Bank Ltd. v. CIT [2021] 431 ITR 1 (SC) in the present case.

Analysis:
The judgment by the Kerala High Court involved a case where the appellant, a society registered under the Kerala Co-operative Societies Act, 1969, claimed exemption from Income-tax under section 80P(2)(a)(i) of the Income-tax Act, 1961. The appellant, classified as a primary credit society, contended that its income derived from providing credit facilities exclusively to its members should be exempt from taxation. However, the Assessing Officer had denied the exemption for the assessment year 2010-11, leading to the appeal.

The key contention in the case revolved around the interpretation of section 80P(2)(a)(i) and its applicability to primary credit societies. Both the appellant's counsel and the respondent acknowledged that the issues addressed in the impugned orders were settled in favor of the assessee by the Supreme Court's judgment in Mavilayi Service Co-operative Bank Ltd. v. CIT [2021] 431 ITR 1 (SC). The High Court, following the precedent set by the Supreme Court, set aside the orders dated March 21, 2013, March 17, 2015, and September 3, 2015, which had denied the appellant's claim for exemption under section 80P.

The judgment highlighted the significance of the apex court's decision in Mavilayi Service Co-operative Bank Ltd. v. CIT, which provided clarity on the scope of exemption under section 80P for primary credit societies engaged in banking activities for their members. By aligning with the Supreme Court's interpretation, the High Court allowed the appeal, thereby granting the appellant the exemption sought under section 80P(2)(a)(i) for the relevant assessment year. The judgment concluded by stating that no costs were awarded in the matter.