IN HIGH COURT OF JUDICATURE AT MADRAS DATED :18.07.2019 CORAM HON'BLE MR.JUSTICE M.SUNDAR W.P.Nos.4467, 4469, 4642, 4796, 4799, 4803, 4818, 4981, 4989, 5010, 5065, 5693, 5696, 5687 and 7350 of 2019 and W.M.P.Nos.5043, 5050, 5255, 5256, 5433, 5434, 5439, 5441, 5449, 5450, 5473, 5474, 5680, 5681,5695, 5696, 5717, 5718, 5771, 5772, 6473, 6475, 6486, 6487, 6480, 6481 and 8029 of 2019 W.P.No.4467 of 2019 M/s.AA539 Avaipoondurai Primary Agricultural Co-operative Bank Limited 146, East Street Avaipoondurai Erode 638 115 PAN AAALA0804C ..Petitioner vs Asst. Commissioner of Income Tax Ward 2(3) Range 2 Erode ..Respondent Writ Petition filed under Article 226 of Constitution of India praying to issue Writ of Certiorari calling for records of respondent herein in PAN/GIR No.AAALA0804C/2011-12 and quash order dated 31.12.2018 passed therein. 2 For Petitioners : Mr.B.Raveendran in W.P.Nos.4467 and 4469 of 2019 Ms.R.Hemalatha in W.P.No.4642, 4981 & 5687 / 2019 Mr.C.Prakasam in W.P.No.4796, 4818, 4803, 4799, 4989, 5010, 5065,5693, 5696 & 7350 of 2019 For Respondents : Mr.A.P.Srinivas Standing Counsel Asst. by Mr.A.N.R.Jayaprathap Standing Counsel (IT) COMMON ORDER This common order will dispose of these 15 writ petitions. 2.Mr.C.Prakasam, learned counsel on record for writ petitioners in W.P.No.4796, 4818, 4803, 4799, 4989, 5010, 5065, 5693, 5696 & 7350 of 2019, Ms.R.Hemalatha, learned counsel for writ petitioners in W.P.No.4642, 4981 & 5687 of 2019, Mr.B.Raveendran, learned counsel on record for writ petitioner in W.P.Nos.4467 and 4469 of 2019 and Mr.A.P.Srinivas, learned senior standing counsel (Income Tax) assisted by Mr.A.N.R.Jayapratap, learned junior standing counsel (Income Tax) on behalf of respondents in all writ petitions are before this Court. http://www.judis.nic.in 3 3.To be noted, respondent has filed counter affidavits in some of writ petitions and pleadings have been completed. Be that as it may with consent of learned counsel on both sides, main writ petitions are taken up, heard out and is being disposed of. 4. There is no disputation or disagreement before this Court that writ petitioners are Co-operative Societies and that they are Co-operative Societies which are registered under 'Tamil Nadu Cooperative Societies Act, 1983' (hereinafter 'TNCS Act' for brevity). 5. What has been called in question in these writ petitions by writ petitioners are Assessment Orders made by respondent under Section 143(3) of 'Income Tax Act, 1961' ('IT Act' for brevity). impugned orders shall collectively be referred to as 'impugned orders' in plural and wherever necessary 'impugned order' in singular. 6. Entire matter turns on Section 80P of IT Act captioned 'Deduction in respect of Income of Cooperative Societies'. http://www.judis.nic.in 4 7. From pleadings and rival submissions made before this Court, it also comes to light that judgment on which reliance was placed by writ petitioners is judgment made by Hon'ble Division Bench of this Court being judgment dated 06.12.2018 made in Tax Case Appeal Nos.882 and 891 of 2019. 'Tax Case Appeals' shall be referred to as 'TCAs' for sake of brevity. To be noted, TCAs in this context are statutory appeals under Section 260A of IT Act. 8.The three substantial questions of law on which TCAs were admitted by Hon'ble Division Bench are as follows: 'i.Whether Appellate Tribunal was right and justified in following jurisdictional High Court decision when there is Apex Court decision of latter date available? ii. Whether, on facts and circumstances of case and in law, Tribunal was right and justified in allowing deduction under Section 80P(2)(a)(i) to assessee society when Apex Court, in its decision in case of Citizen Coopertive Society Ltd., Vs. ACIT (reported in (2017) 84 Taxmann.114] held in paragraph 25 that such activity of appellant is that of finance business and cannot be termed as cooperative society? And iii. Whether, on facts and circumstances of case, Tribunal was right to conclude that activities carried on by assessee are confined to its members only and that too, in http://www.judis.nic.in 5 particular geographical area, when Assessing Officer clearly stated in paragraph 3.1 of assessment order that any one can become associate member of society on payment of nominal token fee?' 9. To be noted, aforesaid TCAs were decided in favour of Assessee. 10. Learned Revenue counsel submits that Department is proposing to file 'Special Leave petitions'('SLPs' for brevity) against aforesaid judgments in TCAs, but this Court is informed that it is only at proposal stage. In other words, SLPs have not even been filed in Hon'ble Supreme Court. 11. Be that as it may, careful perusal of Ammapet Primary Agricultural Cooperative Bank Ltd., case (referred to supra) brings to light that following principles have been laid down by Hon'ble Division Bench: a) Cooperative Society registered under TNCS Act is entitled to benefits / deductions adumbrated in Section 80P of IT Act; b) As sequitur to above principle, writ petitioners herein are entitled to deductions under various heads adumbrated in Section 80P of IT Act. http://www.judis.nic.in 6 c) Owing to insertion of sub-section (4) in Section 80P of IT Act with effect from 01.04.2017 by Finance Act, 2006, distinction between Cooperative Bank and Primary Agricultural Credit Society or Primary Cooperative Agricultural and Rural Development Bank operates. In other words, while Section 80P will not apply to Cooperative bank, deductions will be available to Primary Agricultural Credit Societies and Primary Cooperative Agricultural and Rural Development Banks. Also to be noted, this principle has been laid down by Hon'ble Division Bench by placing reliance on judgment of Hon'ble Supreme Court in Citizen Cooperative Society Limited Vs. ACIT (reported in (2017) 84 Taxmann.com 114). 12. Before this Court proceeds further, it is also to be noticed that some other writ petitions pertaining to 80P deductions filed by some other Cooperative Societies were disposed of by this Court by common order dated 27.06.2019 made in W.P.No.2552 of 2019 etc., It is submitted by both sides in unison that instant writ petitions on hand are not directly covered by aforesaid common order dated 27.06.2019 made in 33 writ petitions owing to slight factual variations. http://www.judis.nic.in 7 13. As far as these writ petitions on hand are concerned, it comes to light that impugned assessment orders turn on deductions claimed by respective cooperative societies/writ petitioners under Section 80P(2)(d) which pertains to income by way of interest derived by writ petitioners from investments. With regard to sub-section (4) which was inserted into Section 80P of IT Act, it is submitted that distinction between Cooperative Bank and Primary Agricultural Credit Society on one side and Primary Cooperative Agricultural and Rural Development Bank on other side is only for purpose of claiming deductions under 80P and whether this distinction can be made applicable in 80P(2)(d) scenario is res integra. 14. perusal of aforesaid Section 80P(2)(d) reveals that interest from investments would be eligible for deduction only when such investments are made in other cooperative societies. In other words, if it is made in other entities or banks other than co-operative societies, it may not be entitled to exemption under Section 80P (2)(d). It is fairly submitted by both sides that with regard to this aspect of matter it is res integra and it is not covered by aforesaid Ammapet Primary Agricultural Cooperative Bank Ltd. case (judgment in TCAs) or any other order or judgment for that matter. To be noted, perusal of impugned orders reveals that writ petitioners have http://www.judis.nic.in 8 made investments in Coimbatore District Central Cooperative Bank, Coimbatore. 15. However, what is of greater significance is vide impugned Assessment Orders, deductions claimed by writ petitioners/ assessees under Section 80P (2)(d) have been negatived primarily on ground that what has been invested is surplus money available with writ petitioners/ assessees at given point of time or in other words, surplus money available with writ petitioners at that given point of time, which is not necessary for its operations (obviously at that point of time) and therefore, interest derived from such investments cannot be classified as operational income. On this basis, interest so derived has been assessed under Section 56 of IT Act by treating same as 'other sources'. impugned orders have also drawn inspiration from judgment of Hon'ble Supreme Court in Totgars' Cooperative Sale Society Limited Vs. Income Tax Officer, Karnataka reported in (2010) 188 Taxmann 282 (SC) and in considered view of this Court paragraphs 10 and 11 of Cooperative Sale Society Limited case is of relevance and same read as follows: '10. At outset, important circumstance needs to be highlighted. In present case, interest held not eligible http://www.judis.nic.in 9 for deduction under Section 80P(2)(a)(i) of Act is not interest received from members for providing credit facilities to them. What is sought to be taxed under Section 56 of Act is interest income arising on surplus invested in short-term deposits and securities which surplus was not required for business purposes. Assessee(s) markets produce of its members whose sale proceeds at times were retained by it. In this case, we are concerned with tax treatment of such amount. Since fund created by such retention was not required immediately for business purposes, it was invested in specified securities. question, before us, is - whether interest on such deposits/securities, which strictly speaking accrues to members' account, could be taxed as business income under Section 28 of Act? In our view, such interest income would come in category of "Income from other sources", hence, such interest income would be taxable under Section 56 of Act, as rightly held by Assessing Officer. In this connection, we may analyze Section 80P of Act. This section coms in Chapter VI-A, which, in turn, deals with "Deductions in respect of certain Incomes". Headnote to Section 80P indicates that said section deals with deductions in respect of income of cooperative Societies. Section 80P(1), inter alia, states that where gross total income of cooperative Society includes any income from one or more specified activities, then such income shall be deducted from gross total income in computing total taxable income of http://www.judis.nic.in 10 assessee-Society. income, which is attributable to any of specified activities in Section 80P(2) of Act, would be eligible for deduction. word "income" has been defined under Section 2(24)(i) of Act to include profits and gains. This Sub-section is inclusive provision. Parliament has included specifically "business profits" into definition of word "income". Therefore, we are required to give precise meaning to words "profits and gains of business" mentioned in Section 80P(2) of Act. In present case, as stated above, assessee-Society regularly invests funds not immediately required for business purposes. Interest on such investments, therefore, cannot fall within meaning of expression "profits and gains of business". Such interest income cannot be said also to be attributable to activities of society, namely, carrying on business of providing credit facilities to its members or marketing of agricultural produce of its members. When assessee-Society provides credit facilities to its members, it earns interest income. As stated above, in this case, interest held as ineligible for deduction under Section 80P(2)(a)(i) is not in respect of interest received from members. In this case, we are only concerned with interest which accrues on funds not required immediately by assessee(s) for its business purposes and which have been only invested in specified securities as "investment". Further, as stated above, assessee(s) markets agricultural produce of its members. It retains sale proceeds in many cases. It is this "retained amount" which was payable to http://www.judis.nic.in 11 its members, from whom produce was bought, which was invested in short-term deposits/securities. Such amount, which was retained by assessee-Society, was liability and it was shown in balance-sheet on liability-side. Therefore, to that extent, such interest income cannot be said to be attributable either to activity mentioned in Section 80P(2)(a)(i) of Act or in Section 80P(2)(a)(iii) of Act. Therefore, looking to facts and circumstances of this case, we are of view that Assessing Officer was right in taxing interest income, indicated above, under Section 56 of Act. 11. alternative submission was advanced by assessee(s) stating that, if interest income in question is held to be covered by Section 56 of Act, even then, assessee- Society is entitled to benefit of Section 80P(2)(a)(i) of Act in respect of such interest income. We find no merit in this submission. Section 80P(2) (a)(i) of Act cannot be placed at par with Explanation (baa) to Section 80HHC, Section 80HHD(3) and Section 80HHE(5) of Act. Each of said sections has to be interpreted in context of its subject-matter. For example, Section 80HHC of Act, at relevant time, dealt with deduction in respect of profits retained for export business. scope of Section 80HHC is, therefore, different from scope of Section 80P of Act, which deals with deduction in respect of income of cooperative Societies. Even Explanation (baa) to http://www.judis.nic.in 12 Section 80HHC was added to restrict deduction in respect of profits retained for export business. words used in Explanation (baa) to Section 80HHC, therefore, cannot be compared with words used in Section 80P of Act which grants deduction in respect of "the whole of amount of profits and gains of business". number of judgements were cited on behalf of assessee(s) in support of its contention that source was irrelevant while construing provisions of Section 80P of Act. We find no merit because all judgements cited were cases relating to Cooperative Banks and assessee- Society is not carrying on Banking business. We are confining this judgement to facts of present case. To say that source of income is not relevant for deciding applicability of Section 80P of Act would not be correct because we need to give weightage to words "the whole of amount of profits and gains of business" attributable to one of activities specified in Section 80P(2)(a) of Act. important point needs to be mentioned. words "the whole of amount of profits and gains of business" emphasise that income in respect of which deduction is sought must constitute operational income and not other income which accrues to Society. In this particular case, evidence shows that assessee- Society earns interest on funds which are not required for business purposes at given point of time. Therefore, on facts and circumstances of this case, in our view, such interest income falls in category of "Other http://www.judis.nic.in 13 Income" which has been rightly taxed by Department under Section 56 of Act.' 16. In aforesaid backdrop, it was contended that such income on facts is operational income and that writ petitioners are entitled to deduction under Section 80P (2)(d) of IT Act. This turns heavily on facts. As already alluded to supra, both sides submit that this aspect of matter is not covered either by Ammapet Primary Agricultural Cooperative Bank Ltd., case or for that matter by any other case and is res integra. Therefore, this Court is of considered view that this is fit case to relegate writ petitioners to alternate remedy by way of statutory appeal. This Court is informed that remedy of filing statutory appeal to Commissioner (Appeals) is available for writ petitioners under Section 246A of IT Act. This Court is informed that in some of these writ petitions, writ petitioners have already preferred statutory appeals. If that be case, it is open to writ petitioners to pursue their appeals and obviously this order can be pressed into service before Appellate Authority. 17. With regard to exercise of writ jurisdiction on teeth of alternate remedy, this Court reminds itself that alternate remedy is rule of discretion. In other words, alternate remedy is not absolute rule and is therefore not http://www.judis.nic.in 14 rule of compulsion, but it is rule of discretion. This Court also reminds itself that alternate remedy rule is self-imposed restraint as far as this Court exercising writ jurisdiction is concerned. Notwithstanding obtaining position that alternate remedy rule is rule of discretion and that it is self- imposed restraint, Hon'ble Supreme Court in Satyawati Tandon principle [United Bank of India Vs. Satyawati Tondon and others reported in (2010) 8 SCC 110] has held that when it comes to cases pertaining to taxes, cess etc., i.e., fiscal laws in general, rule of alternate remedy has to be applied with utmost rigour. Satyawati Tandon principle was reiterated by Hon'ble Supreme Court in K.C.Mathew case [Authorized Officer, State Bank of Travancore Vs. Mathew K.C. reported in (2018) 3 SCC 85]. Relevant paragraph in K.C.Mathew case is paragraph 10 and same reads as follows: '10. In Satyawati Tondon High Court had restrained further proceedings under Section 13(4) of Act. Upon detailed consideration of statutory scheme under SARFAESI Act, availability of remedy to aggrieved under Section 17 before Tribunal and appellate remedy under Section 18 before Appellate Tribunal, object and purpose of legislation, it was observed that writ petition ought not to be entertained in view of alternate statutory remedy available holding: (SCC pp.123 & 128, Paras 43 & 55) 43. Unfortunately, High Court overlooked settled law that High Court will ordinarily not entertain http://www.judis.nic.in 15 petition under Article 226 of Constitution if effective remedy is available to aggrieved person and that this Rule applies with greater rigour in matters involving recovery of taxes, cess, fees, other types of public money and dues of banks and other financial institutions. In our view, while dealing with petitions involving challenge to action taken for recovery of public dues, etc., High Court must keep in mind that legislations enacted by Parliament and State Legislatures for recovery of such dues are code unto themselves inasmuch as they not only contain comprehensive procedure for recovery of dues but also envisage constitution of quasi-judicial bodies for redressal of grievance of any aggrieved person. Therefore, in all such cases, High Court must insist that before availing remedy under Article 226 of Constitution, person must exhaust remedies available under relevant statute. 55.It is matter of serious concern that despite repeated pronouncement of this Court, High Courts continue to ignore availability of statutory remedies under DRT Act and SARFAESI Act and exercise jurisdiction under Article 226 for passing orders which have serious adverse impact on right of banks and other financial institutions to recover their dues. We hope and trust that in future High Courts will exercise their discretion in such matters with greater caution, care and circumspection.' (Underlining made by Court to supply emphasis and highlight) http://www.judis.nic.in 16 18. Therefore, this Court disposes of these writ petitions leaving open all questions including questions/grounds raised in instant writ petitions to be canvassed in statutory appeals before Commissioner (Appeals) under Section 246-A. At his juncture, learned counsel for writ petitioners submit that writ petitioner would opt for alternate remedy (obviously in cases where appeals have not already been filed) and this Court may consider condonation of delay. 19. As far as condonation of delay is concerned, relevant provision is Section 249(3) of IT Act and power vests with Appellate Authority, namely Commissioner (Appeals) to condone delay. Therefore, this Court considers it appropriate to exclude time spent in instant writ petitions i.e, time from date of presentation of instant writ petitions to date on which instant order copy is made available in computing time within which statutory appeals under Section 246A of IT Act have to be preferred. This course is adopted by placing reliance on Section 14 of Limitation Act. However, it is made clear that notwithstanding such exclusion, if there is delay, it is open to writ petitioners to seek condonation of such delay inter alia under Section 249(3) of IT Act and Appellate Authority shall deal with such prayers for condonation of delay on their own merits and in accordance http://www.judis.nic.in 17 with law. These writ petitions are disposed of with above observations. No costs. Consequently, connected miscellaneous petitions are closed. 18.07.2019 Index:Yes/No Speaking order/Non-Speaking order To Asst. Commissioner of Income Tax Ward 2(3) Range 2 Erode http://www.judis.nic.in 18 M.SUNDAR, J. gpa W.P.Nos.4467, 4469, 4642, 4796, 4799, 4803, 4818, 4981, 4989, 5010, 5065, 5693, 5696, 5687 and 7350 of 2019 and W.M.P.Nos.5043, 5050, 5255, 5256, 5433, 5434, 5439, 5441, 5449, 5450, 5473, 5474, 5680, 5681,5695, 5696, 5717, 5718, 5771, 5772, 6473, 6475, 6486, 6487, 6480, 6481 and 8029 of 2019 18.07.2019 AA539 Avaipoondurai Primary Agricultural Co-operative Bank Limited v. Asst. Commissioner of Income-tax, Ward-2(3), Range2, Erode