2021 (4) TMI 610 - HC - Income Tax

Court allows agricultural cooperative society's tax deduction claim under Section 80P, emphasizing beneficiary approach

THANIYAM PANCHAYATH SERVICE CO OPERATIVE BANK LTD Versus INCOME TAX OFFICER WARD-2 (1) THRISSUR, COMMISSIONER OF INCOME TAX (APPEALS)

The Court ruled in favor of the petitioner, a Primary Agricultural Cooperative Society, allowing their entitlement for deduction under Section 80P of the ... Stay of demand - pre deposits demand - Deduction u/s 80P - HELD THAT:- This Court by relying on the observation of the Honorable Supreme Court THE MAVILAYI SERVICE COOPERATIVE BANK LTD. & ORS. [2021 (1) TMI 488 - SUPREME COURT] has in several such matters have directed the appellate authority to decide the appeal without insisting for either pre- deposit or for payment of tax in pursuant to the Assessment Orders. In this view of the matter as the statutory appeal is pending for consideration before the 2nd respondent, the second respondent is directed to decide the appeal expeditiously and till disposal of the appeal, recovery in pursuant to the Assessment order at Exhibit P1 is deferred till disposal of the appeal by the 2nd respondent Issues:1. Entitlement for deduction under Section 80P of the Income Tax Act, 1961.2. Rejection of deduction claim in the Assessment Order.3. Rejection of stay application due to non-payment of 20% of demand.4. Interpretation of Section 80P of the Income Tax Act.5. Appellate authority's discretion on pre-deposit requirements.Entitlement for deduction under Section 80P of the Income Tax Act, 1961:The petitioner, a Primary Agricultural Cooperative Society, claimed entitlement for deduction under Section 80P of the Income Tax Act, 1961. The claim was disallowed in the Assessment Order, leading to the petitioner filing a statutory appeal which was pending for adjudication. The issue was whether the petitioner qualified for the deduction under Section 80P.Rejection of deduction claim in the Assessment Order:The Assessing Officer rejected the claim for deduction under Section 80P in the Assessment Order. The petitioner contended that the issue was covered by a judgment of the Supreme Court and argued for a liberal and reasonable interpretation of Section 80P in favor of the assessee. The Court referred to the Supreme Court's observations emphasizing a liberal reading of Section 80P and directed the appellate authority to decide the appeal without insisting on pre-deposit or payment of tax.Rejection of stay application due to non-payment of 20% of demand:During the pendency of the appeal, the Assessing Officer rejected the petitioner's application for stay as the mandatory 20% of the demand had not been paid. The petitioner argued that previous judgments directed the appellate authority to decide appeals without requiring the 20% pre-deposit. The Court, relying on Supreme Court observations, deferred recovery till the appeal's disposal.Interpretation of Section 80P of the Income Tax Act:The Court highlighted the Supreme Court's interpretation of Section 80P, emphasizing a liberal and beneficiary approach towards cooperative societies. It clarified that deductions under Section 80P should not be restricted or limited by implication, especially concerning cooperative banks engaged in lending money to the public. The Court directed the appellate authority to consider the petitioner's appeal without insisting on pre-deposit or tax payment.Appellate authority's discretion on pre-deposit requirements:The Court, based on the Supreme Court's observations, directed the appellate authority to expeditiously decide the appeal and deferred recovery pursuant to the Assessment Order until the appeal's disposal. The judgment concluded by disposing of the petition in favor of the petitioner, emphasizing the need for a liberal interpretation of Section 80P to benefit cooperative societies.