Assessee Is Substantially Centering Around Section 80P Of The Income Tax Act, 1961 (For Short ‘The Act’). The Counsel Appearing For The Parties Invited The Atte v. In The Above Background, The Following Substantial Questions Are Considered

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE BASANT BALAJI WEDNESDAY, THE 28 DAY OF SEPTEMBER 2022 / 6TH ASWINA, 1944 ITA NO. 12 OF 2017 AGAINST THE ORDER ITA 300/2016 OF I.T.A.TRIBUNAL,COCHIN BENCH APPELLANT/S: THE PRINCIPAL COMMISSIONER OF INCOME TAX, KOTTAYAM BY ADVS. SRI NAVNEETH N NATH SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT/S: THE KIDANGOOR SERVICE CO-OPERATIVE BANK LIMITED, KIDANGOOR, KOTTAYAM. BY ADV SRI.O.D.SIVADAS THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 28.09.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ITA No.12/2017 S.V. Bhatti, J. J U D G M E N T Heard Adv Navneeth N Nath, holding for learned Senior Counsel Mr P K R Menon, and learned Counsel Mr O.D. Sivadas for parties. 2. The Principal Commissioner of Income Tax/Revenue is the appellant. M/s. Kidangoor Service Co-operative Bank Ltd/assessee is the respondent. The appeal, at the instance of the Revenue, is directed against the order dated 31.10.2016 of the Income Tax Appellate Tribunal (for short ‘Tribunal’) Cochin Bench in ITA No.300/Coch/2016. The subject matter of appeal relates to the return filed by the assessee for the Assessment Year 2012-13. 3. The controversy between the Revenue and the ITA No.12/2017 assessee is substantially centering around Section 80P of the Income Tax Act, 1961 (for short ‘the Act’). The Counsel appearing for the parties invited the attention of the Court to the judgment in Mavilayi Service Co-operative Bank Ltd v. Commissioner of Income Tax[1], that the issue is no more res integra. The circumstances relevant for disposing of the appeal are stated in sufficient detail in the orders under appeal. Hence, are not reiterated. But a singular circumstance relevant for decision is noted viz. the assessee is a Primary Agricultural Credit Society, a Society registered under the Kerala Societies Registration Act. Therefore, deduction eligible under Section 80P(2) is the issue for consideration. 4 In the above background, the following substantial questions are considered: (i) Whether, on the facts and circumstances of the case, and also in view of the decision in 363 ITR 268 (in the case of Perinthalmanna Service Co-operative Bank), the Tribunal is right in holding that deduction u/s 80P(2)(a)(i) of the Act be allowed to the assessee merely on the strength of the certificate of registration as "Primary Agricultural Credit Society" ? (ii) Are not the findings of the Hon'ble Court reported in 363 ITR 268 and 384 ITR 490 inconsistent and contradictory with regard to the Assessing Officer's power to examine the assessee's eligibility for deduction u/s 80P(2)(a)(i) of the Act? (iii) Is not the judgement in 384 ITR 490 vitiated in confining itself to the provisions of the State Co-operative Societies Act? 5. The learned counsel appearing for the Revenue argues that the order of assessment mainly concentrated on the entitlement of deduction under Section 80P(2) of the Act and has not considered the consequential examination i.e., assuming that the assessee is a Co-operative Society and entitled to the benefit of Section 80P(2)(a) of the Act. But the deduction is restricted to the language of Section 80P(2) of the Act. In ITA ITA No.12/2017 No.22/2017, Revenue’s appeal, this Court has considered similar substantial questions of law in detail and the reasoning in ITA No.22/2017 squarely covers the question of law formulated in the instant appeal too. By applying the principle laid down by the Apex Court in Mavilayi Service Co-operative Bank Ltd and this Court in Principal Commissioner of Income Tax v. Peroorkada Service Co-operative Bank Ltd[2], the substantial questions raised in the appeal are answered thus: entitlement of deduction under Section 80P(2) of the Act and has not considered the consequential examination i.e., assuming that the assessee is a Co-operative Society and entitled to the benefit of Section 80P(2)(a) of the Act. But the deduction is restricted to the language of Section 80P(2) of the Act. In ITA ITA No.12/2017 No.22/2017, Revenue’s appeal, this Court has considered similar substantial questions of law in detail and the reasoning in ITA No.22/2017 squarely covers the question of law formulated in the instant appeal too. By applying the principle laid down by the Apex Court in Mavilayi Service Co-operative Bank Ltd and this Court in Principal Commissioner of Income Tax v. Peroorkada Service Co-operative Bank Ltd[2], the substantial questions raised in the appeal are answered thus: 6. Question nos. (i) and (ii): (i) Whether, on the facts and circumstances of the case, and also in view of the decision in 363 ITR 268 (in the case of Perinthalmanna Service Co-operative Bank), the Tribunal is right in holding that deduction u/s 80P(2)(a)(i) of the Act be allowed to the assessee merely on the strength of the certificate of registration as "Primary Agricultural Credit Society" ? (ii) Are not the findings of the Hon'ble Court reported in 363 ITR 268 and 384 ITR 490 inconsistent and contradictory with regard to the Assessing Officer's power to examine the assessee's eligibility for deduction u/s 80P(2)(a)(i) of the Act? 6.1 The above questions are covered by the principle laid down in Mavilayi Service Co-operative Bank Ltd, both on the extent ITA No.12/2017 of entitlement of benefit under Section 80P(2) of the Act and also the obligation to independently consider whether the deduction is limited to such of the income which falls within the purview of in Mavilayi Service Co-operative Bank Ltd and Peroorkada Service Co-operative Bank Ltd. Hence, the questions are answered in favour of the Revenue for statistical purposes, and the matter is remitted to the Assessing Officer for making fresh assessment order by keeping in view the judgments referred to above. 7. Question no.(iii): Is not the judgement in 384 ITR 490 vitiated in confining itself to the provisions of the State Co-operative Societies Act? 7.1 In Peroorkada Service Co-operative Bank Ltd we have kept in our perspective the principle laid down by the Supreme Court in Mavilayi Service Co-operative Bank Ltd, the consequential consideration that would arise thereafter, and in the said background, held what all are the deductions permissible under ITA No.12/2017 Section 80P(2) of the Act, what constitutes business income, and what is to be classified as income from other sources. By following the ratio laid down in Peroorkada Service Co-operative Bank Ltd the questions are answered in favour of the Revenue for statistical purposes and for determination of the actual income assessable to tax under these head, the matter is remitted to the Assessing Officer. 9. Resultant to the above discussion, the Tribunal order, Appeal order and Assessment Order are set aside. The matter is remitted to Assessing Officer for disposal afresh. The Income Tax Appeal is allowed as indicated above. Sd/- S.V.BHATTI JUDGE Sd/- BASANT BALAJI JUDGE ITA No.12/2017 PETITIONER ANNEXURES ANNEXURE A ANNEXURE B ANNEXURE C APPENDIX OF ITA 12/2017 ASSESSMENT ORDER U/S.144 DT.19.03.2015. CIT (APPEALS) ORDER NO.K-11/KTM/CIT(A)/KTM/2015-16 DT.20.01.2016. ITAT'S ORDER NO.300/COCH/2016 DT.31.10.2016.