K.255 Kandian Kovil Primary Agricultural Cooperative Credit Society Ltd. v. The Income-tax Officer, Ward–2(3), TPR, Tiruppur
[Citation -2019-LL-0718-29]

Citation 2019-LL-0718-29
Appellant Name K.255 Kandian Kovil Primary Agricultural Cooperative Credit Society Ltd.
Respondent Name The Income-tax Officer, Ward–2(3), TPR, Tiruppur
Court HIGH COURT OF MADRAS
Relevant Act Income-tax
Date of Order 18/07/2019
Judgment View Judgment
Keyword Tags substantial question of law • co-operative society • business of banking • principal business • escaped assessment • loan advanced
Bot Summary: 3623 3632/2019 : Writ Petitions filed under Article 226 of the Constitution of India praying for issuance of a Writ of Certiorari, calling for the entire records relating to the impugned order passed by the respondent in Order Nos.ITBA/AST/S/143(3)/2018-19/1014595448(1) and ITBA/AST/S/143(3)/2018-19/1014594042(1), dated 26.12.2018 and quash the same and pass such further or other orders as this Hon'ble Court may deem fit and proper in the circumstances of the case and thus render justice. 4442 4445/2019 : Writ Petitions filed under Article 226 of the Constitution of India praying for issuance of a Writ of Certiorari, calling for the records of the respondent herein in PAN No.AAAAK4879N/2010-11 and PAN No.AAAAK4879N/2011-12 and quash Order dated 31.12.2018 passed therein and pass such further or other orders as this Hon'ble Court may deem fit and proper in the circumstances of the case and thus render justice. To be noted, 33 writ petitions were disposed of by the aforesaid common order, for the sake of convenience and ease of reference, entire order dated 27.06.2019, made in the aforesaid batch of 33 writ petitions, is extracted, reproduced infra and the same reads as follows: 'This common order will dispose of all these 33 writ petitions. Adverting to the aforesaid order of Hon'ble Division Bench, learned counsel submitted that questions of law, which were entertained by the Hon'ble Division Bench are adumbrated in paragraph 5 of the said order, which reads as follows: '5. In the light of the aforesaid undisputed position, the following order is passed: a) All the 33 impugned notices will be kept in abeyance and there will be no further proceedings pursuant to the same until disposal of the Special Leave Petitions said to have been filed by respondent / Revenue in Hon'ble Supreme Court against the aforementioned orders of Hon'ble Division Bench of this Court particularly orders dated 02.08.2016 in Tax Case Appeal Nos.484-487 and 490 of 2016. In these four writ petitions, the following common order is passed: a) All the four impugned proceedings will be kept in abeyance and there will be no further proceedings pursuant to the same until disposal of the Special Leave Petitions said to have been filed by respondent / Revenue in Hon'ble Supreme Court against the aforementioned orders of Hon'ble Division Bench of this Court particularly orders dated 02.08.2016 in Tax Case Appeal Nos.484-487 and 490 of 2016. D) Though obvious it is made clear that this order pertains to benefit under Section 80P of IT Act qua writ petitioners covered by Hon'ble Division Bench orders against which Revenue submits that SLPs have been filed before Hon'ble Supreme Court and therefore, this order will not preclude Revenue from proceeding against writ petitioners in a manner known to law with regard to other issues, if any.


IN HIGH COURT OF JUDICATURE AT MADRAS Dated : 18.07.2019 Coram HONOURABLE MR. JUSTICE M.SUNDAR W.P.Nos.3623, 3632, 4442 and 4445 of 2019 and WMP Nos.3966, 3969, 3978, 3979, 5004, 5005, 5009 and 5010 of 2019 K.255 Kandian Kovil Primary Agricultural Cooperative Credit Society Ltd.., Rep. by its President M.R.Varadharajan. .. Petitioner in W.P.No.3623/2019 K.2040 Manickapurampudur Primary Agricultural Cooperative Credit Society Ltd.., Rep. by its Secretary A.Kumaresan .. Petitioner in W.P.No.3632/2019 K.863 Elumathur Primary Agricultural Cooperative Society Limited Represented by its Secretary K-863, Elumathur PO Modakkurichi Erode 638 104 PAN: AAAAK4879N .. Petitioner in W.P.Nos.4442 & 4445/2019 vs. Income Tax Officer Ward 2(3), TPR, Income Tax Office No.121, 60 Feet Road, Tiruppur 641 602. .. Respondent in W.P.Nos.3623 & 3632/2019 2 Income Tax Officer Ward 2(1) No.15, Gandhiji Road Erode 638 001. .. Respondent in W.P.Nos.4442 & 4445/2019 PRAYER IN W.P.Nos.3623 & 3632/2019 : Writ Petitions filed under Article 226 of Constitution of India praying for issuance of Writ of Certiorari, calling for entire records relating to impugned order passed by respondent in Order Nos.ITBA/AST/S/143(3)/2018-19/1014595448(1) and ITBA/AST/S/143(3)/2018-19/1014594042(1), dated 26.12.2018 and quash same and pass such further or other orders as this Hon'ble Court may deem fit and proper in circumstances of case and thus render justice. PRAYER IN W.P.Nos.4442 & 4445/2019 : Writ Petitions filed under Article 226 of Constitution of India praying for issuance of Writ of Certiorari, calling for records of respondent herein in PAN No.AAAAK4879N/2010-11 and PAN No.AAAAK4879N/2011-12 and quash Order dated 31.12.2018 passed therein and pass such further or other orders as this Hon'ble Court may deem fit and proper in circumstances of case and thus render justice. For Petitioner in : Mr.C.Prakasam W.P.Nos.3623 & 3632/2019 For Petitioner in : Mr.B.Raveendran W.P.Nos.4442 & 4445/2019 For Respondent in all W.Ps : Mr.A.P.Srinivas, Sr. Standing Counsel for Income Tax Assisted by Mr.A.N.R.Jayaprathap, Jr. Standing Counsel for Income Tax http://www.judis.nic.in 3 COMMON ORDER Mr.C.Prakasam, learned counsel on record for writ petitioner in two of aforesaid four writ petitions and Mr.B.Raveendran, learned counsel on record for two other writ petitions are before this Court. On behalf of Revenue, i.e., respondents in all four writ petitions, Mr.A.P.Srinivas, learned Senior Standing Counsel for Income Tax assisted by Mr.A.N.R.Jayaprathap, learned Junior Standing Counsel for Income Tax are before this Court. 2. All aforesaid learned counsel make common submission in unison that these four cases are covered by earlier common order made by this Court, being order dated 27.06.2019, in W.P.Nos.2552 of 2019 etc., To be noted, 33 writ petitions were disposed of by aforesaid common order, for sake of convenience and ease of reference, entire order dated 27.06.2019, made in aforesaid batch of 33 writ petitions, is extracted, reproduced infra and same reads as follows: 'This common order will dispose of all these 33 writ petitions. There is no disputation or disagreement before this Court and between parties that all these 33 writ petitions are covered by earlier order dated 18.06.2019 made by this Court in W.P.Nos.16868, 16877, 16882 and 16893 of 2019, which in turn was made by following earlier common order dated 11.06.2019 made by this Court in W.P.Nos.15651/2019 etc., (five writ petitions). http://www.judis.nic.in 4 2. To be noted, all these writ petitions turn on Section 80P of 'Income Tax Act, 1961' ('IT Act' for brevity). 3. For sake of convenience, clarity and ease of reference, most relevant paragraphs in aforesaid earlier order dated 11.06.2019 in W.P.Nos.15651 of 2019 etc., (five writ petitions) are extracted and reproduced infra. Most relevant paragraphs in said order are paragraphs Nos.6 to 19 which read as follows: '6. Short facts imperative for disposal of these five writ petitions by this common order are as follows: a) Writ petitioners in each of five writ petitions are Cooperative Societies. b) Writ petitioners claim that they are entitled to benefit of Section 80P of 'Income Tax Act, 1961' ['IT Act' for sake of brevity] c) Respondent has issued notices under Section 148 of IT Act. d) These notices under Section 148 of IT Act issued to each of writ petitioners have been assailed in each writ petitions and these notices shall be referred to as 'impugned notice' in singular and 'impugned notices' in plural. e) Impugned notices have been issued on basis that there has been income that has escaped assessment within meaning of Section 147 of IT Act for various previous Assessment years as set out in respective notices. f) Predicated on Section 147, impugned notices which are under Section 148, call upon writ petitioner assessees to file returns for Assessment years mentioned therein. g) Contending that Hon'ble Division Bench of this Court, has held that Cooperative Societies akin to writ petitioners are entitled to benefit of Section 80P, instant http://www.judis.nic.in 5 writ petitions have been filed, assailing impugned notices. 7. sheetanchor submission of learned counsel for writ petitioner in each of these five writ petitions is that Division Bench of this Hon'ble Court, in order dated 02.08.2016 made in Tax Case Appeal Numbers.484 to 487 and 490 of 2016, has held that Cooperative Societies akin to those of writ petitioners are entitled to benefit of Section 80P of IT Act. 8. Adverting to aforesaid order of Hon'ble Division Bench, learned counsel submitted that questions of law, which were entertained by Hon'ble Division Bench are adumbrated in paragraph 5 of said order, which reads as follows: '5. Aggrieved by order of Income Tax Appellate Tribunal, appellants have filing these appeals, on raising following substantial questions of law:- 1. Whether on facts and in circumstances of case Tribunal was right in holding that assessee is to be treated as primary agricultural society and is carrying on business of banking or providing credit facilities to its members and is entitled for deduction under Section 80P (2) (a) (i) of Income Tax Act, 1961 with respect to interest received from Class B members who were involved in non-agricultural activity. 2. Whether on facts and in circumstances of case Tribunal was right in holding that Class B members of assessee society can be treated as member of society for purpose of Section 80P (2) (a) (i) when Class B members do not have right to participate in voting and meetings of board of society. 3. Whether on facts and in circumstances of case Tribunal was right in not considering fact that assessee was lending monies for non-agricultural purpose and provisions of Section 80P (4) and 2(24) (viia). contention of learned counsel for appellant/ Revenue department, is that Class B members of respondent http://www.judis.nic.in 6 societies cannot be treated as members of assessee societies, as Class B members were not recognised as per record and bye- laws of assessee society, for purpose of voting, attending board meeting etc. Therefore, as per Section 80P (4), benefit under Section 80P cannot be extended to any cooperative Bank other than primary agricultural credit society. assessee cannot be treated as credit society for loan advanced to non-agricultural purposes and so assessee societies are not entitled for benefit under Section 80P (2) (a) (i) read with 80P (4).' 9. To be noted, all three aforesaid substantial questions of law pertain to Section 80P of IT Act qua Cooperative Societies. Also to be noted, aforesaid judgment has been rendered by Hon'ble Division Bench, in tax case appeals, which are essentially under Section 260A of IT Act. 10. aforesaid three substantial questions of law on which statutory appeals i.e., tax case appeals were heard out, were answered in favour of assessee and answer is articulated by Hon'ble Division Bench in Paragraph 8, which reads as follows: '8. In case of ITO Vs. M/s. Veerakeralam Primary Agricultural Co-operative Credit Society in ITA No.197/Mds/2013 dated 11.02.2014, Tribunal dismissed appeal of Revenue. Against order of Income Tax Appellate Tribunal, aforesaid Veerakeralam Primary Agricultural Co-operative Credit Society filed appeal under Section 260A of Income Tax Act, 1961, in T.C.A. Nos. 735, 755 of 2014 and 460 of 2015 before this Court. By judgment dated 05.07.2016, appeals were dismissed, on following reasoning: 13. Sub-section (4) of Section 80P of Income Tax Act, 1961 is extracted below : (4) provisions of this section shall not apply in relation to http://www.judis.nic.in 7 any co-operative bank other than primary agricultural credit society or primary co-operative agricultural and rural development bank. Explanation For purposes of this subsection --- (a) co-operative bank and primary agricultural credit society shall have meanings respectively assigned to them in Part V of Banking Regulation Act, 1949 (10 of 1949); (b) primary co-operative agricultural and rural development bank means society having its area of operation confined to taluk and principal object of which is to provide for long-term credit for agricultural and rural development activities. It is seen that primary object of society is to provide financial accommodation to its members to meet all agricultural requirements and to provide credit facilities to members, as per bye-laws and as laid down in Section 5 (cciv) of Banking Regulation Act, 1949. Further, from CPT Circular dated 12.03.2008, it is evident that credit co-operative society is not co-operative bank, as defined in Part V of Banking Regulation Act, 1949. object of 'Co- operative bank' is to accept deposits from public, for lending or investment of money. On perusal of findings of Appellate Authority as well as Appellate Tribunal, it is categorically made clear that assessee society will not come under object of principal business of co-operative bank, which is banking business. benefit of Section 80P is excluded for deductions by co-operative banks, whereas primary agricultural credit societies are entitled for said deduction. 14. .... 15. In recent decision of Kerala High Court, in case of Chirakkal Service Co-operative Bank Ltd., Kannur vs. Commissioner of Income Tax, reported in (2016) 68 taxmann.com.298 (Kerala), High Court considered similar substantial questions of law (Issue No.A) raised by assessee, regarding entitlement for exemption under sub section (4) of Section 80P. By considering fact that assessee is primary agricultural society, Kerala High Court has answered http://www.judis.nic.in 8 substantial question of law in favour of assessee and held that primary agricultural credit societies, registered as such under KCS Act and classified so under that Act, including appellants, are entitled to such exemption. Therefore, aforesaid decisions is applicable to instant case. 16. In light of aforesaid facts and circumstances of case, we are of view, that substantial question of law framed in instant appeals, is answered against Revenue. exception barred out in Section 80P (4) of Income Tax Act, 1961, is applicable to assessee credit society. Hence, appeals are accordingly dismissed.' 11. There is no disputation or disagreement before this Court that aforesaid order of Hon'ble Division Bench and ratio therein would apply to writ petitioner in each of these cases. 12. Therefore, it would follow as natural sequitur that it would serve no useful purpose in allowing impugned notices to proceed further as ultimately authorities will stand bound by ratio / rationale laid by Hon'ble Division Bench. 13. However, learned counsel for Revenue, raises two submissions in this regard. 14. First submission is on limitation. This first submission is that aforesaid order of Hon'ble Division Bench as well as other orders passed by Hon'ble Division Benches of this Court on same aspect i.e., benefit of Section 80P of Income Tax Act to Cooperative Societies is being carried further to Hon'ble Supreme Court by way of Special Leave Petitions. In other words, it is specific case and stated position of learned Revenue counsel that IT department, has not given legal quietus to order, but is agitating matter further by filing Special Leave Petitions in Hon'ble Supreme Court. http://www.judis.nic.in 9 15. Be that as it may, as of today, there is no disputation that aforesaid order of Hon'ble Division Bench has neither been stayed nor reversed. Therefore, it holds field. 16. Though this could be end of matter and this Court would have been inclined to set aside impugned notices, this Court takes slightly different view owing to second submission made by learned counsel, which is crucial aspect of trajectory of hearing today. 17. second submission made by learned Revenue counsel is that with regard to notices under Section 148 of IT Act particularly with regard to notices predicated on escaped assessment under 147 of IT Act, different periods of limitation have been prescribed for different circumstances. It may not be necessary to advert to those aspects in great detail. Suffice to say that three different periods of limitation have been prescribed for notices akin to instant notices i.e., notices under Section 148 of IT Act and those three periods of limitations are contained in first proviso to Section 147, Section 149(1)(b) and Section 149(1)(c) of IT Act. 18 Learned Revenue counsel adverting to aforesaid provisions submitted that it may be too late in day for Revenue to issue notices under Section 148 afresh, if they are set aside now and ultimately if Revenue succeeds in Special Leave Petitions, which are said to have been filed. 19. To be noted, learned counsel for writ petitioner responding to aforesaid submission submitted that some of impugned notices in instant writ petitions are in any event barred by limitation. This Court expresses no opinion on this plea at this point of time in this order owing to nature of order that is being passed. 10 4. In light of aforesaid undisputed position, following order is passed: a) All 33 impugned notices will be kept in abeyance and there will be no further proceedings pursuant to same until disposal of Special Leave Petitions said to have been filed by respondent / Revenue in Hon'ble Supreme Court against aforementioned orders of Hon'ble Division Bench of this Court particularly orders dated 02.08.2016 in Tax Case Appeal Nos.484-487 and 490 of 2016. b) Subject to outcome of aforesaid Special Leave Petitions, i.e., if Special Leave Petitions are in favour of Revenue, impugned orders will stand revived and law will take its course. If this scenario unfolds, it is open to writ petitioner assessee to take all objections and defences available to section 148 notice including calling for reasons and limitation. c) If Special Leave Petitions end in favour of assessees and if aforesaid Hon'ble Division Bench orders are confirmed or if Hon'ble Supreme Court refuses to interfere with orders of High Court, all 33 impugned notices will stand set aside without further reference to this Court. d) Though obvious it is made clear that this order pertains to benefit under Section 80P of IT Act qua writ petitioners covered by Hon'ble Division Bench orders against which Revenue submits that SLPs have been filed before Hon'ble Supreme Court and therefore, this order will not preclude http://www.judis.nic.in 11 Revenue from proceeding against writ petitioners in manner known to law with regard to other issues, if any. 5. With aforesaid directions, all 33 writ petitions are disposed of and there will be no order as to costs. Consequently, connected miscellaneous petitions are closed.' 3. In light of common submission made in unison by all learned counsel that four writ petitions on hand are covered by aforesaid common order dated 27.06.2019 made in W.P.No.2552 of 2019 batch, it follows as sequitur that operative portion of aforesaid order contained/adumbrated in paragraph 4 will apply to instant cases also. To be noted, in aforesaid operative portion extracted and reproduced supra, term of 'notices' alone will read as 'proceedings' in instant case. Therefore, in these four writ petitions, following common order is passed: a) All four impugned proceedings will be kept in abeyance and there will be no further proceedings pursuant to same until disposal of Special Leave Petitions said to have been filed by respondent / Revenue in Hon'ble Supreme Court against aforementioned orders of Hon'ble Division Bench of this Court particularly orders dated 02.08.2016 in Tax Case Appeal Nos.484-487 and 490 of 2016. http://www.judis.nic.in 12 b) Subject to outcome of aforesaid Special Leave Petitions, i.e., if Special Leave Petitions are in favour of Revenue, impugned orders will stand revived and law will take its course. If this scenario unfolds, it is open to writ petitioner assessee to take all objections and defences available to section 148 notice including calling for reasons and limitation. c) If Special Leave Petitions end in favour of assessees and if aforesaid Hon'ble Division Bench orders are confirmed or if Hon'ble Supreme Court refuses to interfere with orders of High Court, all four impugned proceedings will stand set aside without further reference to this Court. d) Though obvious it is made clear that this order pertains to benefit under Section 80P of IT Act qua writ petitioners covered by Hon'ble Division Bench orders against which Revenue submits that SLPs have been filed before Hon'ble Supreme Court and therefore, this order will not preclude Revenue from proceeding against writ petitioners in manner known to law with regard to other issues, if any. 13 4. With aforesaid directions, all four writ petitions are disposed of and there will be no order as to costs. Consequently, connected miscellaneous petitions are closed. 18.07.2019 Speaking order/Non-Speaking Order Index: Yes/No vsm To 1.The Income Tax Officer Ward 2(3), TPR, Income Tax Office No.121, 60 Feet Road, Tiruppur 641 602. 2.Income Tax Officer Ward 2(1) No.15, Gandhiji Road Erode 638 001. http://www.judis.nic.in 14 M.SUNDAR.J., vsm W.P.Nos.3623, 3632, 4442 and 4445 of 2019 and WMP Nos.3966, 3969, 3978, 3979, 5004, 5005, 5009 and 5010 of 2019 18.07.2019 K.255 Kandian Kovil Primary Agricultural Cooperative Credit Society Ltd. v. Income-tax Officer, Ward2(3), TPR, Tiruppur
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