2022 (4) TMI 1186 - HC - Income Tax

Denial of deduction claimed u/s 80P(2)(a)(i) - Senior Standing Counsel appearing for the appellant contended that once the order of 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 - HELD THAT - As 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. 2021 (1) TMI 488 - SUPREME COURT 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. 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.

Summary

Issues:
Validity of order dated 03.07.2019 in W.P. No. 18893 of 2019 challenging assessment order and tax payment demand.
Applicability of exemption under section 80P(4) of the Income Tax Act, 1961 to a cooperative credit society.
Entertainment of writ petition under Article 226 of the Constitution of India instead of filing statutory appeal.
Interpretation of Section 80P of the Income Tax Act, 1961 in favor of cooperative credit societies.
Direction to the Appellate Authority based on the judgment of the Honourable Supreme Court in Mavilayi Service Co-operative Bank Ltd. v. Commissioner of Income Tax, Calicut (2021) 123 taxmann.com 161 (SC).

Issue 1:
The High Court addressed the validity of the order dated 03.07.2019 in W.P. No. 18893 of 2019, where the Revenue challenged the assessment order and tax payment demand made by the Assessing Officer. The respondent, a cooperative credit society, filed a writ petition under Article 226 of the Constitution of India, disputing the disallowance of deduction claimed under section 80P(2)(a)(i) of the Income Tax Act, 1961.

Issue 2:
The Court considered the applicability of the exemption under section 80P(4) of the Income Tax Act, 1961 to the cooperative credit society. The judgment dated 02.08.2016 by the Division Bench of the Court held that the exemption under section 80P(4) is applicable to credit societies. However, an appeal was filed before the Honourable Supreme Court, and the High Court directed to keep the assessment order in abeyance pending the outcome of the Special Leave Petition.

Issue 3:
The Revenue argued that the respondent should have filed a statutory appeal instead of a writ petition under Article 226 of the Constitution of India. The Court acknowledged the Revenue's contention but highlighted the previous judgment by the Division Bench supporting the cooperative credit society's entitlement to benefits under Section 80P of the Act.

Issue 4:
Interpreting Section 80P of the Income Tax Act, the Court referred to the judgment in Mavilayi Service Co-operative Bank Ltd. v. Commissioner of Income Tax, Calicut (2021) 123 taxmann.com 161 (SC). The Court emphasized a liberal and reasonable reading of Section 80P in favor of the assessee, particularly cooperative credit societies, and directed the Appellate Authority to consider the decision of the Honourable Supreme Court in their statutory appeal.

Issue 5:
Based on the submissions, the Court granted the respondent four weeks to file a statutory appeal before the Appellate Authority. The Authority was directed to consider the eligibility of the cooperative society under section 80P, pass orders on merit, and take into account the decision of the Honourable Supreme Court. Consequently, the impugned order was modified, and the writ appeal was disposed of without costs.