M/s.Vengara Service co-op Rural Bank Ltd, Malappuram V. The ITO, Tirur

CO 32/COCH/2016

• Counselvise Citation: [2017] 123 COUNSELVISE.COM (IT) 2783 (ITAT-COCHIN)
• Duration Of Justice: 3 month(s) 3 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 22-03-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 21-03-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 19-12-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A DHANARAJ
• Assessee Lawyers: C A JOJO
• Keywords: Question of law; Competent authority
• Section: 147; 148

Judgement Text

ITA NO S 433 TO 435 /COCH/2016 & C O NOS . 30 TO 32/COCH/2016 1 IN THE INCOME TAX APPEL L A TE T R IBUNAL COCHIN BENCH KOCHI BEFORE S/ SH RI ABRAHAM P GEORGE , A M & GEORGE GEORGE K, JM ITA NO S 433 TO 435/ COCH/2016 (ASST YEARS 200910 TO 2011 - 12) & CROSS OBJECTION NO. 30 TO 32/COCH/2016 THE INCOME TAX OFFICER WARD 3 TIRUR VS THE VENGARA SERVICE COOP RURAL BANK LTD NO.1186 VENGARA PO MALAPPURA 676 304 ( APPELLANT /RESPONDENT ) (RESPONDENT /CROSS OBJECTOR ) PAN NO. AADAT6601L ASSESSEE BY SHRI C.A JOJO REVENUE BY SH A DHANARAJ, SR DR DATE OF HEARING 21 ST MARCH 2017 D ATE OF PRONOUNCEMENT 22 ND MARCH 2017 OR D ER PER GEROGE GEORGE K, JM : THESE APPEALS, AT THE INSTANCE OF THE REVENUE AND THE CROSS OBJECTIONS, AT THE INSTANCE OF THE ASSESSEE, ARISE OUT OF THE CONSOLIDATED ORDER OF THE CIT(A) DATED 23.6.2016. THE RELEVAN T ASSESSMENT YEARS ARE 2009 - 10 TO 2011 - 12. 2 COMMON ISSUE ARISES IN THESE APPEALS AND THE CROSS OBJECTIONS AND TH EY PERTAIN TO THE SAME ASSESSEE , H ENCE, THESE APPEALS AND CROSS OBJECTIONS WERE HEARD TOGETHER AND DISPOSED OF BY THIS CONSOLIDATED ORDER. ITA NO S 433 TO 435 /COCH/2016 & C O NOS . 30 TO 32/COCH/2016 2 3 IDENTICAL GROUNDS ARE RAISED BY THE REVENUE FOR ALL THE APPEALS AND THEY READ AS FOLLOWS: 1 THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IS AGAINST LAW, FACTS AND CIRCUMSTANCES OF THE CASE. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANC ES OF THE CASE, THE COMMISSIONER OF INCOME TAX(APPEALS) IS RIGHT IN LAW IN HOLDING THAT THE ASSESSEE IS ELIGIBLE FOR CLAIMING DEDUCTION UNDER SECTION BOP OF THE INCOME TAX ACT WHEN THE ASSESSEE FAILED TO FULFIL THE PRINCIPAL OBJECTIVE OF PROVIDING AGRICULT URAL CREDITS TO MEMBERS? 3. THE KERALA CO - OPERATIVE SOCIETIES ACT(AMENDMENT) ACT, 2010, ACT 7 OF 2010 STIPULATES THAT IF THE PRINCIPAL OBJECTIVE OF PROVIDING AGRICULTURAL CREDITS TO MEMBERS IS NOT FULFILLED, SUCH SOCIETY SHALL LOSE ALL CHARACTERISTICS OF A PRIMARY AGRICULTURAL CREDIT SOCIETY. IN VIEW OF THIS, IS NOT THE DECISION OF THE CIT(A) IS AGAINST LAW? 4. THE HON'BLE HIGH COURT OF KERALA HAD IN THE CASE OF M/S PERINTHALMANNA SERVICE CO - OPERATIVE BANK VS CIT IN ITA NO 4 OF 2014 HELD THAT 'AN ENQUIR Y HAS TO BE CONDUCTED INTO THE FACTUAL SITUATION WHETHER CO OPERATIVE BANK IS CONDUCTING THE BUSINESS AS PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO - OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK AND DEPENDING UPON THE TRANSACTIONS, THE ASSESSI NG OFFICER HAS TO EXTEND THE BENEFITS AVAILABLE AND NOT MERELY LOOKING AT THE REGISTRATION CERTIFICATE BY THE KERALA CO - OPERATIVE SOCIETIES ACT OR THE NOMENCLATURE'. 5. IN VIEW OF THE ABOVE, THE RELIANCE PLACED BY THE CIT(A) IN THE DECISION OF THE HON'BLE HIGH C OURT OF KERALA IN THE CASE OF M/ S CHIRAKKAL SERVICE CO - OPERATIVE BANK AND OTHERS IN ITA NO. 212 OF 2013 IS NOT CORRECT, ESPECIALLY WHEN A CONTRARY VIEW WAS TAKEN BY ANOTHER DIVISION BENCH OF THE HIGH COURT OF KERALA IN THE CASE OF M/ S PERINTHALMANN A SERVICE CO - OPERATIVE BANK IN ITA NO.4 OF 2014. 6. THE DECISION OF THE HON'BLE HIGH CO URT OF KERALA IN THE CASE OF M/S CHIRAKKAL SERVICE CO - OPERATIVE BANK AND OTHERS IN ITA NO. 212 OF 2013, RELIED ON BY THE COMMISSIONER OF INCOME TAX(APPEALS) HAS NOT BE COME CONCLUSIVE AS THE DECISION WAS NOT ACCEPTED BY THE DEPARTMENT AND SLP IS BEING FILED IN THE SUPREME COURT. 7. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, IT IS REQUESTED THAT THE ORDER OF THE CIT(A) MAY BE SET ASIDE AND THA T OF THE ASSESSING OFFICER RESTORED. 4 THE BRIEF FACTS OF THE CASE ARE AS FOLLOWS: ITA NO S 433 TO 435 /COCH/2016 & C O NOS . 30 TO 32/COCH/2016 3 THE ASSESSEE IS A COOPERATIVE SOCIETY REGISTERED UNDER THE KERALA COOPERATIVE SOCIETIES ACT, 1969. FOR THE ASSESSMENT YEARS 2009 - 10 , 2010 - 11 AND 2011 - 12, THE ASSESSEE D ID NOT FILE ITS RETURN OF INCOME. THE ASSESSING OFFICER ISSUES NOTICE U/S 148 OF THE ACT ON 17.7.2013. IN RESPONSE TO THE NOTICE ISSUED U/S 148, THE ASSESSEE FILED RETURNS OF INCOME DECLARING NIL INCOME AFTER CLAIMING EXEMPTION U/S 80P(2) OF THE ACT . THE CLAIM OF DEDUCTION U/S 80P FOR THE RELEVANT ASSESSMENT YEARS ARE AS FOLLOWS: ASSESSMENT YEAR 2 009 - 10 RS,35,68,311/ - ASSESSMENT YEAR 2010 - 11 RS 51,66,364/ ASSESSMENT YEAR 2011 - 12 RS 73,08,340/ - 4.1 THE CLAIM OF DEDUCTION U/S 80P(2) OF THE ACT WAS D ENIED BY THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT U/S 143 R.W.S 147 OF THE A CT FOR THE AYS 2009 - 10 TO 2011 - 12. THE ASSESSING OFFICER HELD THAT THE ASSESSEE COULD NOT BE TREATED AS PRIMARY AGRICULTURAL SOCIETY AS IT WAS ENG AGED IN THE BUSINESS OF BANKING AND THE PROVISIONS OF SECTION 80P(4) DISENTITLE THE ASSESSEE, WHO IS DOING THE BUSINESS OF BANKING , FOR CLAIMING DEDUCTION U/S 80P(2) OF THE ACT. 4.2 AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE PREFERRED APPEALS FOR THE AYS 2009 - 10 TO 2011 - 12 BEFORE THE FIRST APPELLATE AUTHORITY. THE CIT(A) FOLLOWING THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CHIRAKKAL SERVICE CO - OPERATIVE BANK LTD REPORTED IN 384 ITR 490(KER) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. ITA NO S 433 TO 435 /COCH/2016 & C O NOS . 30 TO 32/COCH/2016 4 5 REVENUE BEING AGGRIEVED IS IN APPEAL BEFORE THE TRIBUNAL. THE LD DR SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND RELIED ON THE GROUNDS RAISED IN THE MEMORANDUM OF APPEAL . THE LD AR SUBMITTED THAT THE ISSUE IN QUESTION IS SQUARELY COVERED BY THE JUDGMENT OF THE HONBLE KERALA HIGH COURT IN THE CASE OF CHIRAKKAL SERVICE CO - OPERATIVE BANK LTD (SUPRA). 6 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF THE CHIRAKKAL SERVICE COOPERATIVE BANK LTD & OTHERS (SUPRA) HAS HELD THAT THE PRIMARY AGRICULTURAL CREDIT SOCIETY REGISTERED UNDER THE KERALA COOPERATIVE SOCIETIES ACT, 1969 , IS ENTITLED TO THE BENEFIT OF DEDUCTION U/S 80P(2). THE HONBLE HIGH COURT WA S CONSIDERING THE FOLLOWING SUBSTANTIAL QUESTION OF LAW: A) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE UNDER CONSIDERATION, THE TRIBUNAL IS CORRECT IN LAW IN DECIDING AGAINST THE ASSESSEE, THE ISSUE REGARDING ENTITLEMENT FOR EXEMPTION UNDER SECTION 80P, IGNORING THE FACT THAT THE ASSESSEE IS A PRIMARY AGRICULTURAL CREDIT SOCIETY? 6.1 IN CONSIDERING THE ABOVE QUESTION OF LAW, THE HONBLE HIGH COURT RENDERED THE FOLLOWING FINDINGS: 15. APPELLANTS IN THESE DIFFERENT APPEALS ARE INDISPUTABLY SO CIETIES REGISTERED UNDER THE KERALA CO - OPERATIVE SOCIETIES ACT, 1969, FOR SORT, KCS ACT AND THE BYE - LAWS OF EACH OF THEM, AS MADE AVAILABLE TO THIS COURT AS PART OF THE PAPER BOOKS, CLEARLY SHOW THAT THEY HAVE BEEN CLASSIFIED AS PRIMARY AGRICULTURAL CREDIT SOCIETIES BY THE COMPETENT AUTHORITY UNDER THE PROVISIONS OF THAT ACT. THE PARLIAMENT, HAVING DEFINED THE TERM 'CO - OPERATI VE SOCIETY' FOR THE PURPOSES OF THE BR ACT ITA NO S 433 TO 435 /COCH/2016 & C O NOS . 30 TO 32/COCH/2016 5 WI TH REFERENCE TO, AMONG OTHER THINGS, THE REGISTRATION OF A SOCIETY U N DER ANY STATE LAW R ELATING TO CO - OPERATIVE SOCIETIES FOR THE TIME BEING; IT CANNOT BUT BE TAKEN THAT THE PURPOSE OF THE SOCIETIES SO REGISTERED UNDER THE STATE LAW AND ITS OBJECTS HAVE TO BE UNDERSTOOD AS THOSE WHICH HAVE BEEN APPROVED BY THE COMPETENT AUTHORITY UNDER SUCH STATE LAW. THIS, WE VISUALISE AS DUE RECIPROCATIVE LEGISLATIVE EXERCISE BY THE PARLIAMENT RECOGN I SING THE PREDOMINANCE OF DECISIONS RENDERED UNDER THE RELEVANT STATE LAW. IN TH I S VIEW OF THE MATTER, ALL THE APPELLANTS HAV I NG BEEN CLASSIFIED AS PRIMARY AGR ICULTURAL CRED I T SOC I ET I ES B Y THE COMPETENT AUTHOR I TY UNDE R TH E KCS ACT , I T HAS NECESSAR IL Y TO BE HELD THAT THE PRINCIPAL OBJECT OF SUCH SOCIETIES IS TO UNDERTAKE AGR I CULTURAL CREDIT ACTIVITIES AND TO PROVIDE LOANS AND ADVANCES FOR AGRICULTURAL PURPOSES , THE RATE ' OF INTEREST ON SUCH LOANS AND ADVANCES TO BE AT THE RATE FIXED BY THE REGISTRAR OF CO - OPERATIVE SOCIETIES UNDER THE KCS ACT AND HAV I NG I TS AREA OF OPERATION CONFINED TO A VILLAGE, PANCHAYAT OR A MUNICIPALITY. THIS IS THE CONSEQUENCE OF THE DEFIN ITION CLAUSE IN SECTION 2(OAA) OF THE KCS ACT. THE AUTHORITIES UNDER THE IT ACT CANNOT PROBE INTO ANY ISSUE OR SUCH MATTER RELATING TO SUCH APPLICANTS. 16. THE POSITION OF 1 AW BEING AS ABOVE WITH REFERENCE TO THE STATUTORY PROVISIONS, THE APPELLANTS HAD S HOWN TO THE AUTHORITIES AND THE TRIBUNAL THAT THEY ARE PRIMARY AGRICULTURA L CREDIT SOCIETIES IN TERMS OF CLAUSE (CCIV) OF SECTION 5 OF THE BR ACT, HAVING REGARD TO THE PRIMARY OBJECT OR PRINCIPAL BUSINESS OF EACH OF THE APPELLANTS. IT IS ALSO CLEAR FROM TH E MATERIALS ON RECORD THAT THE BYE - LAWS OF EACH OF THE APPELLANTS DO . NOT PERMIT ADMISSION OF ANY OTHER CO - OPERATIVE SOCIETY AS MEMBER, EXCEPT MAY BE, IN ACCORDANCE WITH THE PROVISO TO SUB - CLAUSE 2 OF SECTION 5(CCIV) OF THE BR ACT. THE DIFFERENT ORDERS OF THE TRIBUNAL WHICH ARE IMPEACHED IN THESE APPEALS DO NOT CONTAIN ANY FINDING OF FACT TO THE EFFECT THAT THE BYE - 1AWS OF ANY OF THE APPELLANT OR ITS CLASS I FICATION BY THE COMPETENT AUTHORITY UNDER THE KCS ACT LS ANYTHING DIFFERENT FROM WHAT WE HAVE STATED HEREIN ABOVE. FOR THIS REASON, IT CANNOT BUT BE HELD THAT THE APPELLANTS ARE ENTITLED TO EXEMPTION FROM THE PROVISIONS OF SECTION 80P OF THE IT ACT BY VIRTUE OF SUB - SECTION 4 OF THAT SECT; ON. IN THIS VIEW OF THE MATTER, THE APPEALS SUCCEED. 17. IN TH E LIGHT OF THE AFORESAID, WE ANSWER SUBSTANTIA 1 QUESTION 'A' IN FAVOUR OF THE APPELLANTS AND HOLD THAT THE TRIBUNAL ERRED IN LAW IN DECIDING THE ISSUE REGARDING THE ENTITLEMENT OF EXEMPTION UNDER SECTION 80P AGAINST THE APPELLANTS. WE HOLD THAT THE PRIMARY AGRICULTURAL CREDIT SOCIETIES, REGISTERED AS SUCH UNDER THE KCS ACT; AND CLASSIFIED SO, UNDER THAT ACT, INCLUDING THE APPELLANTS AR E ENTITLED TO SUCH EXEMPTION. ITA NO S 433 TO 435 /COCH/2016 & C O NOS . 30 TO 32/COCH/2016 6 6.2 RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HONBLE JUDICIAL HIGH COURT, IN THE CASE OF CHIRAKKAL SERVICE CO - OPERATIVE BANK LTD (SUPRA), WE HOLD THAT THE CIT(A) IS JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO GRANT BENEFIT OF SECTION 80P(2) OF THE ACT. IT IS ORDERED ACCORDINGLY. 7 IN THE RESULT, THE APPEALS FILED BY THE REVENUE ARE DI SMISSED. CROSS OBJECTION NO S . 30 TO 32/COCH/2016 ( BY THE ASSESSEE) 8 THESE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE SUPPORTING THE ORDER OF THE CIT(A). SINCE WE HAVE DISMISSED THE APPEALS FILED BY THE REVENUE, THESE CROSS OBJECTIONS BY THE ASSESSEE H AVE BECOME INFRUCTUOUS AND THE SAME ARE DISMISSED. 9 TO SUM - UP, THE APPEALS BY THE REVENUE AND THE CROSS OBJECTIONS BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 22 ND DAY OF MARCH 2017 . SD/ - SD / - ( ABRAHAM P GEORGE ) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN: DATED 22 ND MARCH 2017 RAJ* ITA NO S 433 TO 435 /COCH/2016 & C O NOS . 30 TO 32/COCH/2016 7 COPY TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT , 5 . DR 6 . GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN