S K AND UDUPI DISTRICT CO-OPERATIVE V. COMMISSIONER OF INCOME TAX

WP/4490/2020

AI Insights

The case involves S.K. and Udupi District Co-operative Fish Marketing Federation Ltd., a credit co-operative society, which filed a writ petition against the Commissioner of Income Tax (Appeals) and the Income Tax Officer. The petitioner challenged the assessment order that treated a previously deducted sum under Section 80P of the Income Tax Act as 'income from other sources' and taxed it. The petitioner argued that the income derived from fixed deposits should be considered as permissible deduction under Section 80P, referencing a prior judgment that supported a broad interpretation of 'attributable to'. The respondents contended that the appeal was still pending and the order was reasoned, emphasizing the procedural requirement of depositing 20% of the demand for a stay.

• Counselvise Citation: [2020] 140 COUNSELVISE.COM (IT) 771734 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 03-03-2020
• Assessment Year: misc
• Other Referred Cases: M/s.Guttigedarara Credit Co-operative Society Ltd. v. The Income Tax officer (ITA No.29/2015)
• Laws Referred To: Income Tax Act, 1961, Karnataka Co-operative Societies Act, 1959
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: JEEVAN NEERALGI
• Assessee Lawyers: MAHESH UPPIN
• Keywords: Assessment Order; Credit Co-operative Society; Deduction; Income Tax; Stay of demand; Writ petition
• Section: 263; 246A; 80P(2)(a)(i)

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 3RD DAY OF MARCH 2020 BEFORE THE HON'BLE MR.JUSTICE S. SUNIL DUTT YADAV WRIT PETITION No.4490/2020 (T-IT) Between: S.K. and Udupi District Co-operative Fish Marketing Federation Ltd., Mulihithlu, Bolar, Mangalore – 575 001. Rep. by its Managing Director Mr. Harish Kumar. … Petitioner (By Sri Mahesh R. Uppin, Advocate) And: 1. Commissioner of Income Tax (Appeals), Aayakar Bhavan, C.R. Building, N.G. Road, Attavara, Mangaluru – 575 001. 2. Income Tax Officer, Ward – 2(5), C.R. Building, N.G. Road, Attavara, Mangaluru – 575 001. … Respondents (By Sri Jeevan J. Neeralgi, Advocate) 2 This Writ Petition is filed under Articles 226 & 227 of the Constitution of India, praying to quash the assessment order dated 26.12.2019 passed in PAN No.AADAT6313M by the R-2 marked as Annexure-A or in the alternative quash the notice dated 11.02.2020 issued by the R2 marked as Annexure-D and etc. This Writ Petition coming on for preliminary hearing this day, the Court made the following: ORDER The petitioner is a credit Co-operative Society registered under the provisions of Karnataka Co-operative Societies Act, 1959 and is stated to be engaged in the business of facilitating market for the fish catches of its members, credit facilities, etc. 2. The petitioner submits that the profits of petitioner–Society is eligible for deduction under Section 80P(2)(a)(i) of the Income Tax Act, 1961 (‘I.T. Act’ for brevity). It is further submitted that the petitioner’s assessment was concluded allowing the benefit of deduction as contemplated under Section 80P of the I.T. Act for the assessment year 2012-2013, which was 3 however reopened by the Department under Section 263 of the I.T. Act on the ground that the original assessment order was prejudicial to the interests of Revenue and fresh assessment proceedings were initiated. 3. It is submitted that the entire sum of Rs.2,79,89,807/- that was permitted as deduction under Section 80P of the I.T. Act on the earlier occasion was now treated as ‘income from other source’ and was brought under the purview of tax as per the order dated 26.12.2019 and subsequently the demand notice came to be raised. 4. It is submitted that the petitioner has preferred an appeal before respondent No.1 under Section 246A of the I.T. Act, which is pending disposal. It is further submitted that the application for stay of demand was made before respondent No.2 and the respondent No.2 as per the order at Annexure-D has 4 declined to consider the petition for stay by ordering that the petitioner had to pay 20% of the demand and as such demand was not met, the application was rejected. 5. The petitioner has challenged the said order at Annexure-D and has raised various contentions on merits of the matter, including that the income that is derived from fixed deposit is allowed as permissible deduction and reliance is placed on the judgment of this Court in the case of M/s.Guttigedarara Credit Co-operative Society Ltd. v. The Income Tax officer (ITA No.29/2015 disposed off on 9.6.2015) to contend that a wide meaning ought to be assigned to the word ‘attributable to’ as found in the said Section (Section 80P of I.T. Act). 6. Learned counsel appearing for respondents would however contend that the appeal is still pending adjudication and the order that is passed is a reasoned 5 order. Once the application for stay has been disposed off on the ground that 20% deposit of the demand as required has not been made as per the Circular No.1914 as modified by subsequent circular No.F 404/72/93, the assessee has a right to approach the jurisdictional Administrative Principal Commissioner of Income Tax (PCIT)/Commissioner of Income Tax (CIT) for review of decision of the officer. This is in light of the fact that Senior Administrative Officer has been conferred with power to look into the imposition of condition relating to deposit. This Court in the order dated 23.02.2017 passed in W.P.Nos.1339-1342/2017 at para-16 has further observed that PCIT is also to examine as to whether the grounds as made out by the assessee that assessment is “unreasonably highpitched” or the requirement of deposit would lead to genuine hardship being caused to the assessee. 6 7. In light of the procedure that is provided for in the circular referred to above and noting that in the present case the application for stay has been rejected primarily on the inability of the petitioner to have deposited 20% of the demand, keeping all the contentions open, the petitioner is at liberty to explore the procedure provided for under the circular by approaching the Administrative Senior Authority as provided for in the circular and seek for review of the order including the direction relating to deposit and PCIT/CIT would dispose of the said application of the petitioner, if made within a period of one week from the date of release of this order expeditiously. 8. Sri Jeevan J. Neeralgi, the learned standing counsel appearing for respondents submits that after affording an opportunity of hearing to the petitioner on the application to be submitted by him, necessary 7 orders would be passed within a period of two weeks of receipt of the representation of the petitioner. 9. During this whole process, it is needless to state that no coercive measures would be taken to recover the demand which is a matter still pending consideration. It is also open for the Appellate Authority to dispose of the appeal expeditiously. Subject to the above, this petition is disposed off. Sd/- JUDGE VGR "