Ita v. Itr 1 (Sc

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. 205 OF 2019 AGAINST THE ORDER ITA 127/2018 OF I.T.A.TRIBUNAL, COCHIN BENCH APPELLANT/S: THE PRINCIPAL COMMISSIONER OF INCOME TAX KOTTAYAM. BY ADVS.NAVNEETH N NATH P.K.RAVINDRANATHA MENON (SR.) SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT/S: M/S.VAZHAPPALLY SERVICE CO-OPERATIVE BANK LTD VAZHAPPALLY, KOTTAYAM. BY ADVS.MR RAJA KANNNAN SRI.M.GOPIKRISHNAN NAMBIAR SRI.K.JOHN MATHAI; SRI.JOSON MANAVALAN SRI.KURYAN THOMAS; SRI.PAULOSE C. ABRAHAM THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 28.09.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ITA No.205/2019 J U D G M E N T S.V. Bhatti, J. Heard Adv Navneeth N Nath, holding for learned Senior Counsel Mr P K R Menon, and learned Counsel Mr Raja Kannan for parties. 2. The Principal Commissioner of Income Tax/Revenue is the appellant. M/s. Vazhappally Service Co-operative Bank Ltd/assessee is the respondent. The appeal, at the instance of the Revenue, is directed against the order dated 04.09.2018 of the Income Tax Appellate Tribunal (for short ‘Tribunal’) Cochin Bench in ITA No.127/Coch/2018. The subject matter of appeal relates to the return filed by the assessee for the Assessment Year 2014-15. ITA No.205/2019 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 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. ITA No.205/2019 4 In the above background, the following substantial questions are considered: 1. a) Whether on the facts and in the circumstances of the case, the assessee is entitled to the benefit of Section 80P of the Income tax Act? b) Whether on the facts and in the circumstances of the case does the assessee satisfy the conditions to be qualified as a primary agricultural society? c) Are the functions of the society such as to qualify as a Primary Agricultural Society as defined under Banking Regulations Act? d) Whether on the facts and circumstances of the case, the assessee is entitled to the benefit of section 80P with reference to the transaction held to be contrary to the object? 2. Whether on the facts and in the circumstances of the case and in law, Tribunal justified in holding that the interest from surplus fund is "Income from business" and not as "Income from other sources"? 5. The learned counsel appearing for the Revenue argues that the order of assessment mainly concentrated on the ITA No.205/2019 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 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 Peroorkada Service Co-operative Bank Ltd, the substantial questions raised in the appeal are answered thus: ITA No.205/2019 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 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 Peroorkada Service Co-operative Bank Ltd, the substantial questions raised in the appeal are answered thus: 6. Question no.1(a): Whether on the facts and in the circumstances of the case, the assessee is entitled to the benefit of Section 80P of the Income tax Act? 6.1 A comprehensive issue on the eligibility of deduction under Section 80P(2) arises. The central issue is no more res ITA No.205/2019 integra in view of the principle laid down in Mavilayi Service Co- operative Bank Ltd. The question is answered in favour of the Revenue and against the Assessee. The matter is remitted to the Assessing Officer. 7. Question no.1(b), (c) and (d): b) Whether on the facts and in the circumstances of the case does the assessee satisfy the conditions to be qualified as a primary agricultural society? c) Are the functions of the society such as to qualify as a Primary Agricultural Society as defined under Banking Regulations Act? d) Whether on the facts and circumstances of the case, the assessee is entitled to the benefit of section 80P with reference to the transaction held to be contrary to the object? 7.1 The counsel appearing for the parties submit that question nos. 1(b), (c) and (d) are ancillary or academic, therefore need not be considered and answered. 8. Question no.(2): 2. Whether on the facts and in the circumstances of the case and in law, Tribunal justified in holding that the interest from surplus fund is "Income from business" and not as "Income from other sources"? ITA No.205/2019 8.1 In Principal Commissioner of Income Tax v. Peroorkada Service Co-operative Bank Ltd[2] 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 we have, in the above-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 income assessable to tax under these head, the matter is remitted to the Assessing Officer. 9. Resultant to the above discussion, the Tribunal order, ITA No.205/2019 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 jjj PETITIONER ANNEXURES ANNEXURE A ANNEXURE B ANNEXURE C APPENDIX OF ITA 205/2019 ASSESSMENT ORDER U/S.143(3)DT.30/12/2016 CIT(A)/S ORDER NO.ITA NO.T-59/CIT(A)/KTM/16-17 DATED 31.01.2018 ITAT'S ORDER IN ITA.NO.127/COCH/2018 CO.45/COCH/18 DATED 04.09.2018.