KUNNAMANGALAM CO-OPERATIVE BANK V. THE INCOME TAX OFFICER

ITA/264/2014

AI Insights

The case involves the Kunnamangalam Co-operative Bank, which appealed against the order of the Income Tax Appellate Tribunal, Cochin Bench, which had disallowed a deduction claimed under Section 80P(2)(a)(i) of the Income Tax Act, 1961. The deduction was initially claimed in the return for the assessment year 2009-10, asserting that the income was from providing credit facilities to its members, which should be exempt under the said section. The Tribunal's decision was contested based on the precedent set by the Supreme Court in the Mavilayi Service Co-operative Bank case, which favored the entitlement of deductions for cooperative societies under similar circumstances. The High Court, acknowledging the binding nature of the Supreme Court's decision, remitted the case back to the Tribunal for a fresh evaluation in accordance with the law as clarified by the Supreme Court.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 686878 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 04-10-2021
• Assessment Year: misc
• Other Referred Cases: Mavilayi Service Co-operative Bank Ltd. v. Commissioner of Income Tax, Mavilayi Service Cooperative Bank and others v. Commissioner of Income Tax and another
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: P K R MENON
• Assessee Lawyers: ANIL NAIR; JOSE CHEMPLAYIL; C S BEEVI; R; SOUMYA PRAKASH
• Keywords: Assessment Year 2009-10; Co-operative Bank; Credit Facilities; Deduction; Income tax appeal
• Section: 260A; 80P(2)(a)(i)

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE VIJU ABRAHAM MONDAY, THE 4TH DAY OF OCTOBER 2021 / 12TH ASWINA, 1943 ITA NO. 264 OF 2014 AGAINST THE ORDER/JUDGMENT IN ITA 156/2014 OF I.T.A.TRIBUNAL,COCHIN BENCH, ERNAKULAM APPELLANT/S: KUNNAMANGALAM CO-OPERATIVE BANK KUNNAMANGALAM,KOZHIKODE BY ADVS. SRI.ANIL D. NAIR SRI.JOSE JOSEPH CHEMPLAYIL SMT.C.S.SULEKHA BEEVI SRI.R.SREEJITH KUM.SOUMYA PRAKASH RESPONDENT/S: THE INCOME TAX OFFICER WARD 2(3),KOZHIKODE 673 001. SC SR ADV. P.K. R. MENON THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 04.10.2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ITA NO. 264 OF 2014 -2- J U D G M E N T S.V.BHATTI,J. Heard learned counsel Mr.Anil D Nair and learned Senior Counsel Sri. P.K.R Menon for parties. 2. Kunnamangalam Co-operative Bank, Kozhikode/Assessee is the appellant. The Income Tax Officer, Ward 2(3), Kozhikode/Revenue is the respondent. The assessee being aggrieved by the order dated 25.07.2014 in I.T.A No.156 /Coch/2014 has filed the present appeal under Section 260A of the Income Tax Act, 1961 (for short, the Act). The subject matter of the appeal relates to the issues coming for consideration in the return filed by the assessment Year 2009-10. The appellant claims to be a registered Primary Agricultural Credit Society and is a Bank in the Co-operative Sector. The assessee claimed deduction under Section 80P (2) ( a) (i) of the Act. The deduction claimed by the assessee was disallowed and thus resulting in the filing of the appeal before the Commissioner of Income Tax (Appeals) and the ITA NO. 264 OF 2014 -3- resultant order in Annexure- B and further appeal before the Tribunal and the resultant order 25.07.2014 in Annexure-C. The assessee raises the following substantial question of law: i) In the facts and circumstances of the case, ought not the Tribunal have allowed the deduction under section 80P (2)(a) (i) to the appellant being income from providing credit facilities to its members ? ii) In the facts and circumstances of the case, ought not the Tribunal have held that the Assessing Officer cannot deny the benefit of the certificate of registration given by the Competent authority/the Co-operative department without referring the issue to the Reserve Bank of India as per Explanation to section 5 (ccvi)? iii) Ought not the Tribunal conclude that the appellant is a Primary Agricultural Co-operative Society as confirmed by the statutory authority and allowed the claim of exemption under section 80 P (2) (a)(i)? 3. The learned counsel appearing for the appellant submits that the view taken by the full bench of this court dated 19th day of March 2019 in Mavilayi Service Co-operative Bank Ltd. v. Commissioner of Income Tax was appealed to the Supreme Court and the Supreme Court in Mavilayi service Cooperative Bank ITA NO. 264 OF 2014 -4- and others v. commissioner of Income tax and another1 has declared the law on the entitlement of deduction in favour of a Co- operative Society registered under the Co-operative Societies Act. In the case on hand the Tribunal has considered a few circumstances and has also found that the assessee is doing business in banking. According to him, the said finding is unsustainable both in law and fact. It is argued that the assessee is catering to the needs of its members and is not independently doing banking business to dis-entitle itself for deduction under Section 80P. According to him, the judgments of the Supreme Court in the Mavilayi case are applicable to the case on hand in all fours. Firstly, he prays for setting aside the judgment under appeal and holding that the assessee is entitled to the benefits under Section 80P of the Act. It is alternatively argued that as a few circumstances are considered by the Tribunal to ensure that the return filed by the assessee is finalised in accordance with law, the matter could be remitted to Tribunal for consideration and 1 [2021] 431 ITR 1 (SC) ITA NO. 264 OF 2014 -5- disposal afresh in accordance with law. 4. Senior Counsel Sri. P.K.R Menon submits that with the pronouncement of the Supreme Court in Mavilayi case, the scope and ambit of Section 80P, no doubt has been laid and it is binding on both the parties. However, before the principle of law laid down in Mavilayi case is applied to the case on hand, particularly, having regard to the findings recorded by the Tribunal, the matter is remitted to the Tribunal for consideration and disposal afresh. 5. It is further stated that the remand in the circumstances of this case would give an opportunity to the assessee and the interest of the revenue is also suitably protected to contest on the eligibility in fact of the assessee for deduction under Section 80P of the Act. Keeping in perspective, the limited submissions made by the counsel appearing for the parties, we are convinced that the judgment under appeal could be set aside and the matter remitted to the Tribunal for disposal afresh in accordance with law. By keeping in view the applicable precedents on the point including ITA NO. 264 OF 2014 -6- the judgment of the Supreme Court in Mavilayi case, parties are given liberty to place such material as may be advised in this behalf in support of their respective contentions. The questions are answered in favour of assessee and against the revenue and matter remitted to Tribunal for disposal. The Appeal is allowed as indicated above. No order as to costs. Sd/- S.V.BHATTI JUDGE Sd/- VIJU ABRAHAM JUDGE JS ITA NO. 264 OF 2014 -7- APPENDIX APPELLANT'S ANNEXURES ANNEXURE A TRUE COPY OF THE ORDER OF ASSESSMENT FOR THE YEAR 2009-10 ISSUED TO THE RESPONDENT ANNEXURE B TRUE COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX DATED 3.1.2014 ANNEXURE C CERTIFIED COPY OF THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH DATED 25.07.2014 "