Ita 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 THURSDAY, THE 29 DAY OF SEPTEMBER 2022 / 7TH ASWINA, 1944 ITA NO. 201 OF 2019 AGAINST THE ORDER ITA 37/2017 OF I.T.A.TRIBUNAL,COCHIN BENCH APPELLANT/S: THE PRINCIPAL COMMISSIONER OF INCOME TAX KOTTAYAM. BY ADV NAVNEETH N NATH; SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT/S: M/S. THE MANJOOR SERVICE CO-OPERATIVE BANK LTD. K-73, MANJOOR, KOTTAYYAM 686 603. BY ADVS. SRI.A.KUMAR; SRI.P.J.ANILKUMAR SMTG.MINI(1748); SRI.P.S.SREE PRASAD SHRI.JOB ABRAHAM; SRI.AJAY V.ANAND THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 29.09.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ITA No.201/2019 -2- J U D G M E N T S.V. Bhatti, J. Heard Adv Navneeth N Nath, holding for learned Standing Counsel Mr Jose Joseph, and learned Counsel Mr A Kumar for parties. 2. The Principal Commissioner of Income Tax/Revenue is the appellant. M/s. The Manjoor Service Co-operative Bank Ltd/assessee is the respondent. The appeal, at the instance of the Revenue, is directed against the order dated 20.04.2018 of the Income Tax Appellate Tribunal (for short ‘Tribunal’) Cochin Bench in ITA No.37/Coch/2017. The subject matter of appeal relates to the return filed by the assessee for the Assessment Year 2013-14. ITA No.201/2019 3. The controversy between the Revenue and the 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 to dispose 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: 1. Whether on the facts and in the circumstances of the case and in law, assessee is entitled to the benefit of section 80P of the Income tax Act? 2. The Tribunal is right in law in interfering with Assessment order on the issue of section 80P? 3. Whether the interest earned on fixed deposit is assessable under the head "business income"? 4. Or under the head "other sources" and is not the order of the Tribunal against decision reported in (2014) 50 Taxman 278? 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 deduction 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 No.22/2017, Revenue’s appeal, this Court has considered similar substantial questions of law in detail and the reasoning in ITA ITA No.201/2019 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. (1) and (2): 1. Whether on the facts and in 1. Whether on the facts and in the circumstances of the case and in law, assessee is entitled to the benefit of section 80P of the Income tax Act? Question nos. (1) and (2): 1. Whether on the facts and in 1. Whether on the facts and in substantial questions of law in detail and the reasoning in ITA ITA No.201/2019 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. (1) and (2): 1. Whether on the facts and in 1. Whether on the facts and in the circumstances of the case and in law, assessee is entitled to the benefit of section 80P of the Income tax Act? Question nos. (1) and (2): 1. Whether on the facts and in 1. Whether on the facts and in 2. The Tribunal is right in law in interfering with Assessment order on the issue of section 80P? 6.1 The above questions are covered by the principle laid down in Mavilayi Service Co-operative Bank Ltd, both on the extent 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 ITA No.201/2019 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.(3) and (4): 3. Whether the interest earned on fixed deposit is assessable under the head "business income"? 4. Or under the head "other sources" and is not the order of the Tribunal against decision reported in (2014) 50 Taxman 278? 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 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 ITA No.201/2019 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/- jjj BASANT BALAJI JUDGE PETITIONER ANNEXURES ANNEXURE A ANNEXURE B ANNEXURE C APPENDIX OF ITA 201/2019 ASSESSMENT ORDER U/S. 143 (3) DATED 10.3.2016 CIT (A) S ORDER NO. ITA NO. K-13 & K14 /CIT (A) /KTM /15-16 & 16/17 DATED 9.12.2016 ITATS ORDER IN ITA NO. 37/COCH/2017 & C.O. 13/COCH/17 DATED 20.4.2018