Wp/18893/2019 Of Aa.226 Modakurichi Primary v. The Income Tax Officer

IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated : 03.07.2019 Coram THE HONOURABLE MR. JUSTICE M.SUNDAR W.P.No.18893 of 2019 AA 226 Modakurichi Primary Agricultural Cooperative Credit SocietyRep. By its PresidentP.V.Saravanan, M/52S/o.VenkatachalamPerumapalayam, Modakurichi PostErode District ...Petitioner The Income Tax OfficerWard-2(1) ErodeIncome Tax OfficeNo.15, Gandhiji Road, ErodeErode District ... Respondent Prayer: Writ Petition filed under Article 226 of theConstitution of India praying for issuance of a Writ ofCertiorari calling for the entire records relating to theimpugned order passed by the respondent in Order No.Nil dated17.06.2019 and quash the same. For Petitioner: Mr.C.Prakasam For Respondent: Mr.A.N.R.Jayaprathap ORDER Mr.C.Prakasam, learned counsel on record for writpetitioner and Mr.A.N.R.Jayapratap, learned junior standingcounsel for respondents are before this Court. 2.It is submitted without any disputation or disagreementthat this matter is covered by an earlier order made by thisCourt being order dated 27.06.2019 in W.P.No.2552 of 2019 etc., https://hcservices.ecourts.gov.in/hcservices/ batch. For the sake of convenience, clarity and ease ofreference, the entire order dated 27.06.2019 made in the batchis extracted and reproduced infra: 'This common order will dispose of all these 33writ petitions. There is no disputation or disagreementbefore this Court and between the parties that allthese 33 writ petitions are covered by an earlier orderdated 18.06.2019 made by this Court in W.P.Nos.16868,16877, 16882 and 16893 of 2019, which in turn was madeby following an earlier common order dated 11.06.2019made by this Court in W.P.Nos.15651/2019 etc., (fivewrit petitions). 2. To be noted, all these writ petitions turn onSection 80P of 'Income Tax Act, 1961' ('IT Act' forbrevity). 3. For the sake of convenience, clarity and easeof reference, most relevant paragraphs in the aforesaidearlier order dated 11.06.2019 in W.P.Nos.15651 of 2019etc., (five writ petitions) are extracted andreproduced infra. Most relevant paragraphs in the saidorder are paragraphs Nos.6 to 19 which read as follows:'6. Short facts imperative for disposal of these fivewrit petitions by this common order are as follows: a) Writ petitioners in each of the five writpetitions are Cooperative Societies. b) Writ petitioners claim that they are entitledto the benefit of Section 80P of the 'Income Tax Act,1961' ['IT Act' for the sake of brevity] c) Respondent has issued notices under Section 148of IT Act. d) These notices under Section 148 of IT Actissued to each of the writ petitioners have beenassailed in each writ petitions and these notices shallbe referred to as 'impugned notice' in singular and'impugned notices' in plural. e) Impugned notices have been issued on the basisthat there has been income that has escaped assessmentwithin the meaning of Section 147 of IT Act for variousprevious Assessment years as set out in the respectivenotices. f) Predicated on Section 147, the impugned noticeswhich are under Section 148, call upon the writpetitioner assessees to file returns for the Assessmentyears mentioned therein. g) Contending that a Hon'ble Division Bench ofthis Court, has held that Cooperative Societies akin tothe writ petitioners are entitled to the benefit ofSection 80P, instant writ petitions have been filed,assailing the impugned notices. 7. The sheetanchor submission of learned counselfor writ petitioner in each of these five writpetitions is that a Division Bench of this Hon'bleCourt, in an order dated 02.08.2016 made in Tax CaseAppeal Numbers.484 to 487 and 490 of 2016, has heldthat Cooperative Societies akin to those of writpetitioners are entitled to the benefit of Section 80Pof IT Act. f) Predicated on Section 147, the impugned noticeswhich are under Section 148, call upon the writpetitioner assessees to file returns for the Assessmentyears mentioned therein. g) Contending that a Hon'ble Division Bench ofthis Court, has held that Cooperative Societies akin tothe writ petitioners are entitled to the benefit ofSection 80P, instant writ petitions have been filed,assailing the impugned notices. 7. The sheetanchor submission of learned counselfor writ petitioner in each of these five writpetitions is that a Division Bench of this Hon'bleCourt, in an order dated 02.08.2016 made in Tax CaseAppeal Numbers.484 to 487 and 490 of 2016, has heldthat Cooperative Societies akin to those of writpetitioners are entitled to the benefit of Section 80Pof IT Act. 8. Adverting to the aforesaid order of Hon'bleDivision Bench, learned counsel submitted thatquestions of law, which were entertained by the Hon'bleDivision Bench are adumbrated in paragraph 5 of thesaid order, which reads as follows: '5. Aggrieved by the order of the Income Tax AppellateTribunal, the appellants have filing these appeals, onraising the following substantial questions of law:- 1. Whether on the facts and in the circumstancesof the case the Tribunal was right in holding that theassessee is to be treated as primary agriculturalsociety and is carrying on the business of banking orproviding credit facilities to its members and isentitled for deduction under Section 80P (2) (a) (i) ofthe Income Tax Act, 1961 with respect to the interestreceived from Class B members who were involved in non-agricultural activity. 2. Whether on the facts and in the circumstancesof the case the Tribunal was right in holding that theClass B members of the assessee society can be treatedas a member of the society for the purpose of Section80P (2) (a) (i) when Class B members do not have theright to participate in the voting and meetings of theboard of the society. 3. Whether on the facts and in the circumstancesof the case the Tribunal was right in not consideringthe fact that the assessee was lending monies for non-agricultural purpose and the provisions of Section 80P(4) and 2(24) (viia). The contention of the learned counsel for theappellant/ Revenue department, is that Class B membersof the respondent societies cannot be treated asmembers of the assessee societies, as Class B memberswere not recognised as per record and bye-laws of theassessee society, for the purpose of voting, attendingthe board meeting etc. Therefore, as per Section 80P(4), the benefit under Section 80P cannot be extendedto any cooperative Bank other than a primaryagricultural credit society. The assessee cannot betreated as a credit society for the loan advanced to non-agricultural purposes and so the assessee societiesare not entitled for the benefit under Section 80P (2)(a) (i) read with 80P (4).' 9. To be noted, all three aforesaid substantialquestions of law pertain to Section 80P of IT Act quaCooperative Societies. Also to be noted, the aforesaidjudgment has been rendered by Hon'ble Division Bench,in tax case appeals, which are essentially underSection 260A of IT Act. 10. The aforesaid three substantial questions oflaw on which the statutory appeals i.e., tax caseappeals were heard out, were answered in favour of theassessee and the answer is articulated by the Hon'bleDivision Bench in Paragraph 8, which reads as follows: '8. In the case of ITO Vs. M/s. VeerakeralamPrimary Agricultural Co-operative Credit Society in ITANo.197/Mds/2013 dated 11.02.2014, the Tribunaldismissed the appeal of the Revenue. Against the orderof the Income Tax Appellate Tribunal, the aforesaidVeerakeralam Primary Agricultural Co-operative CreditSociety filed an appeal under Section 260A of theIncome Tax Act, 1961, in T.C.A. Nos. 735, 755 of 2014and 460 of 2015 before this Court. By judgment dated05.07.2016, the appeals were dismissed, on thefollowing reasoning: '8. In the case of ITO Vs. M/s. VeerakeralamPrimary Agricultural Co-operative Credit Society in ITANo.197/Mds/2013 dated 11.02.2014, the Tribunaldismissed the appeal of the Revenue. Against the orderof the Income Tax Appellate Tribunal, the aforesaidVeerakeralam Primary Agricultural Co-operative CreditSociety filed an appeal under Section 260A of theIncome Tax Act, 1961, in T.C.A. Nos. 735, 755 of 2014and 460 of 2015 before this Court. By judgment dated05.07.2016, the appeals were dismissed, on thefollowing reasoning: “13. Sub-section (4) of Section 80P of the IncomeTax Act, 1961 is extracted below : “(4) The provisions of this section shall notapply in relation to any co-operative bank other than aprimary agricultural credit society or a primary co-operative agricultural and rural development bank.”Explanation – For the purposes of this subsection --- (a) “co-operative bank” and “primary agriculturalcredit society” shall have the meanings respectivelyassigned to them in Part V of the Banking RegulationAct, 1949 (10 of 1949); (b) “primary co-operative agricultural and ruraldevelopment bank” means a society having its area ofoperation confined to a taluk and the principal objectof which is to provide for long-term credit foragricultural and rural development activities.” It is seen that the primary object of the societyis to provide financial accommodation to its members tomeet all the agricultural requirements and to providecredit facilities to the members, as per the bye-lawsand as laid down in Section 5 (cciv) of the BankingRegulation Act, 1949. Further, from the CPT Circulardated 12.03.2008, it is evident that a credit co- operative society is not a co-operative bank, asdefined in Part V of the Banking Regulation Act, 1949.The object of a 'Co- operative bank' is to acceptdeposits from the public, for lending or investment ofmoney. On perusal of the findings of the AppellateAuthority as well as the Appellate Tribunal, it iscategorically made clear that the assessee society willnot come under the object of the principal business ofa co-operative bank, which is a banking business. Thebenefit of Section 80P is excluded for deductions byco-operative banks, whereas the primary agriculturalcredit societies are entitled for the said deduction. 14. .... 15. In the recent decision of the Kerala HighCourt, in the case of Chirakkal Service Co-operativeBank Ltd., Kannur vs. the Commissioner of Income Tax,reported in (2016) 68 taxmann.com.298 (Kerala), theHigh Court considered similar substantial questions oflaw (Issue No.A) raised by the assessee, regarding theentitlement for exemption under sub section (4) ofSection 80P. By considering the fact that the assesseeis a primary agricultural society, the Kerala HighCourt has answered the substantial question of law infavour of the assessee and held that the primaryagricultural credit societies, registered as such underthe KCS Act and classified so under that Act, includingthe appellants, are entitled to such exemption.Therefore, the aforesaid decisions is applicable to theinstant case. 16. In the light of the aforesaid facts andcircumstances of the case, we are of the view, that thesubstantial question of law framed in the instantappeals, is answered against the Revenue. The exceptionbarred out in Section 80P (4) of the Income Tax Act,1961, is applicable to the assessee credit society.Hence, the appeals are accordingly dismissed.' 11. There is no disputation or disagreement beforethis Court that the aforesaid order of Hon'ble DivisionBench and the ratio therein would apply to the writpetitioner in each of these cases. 12. Therefore, it would follow as a naturalsequitur that it would serve no useful purpose inallowing the impugned notices to proceed further asultimately the authorities will stand bound by theratio / rationale laid by the Hon'ble Division Bench. 11. There is no disputation or disagreement beforethis Court that the aforesaid order of Hon'ble DivisionBench and the ratio therein would apply to the writpetitioner in each of these cases. 12. Therefore, it would follow as a naturalsequitur that it would serve no useful purpose inallowing the impugned notices to proceed further asultimately the authorities will stand bound by theratio / rationale laid by the Hon'ble Division Bench. 13. However, learned counsel for Revenue, raisestwo submissions in this regard. https://hcservices.ecourts.gov.in/hcservices/ 14. First submission is on limitation. This firstsubmission is that the aforesaid order of the Hon'bleDivision Bench as well as other orders passed byHon'ble Division Benches of this Court on the sameaspect i.e., benefit of Section 80P of Income Tax Actto Cooperative Societies is being carried further toHon'ble Supreme Court by way of Special LeavePetitions. In other words, it is the specific case andstated position of the learned Revenue counsel that theIT department, has not given legal quietus to theorder, but is agitating the matter further by filingSpecial Leave Petitions in Hon'ble Supreme Court. 15. Be that as it may, as of today, there is nodisputation that the aforesaid order of Hon'bleDivision Bench has neither been stayed nor reversed.Therefore, it holds the field. 16. Though this could be the end of the matter andthis Court would have been inclined to set aside theimpugned notices, this Court takes a slightly differentview owing to the second submission made by learnedcounsel, which is a crucial aspect of the trajectory ofthe hearing today. 17. The second submission made by learned Revenuecounsel is that with regard to notices under Section148 of IT Act particularly with regard to noticespredicated on escaped assessment under 147 of IT Act,different periods of limitation have been prescribedfor different circumstances. It may not be necessary toadvert to those aspects in a great detail. Suffice tosay that three different periods of limitation havebeen prescribed for notices akin to the instant noticesi.e., notices under Section 148 of IT Act and thosethree periods of limitations are contained in firstproviso to Section 147, Section 149(1)(b) and Section149(1)(c) of IT Act. 18 Learned Revenue counsel adverting to theaforesaid provisions submitted that it may be too latein the day for the Revenue to issue notices underSection 148 afresh, if they are set aside now andultimately if the Revenue succeeds in the Special LeavePetitions, which are said to have been filed. 19. To be noted, learned counsel for writpetitioner responding to the aforesaid submissionsubmitted that some of the impugned notices in theinstant writ petitions are in any event barred by limitation. This Court expresses no opinion on thisplea at this point of time in this order owing to thenature of the order that is being passed. 4. In the light of the aforesaid undisputedposition, the following order is passed: a) All the 33 impugned notices will be kept inabeyance and there will be no further proceedingspursuant to the same until disposal of the SpecialLeave Petitions said to have been filed by respondent /Revenue in Hon'ble Supreme Court against theaforementioned orders of Hon'ble Division Bench of thisCourt particularly orders dated 02.08.2016 in Tax CaseAppeal Nos.484-487 and 490 of 2016. b) Subject to the outcome of the aforesaid SpecialLeave Petitions, i.e., if the Special Leave Petitionsare in favour of the Revenue, the impugned orders willstand revived and law will take its course. If thisscenario unfolds, it is open to the writ petitionerassessee to take all objections and defences availableto section 148 notice including calling for reasons andlimitation. a) All the 33 impugned notices will be kept inabeyance and there will be no further proceedingspursuant to the same until disposal of the SpecialLeave Petitions said to have been filed by respondent /Revenue in Hon'ble Supreme Court against theaforementioned orders of Hon'ble Division Bench of thisCourt particularly orders dated 02.08.2016 in Tax CaseAppeal Nos.484-487 and 490 of 2016. b) Subject to the outcome of the aforesaid SpecialLeave Petitions, i.e., if the Special Leave Petitionsare in favour of the Revenue, the impugned orders willstand revived and law will take its course. If thisscenario unfolds, it is open to the writ petitionerassessee to take all objections and defences availableto section 148 notice including calling for reasons andlimitation. c) If the Special Leave Petitions end in favour ofassessees and if the aforesaid Hon'ble Division Benchorders are confirmed or if the Hon'ble Supreme Courtrefuses to interfere with the orders of the High Court,all the 33 impugned notices will stand set asidewithout further reference to this Court. d) Though obvious it is made clear that this orderpertains to benefit under Section 80P of IT Act quawrit petitioners covered by Hon'ble Division Benchorders against which Revenue submits that SLPs havebeen filed before Hon'ble Supreme Court and therefore,this order will not preclude Revenue from proceedingagainst writ petitioners in a manner known to law withregard to other issues, if any. 5. With the aforesaid directions, all the 33 writpetitions are disposed of and there will be no order asto costs. Consequently, connected miscellaneouspetitions are closed.' 3. Suffice to say that the aforesaid order will govern theinstant writ petitioner also and the operative portion of theaforesaid order contained in Paragraph 4 will apply and operatein the instant case also. This writ petition is disposed of on the above terms. Nocosts. Consequently, connected miscellaneous petition isclosed. Sd/- Assistant Registrar //True Copy// Sub Assistant Registrar To The Income Tax Officer,Ward-2(1) Erode,Income Tax Office,No.15, Gandhiji Road, Erode,Erode District. +1cc to Mr.C.Prakasam, Advocate Sr.56008+1cc to Mr.A.P.Srinivas, Advocate Sr.57482 W.P.No.18893 of 2019 gp[co]srg 13/08/2019