High Court rules on tax deduction dispute, directs Appellate Authority to review eligibility

The High Court addressed the validity of the order challenging the assessment and tax demand made by the Assessing Officer. The cooperative credit society filed a writ petition disputing the disallowance of deduction claimed under section 80P(2)(a)(i) of the Income Tax Act, 1961. The Court directed the Appellate Authority to consider the society's eligibility under section 80P, follow the Supreme Court's decision, and modify the impugned order. The writ appeal was disposed of without costs, granting the respondent four weeks to file a statutory appeal.

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Issues:
Validity of order dated 03.07.2019 in W.P. No. 18893 of 2019 challenging assessment order and tax payment demand.
Applicability of exemption under section 80P(4) of the Income Tax Act, 1961 to a cooperative credit society.
Entertainment of writ petition under Article 226 of the Constitution of India instead of filing statutory appeal.
Interpretation of Section 80P of the Income Tax Act, 1961 in favor of cooperative credit societies.
Direction to the Appellate Authority based on the judgment of the Honourable Supreme Court in Mavilayi Service Co-operative Bank Ltd. v. Commissioner of Income Tax, Calicut (2021) 123 taxmann.com 161 (SC).

Issue 1:
The High Court addressed the validity of the order dated 03.07.2019 in W.P. No. 18893 of 2019, where the Revenue challenged the assessment order and tax payment demand made by the Assessing Officer. The respondent, a cooperative credit society, filed a writ petition under Article 226 of the Constitution of India, disputing the disallowance of deduction claimed under section 80P(2)(a)(i) of the Income Tax Act, 1961.

Issue 2:
The Court considered the applicability of the exemption under section 80P(4) of the Income Tax Act, 1961 to the cooperative credit society. The judgment dated 02.08.2016 by the Division Bench of the Court held that the exemption under section 80P(4) is applicable to credit societies. However, an appeal was filed before the Honourable Supreme Court, and the High Court directed to keep the assessment order in abeyance pending the outcome of the Special Leave Petition.

Issue 3:
The Revenue argued that the respondent should have filed a statutory appeal instead of a writ petition under Article 226 of the Constitution of India. The Court acknowledged the Revenue's contention but highlighted the previous judgment by the Division Bench supporting the cooperative credit society's entitlement to benefits under Section 80P of the Act.

Issue 4:
Interpreting Section 80P of the Income Tax Act, the Court referred to the judgment in Mavilayi Service Co-operative Bank Ltd. v. Commissioner of Income Tax, Calicut (2021) 123 taxmann.com 161 (SC). The Court emphasized a liberal and reasonable reading of Section 80P in favor of the assessee, particularly cooperative credit societies, and directed the Appellate Authority to consider the decision of the Honourable Supreme Court in their statutory appeal.

Issue 5:
Based on the submissions, the Court granted the respondent four weeks to file a statutory appeal before the Appellate Authority. The Authority was directed to consider the eligibility of the cooperative society under section 80P, pass orders on merit, and take into account the decision of the Honourable Supreme Court. Consequently, the impugned order was modified, and the writ appeal was disposed of without costs.

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