Cooperative Society’s writ on Status of Cooperative Bank for S.80P Deduction Dismissed: Madras HC Says No Decision Possible without its Presence [Read Order]

The Court held that the question of whether the Virudhunagar District Central Cooperative Bank Limited qualifies as a “Cooperative Bank” or a “Cooperative Society” cannot be decided in the absence of the institution itself as a party to the proceedings.

The appellant society, Q.837, Muhavoor Primary Agricultural Cooperative Society Ltd had invested in the Virudhunagar District Central Cooperative Bank and earned interest income during the assessment year 2021-22. Claiming deduction under Section 80P(2)(a)(i) of the Act, the appellant contended that the income was exempt as the investments were made with a Cooperative Society.

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The Assessing Unit, National Faceless Assessment Centre, Delhi, rejected the claim, treating the Virudhunagar District Central Cooperative Bank as a Cooperative Bank and thereby disallowing the deduction. An assessment order was passed on 20.12.2022, resulting in tax demand against the appellant.

The Cooperative Society challenged this order and filed a writ petition before the Madurai Bench of the Madras High Court. The Single Judge, however, dismissed the petition on the ground of non-exhaustion of alternative remedies, while granting liberty to file an appeal before the appropriate appellate authority.

Aggrieved by the decision of the single bench, the appellant approached the Division Bench in writ appeal.

Before the Division Bench of Justices G.R. Swaminathan and K. Rajasekar, the primary issue raised was whether the Virudhunagar District Central Cooperative Bank should be treated as a Cooperative Bank or a Cooperative Society.

While acknowledging the legal importance of the question, the bench observed that such a determination cannot be made without the said bank being impleaded as a party. The Court noted that pronouncing upon the identity or character of the institution behind its back would be impermissible.

The court said that “We do feel tempted to go into this issue as it is more a question of law. But we wonder if a finding can be given without the said entity being before us. We cannot speculate on the stand that may be taken by them as to their identity or character. In any event, no pronouncement as to whether they are a cooperative society or a cooperative bank can be made behind their back. The appellant did not implead the said institution as a party respondent and hence, we decline to go into this issue.”

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Accordingly, the Bench declined to interfere with the Single Judge’s order and dismissed the writ appeal. However, the petitioner was permitted by the appellant to pursue statutory appellate remedies.

The high court directed that if an appeal is filed within three weeks from the receipt of the order, it shall be entertained without reference to limitation, leaving all contentions of the assessee open, including the possibility of seeking interim relief.

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