Vilappil Service Co-op Bank Ltd, Trivandrum V. The iTO, Wd-2(4), Trivandrum

CO 32/COCH/2019

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7458 (ITAT-COCHIN)
• Duration Of Justice: 21 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 22-07-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 01-07-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A S BINDHU
• Keywords: Competent authority
• Section: 80P

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFOR E S/ SHRI CHANDRA POOJARI , AM & GEORGE GEORGE K., J M C.O. NO. 32/COCH/2019 (ARISING OUT OF I .T . A. NO . 398 / COCH/ 2019) ASSESSMENT YEAR : 2012 - 13 M/S. VILAPPIL SERVICE CO - OPERATIVE BANK LTD., VP/V/209, PEYAD P.O., PEYAD JUNCTION, THIRUVANANTHAPURAM - 695 573. [PAN: AAAAV 4785E] VS. THE INCOME TAX OFFICER, W ARD - 2(4),RANGE - 2, THIRUVANANTHAPURAM. (ASSESSEE - APPELLANT) (REVENUE - RESPONDENT) ASSESSEE BY NONE REVENUE BY SMT. A.S. BINDHU, SR. DR D ATE OF HEARING 22/07/2019 DATE OF PRONOUNCEMENT 22 / 07 /201 9 O R D E R PER CHANDRA POOJARI, AM: THIS CROSS OBJECTION FILED BY THE A SSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A) , TRIVANDRUM DATED 05/03/2019 AND PERTAIN TO THE ASSESSMENT YEAR 2012 - 13. 2. AT THE TIME OF HEARING OF THIS CROSS OBJECTION, NONE APPEARED ON BEHALF OF THE ASSESSEE. HOWEVER, WE PROCEED TO DECIDE THE ISSUE EXPARTE AFTER HEARING THE LD. DR . 3 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN ITS CROSS OBJECTION: 1.THE LEARNED C OMMISSIONER OF INCOME TAX (APPEALS), TRIVANDRUM DID NOT ERR IN CONCLUDING THAT THE RESPONDENT SOCIETY BEING A PRIMARY AGRICULTURAL CREDIT C.O. NO . 32 /COCH/201 9 2 CO - OPERATIVE SOCIETY REGISTERED UNDER THE KERALA CO - OPERATIVE SOCIETIES ACT IS ENTITLED TO EXEMPTION OF ITS INCOME U/S . 80P(2) OF THE IT ACT, 1961, AS CLAIMED IN THE RETURN OF INCOME FILED BY IT. 2. THE CONTENTION OF THE ASSESSING OFFICER THAT THE RESPONDENT BEING ESSENTIALLY A CO - OPERATIVE BANK AND NOT MERELY A PRIMARY AGRICULTURAL CREDIT SOCIETY, THE ALLOWANCE OF DED UCTION UNDER SECTION 80P TO IT WAS IRREGULAR INNATUER AND AGAINST LAW, IS WITHOUT BASIS AND CONTRARY TO FACTS DUE TO THE FOLLOWING: - I) THE RESPONDENT ASSESSEE WAS CLASSIFIED AS A PRIMARY AGRICULTURAL CREDIT CO - OPERATIVE SOCIETY BY THE COMPETENT AUTHOR ITY UNDER RULE 15(1A) 3 OF KERALA CO OPERATIVE SOCIETIES RULES, 1969 AND UNDER ITS OBJECT CLAUSE, ITS AREA OF OPERATION IS CONFINED TO A VILLAGE, PANCHAYATH, THE PRINCIPAL OBJECT OF UNDERTAKING AGRICULTURAL CREDIT ACTIVITIES, TO PROVIDE LOANS AND ADVANCES FOR AGRICULTURAL PURPOSES AT THE RATES FIXED BY THE REGISTRAR OF CO - OPERATIVE SOCIETIES UNDER THE ACT, ITS FACILITIES BEING EXTENDED ONLY TO ITS MEMBERS. II) ACCORDING TO THE EXPLANATION TO SECTION 80P(4), THE TERMS CO - OPERATIVE BANK AND PRIMARY AGRICULT URAL CREDIT CO - OPERATIVE BANK AND PRIMARY AGRICULTURAL CREDIT CO - OPERATIVE SOCIETIES SHALL HAVE THE MEANING RESPECTIVELY ASSIGNED TO THEM IN PART V OF BANKING REGULATIONS ACT, 1949. ACCORDING TO PAT V OF THE BANKING REGULATIONS ACT, PRIMARY AGRICULTURAL C REDIT CO - OPERATIVE SOCIETY MEANS A CO - OPERATIVE SOCIETY THE PRIMARY OBJECT OR PRINCIPAL BUSINESS OF WHICH IS TO PROVIDE FINANCIAL ACCOMMODATION TO ITS MEMBERS FOR AGRICULTURAL PURPOSES OR FOR PURPOSES CONNECTED WITH AGRICULTURAL ACTIVITIES. AS SUCH, TO BE ENTITLED FOR DEDUCTION, THE SOCIETY MUST BE A PRIMARY AGRICULTURAL CREDIT CO - OPERATIVE SOCIETY AND REGISTERED AS SUCH UNDER THE KERALA CO - OPERATIVE SOCIETIES ACT. IN THE CASE MAVILAYI SERVICE CO - OPERATIVE BANK LTD., THE DIVISION BENCH OF KERALA HIGH COURT IN ITS JUDGMENT DATED 19.3.2019, HELD THAT THE ASSESSING OFFICER HAS TO CONDUCT AN ENQUIRY INTO THE FACTUAL SITUATION AS TO THE ACTIVITIES OF THE ASSESSE SOCIETY AND ARRIVE AT A CONCLUSION WHETHER BENEFIT CAN BE EXTENDED OR NOT IN THE LIGHT OF PROVISIONS O F SUB SECTION (4) OF SECTION 80P OF IT. ACT. THE HON. DIVISION BENCH OF HIGH COURT OF KERALA DID NOT STATE BLANKET DENIAL OF ELIGIBILITY OF THE CLAIM U/S 80P(2)(A)(I), AS CONTENDED BY THE LEARNED ASSESSING OFFICER. 3. THE CONTENTION OF THE LEARNED ASSESS ING OFFICER IN PARA 3 OF THE GROUNDS OF APPEAL IS NOT TENABLE AS DETAILED SCRUTINY OF THE APPELLANT'S AFFAIRS AND FINANCIAL STATEMENTS FOR THE ASSESSMENT YEAR 2012 - 13 WAS CARRIED OUT BY THE LEARNED ASSESSING OFFICER BEFORE COMPLETING THE ASSESSMENT U/S 143 ( 3) OF I.T. ACT, 1961. THE ASSESSMENT FOR THE ASSESSMENT YEAR 2012 - 13 WAS NOT COMPLETED BY THE ASSESSING OFFICER ONLY ON THE BASIS OF CERTIFICATE ISSUED BY THE OFFICIALS OF GOVT. OF KERALA CO - OPERATIVE DEPARTMENT CERTIFYING THAT THE RESPONDENT SOCIETY WAS C.O. NO . 32 /COCH/201 9 3 REGISTERED AS A PRIMARY AGRICULTURAL CREDIT SOCIETY UNDER RULE 15(1A) 3 OF THE KERALA CO OPERATIVE SOCIETIES ACT, 1969, BUT AFTER A THOROUGH SCRUTINY OF THE BOOKS OF ACCOUNTS MAINTAINED BY THE RESPONDENT ASSESSEE. 4. THE LEARNED COMMISSIONER OF INCOME TA X (APPEAL S ) HAS DULY CONSIDERED THE JUDGMENT OF THE HON'BLE APEX COURT IN THE CASE OF CITIZEN CO OPERATIVE SOCIETY [397 ITR 1 (SC)]. THAT CASE WAS NOT DEALING WITH THE ELIGIBILITY OF A PRIMARY AGRICULTURAL CREDIT SOCIETY FOR DEDUCTION UNDER SECTION 80 P OF THE INCOME TAX ACT; EVEN SO, PARA 23 OF THE AFORESAID JUDGMENT HAD EMPHASIZED THAT EVEN AFTER THE AMENDMENT MADE TO THE PROVISIONS OF SECTION 80 P OF THE ACT, BY INSERTION OF SECTION 80P(4) OF THE INCOME TAX ACT, THE PRIMARY AGRICULTURAL CREDIT SOCIETY IS E LIGIBLE FOR DEDUCTION UNDER SECTION 80P OF THE ACT. 5. A) THE CASE SABARGANTHA ZILLA KHARID VECHAR SANGH LTD. (203 ITR 1027 (SC) CITED BY THE LEARNED ASSESSING OFFICER IS NOT APPLICABLE TO THE RESPONDENT'S CASE AS IN THAT CASE, THE ASSESSEE SOCIETY WAS EF FECTING SALE OF AGRICULTURAL INPUTS OF BOTH MEMBERS AS WELL AS NON MEMBERS AND CLAIMED SHARE OF GROSS PROFIT OUT OF THE TRANSACTION WITH MEMBERS AS A DEDUCTION FROM THE COMBINED NET PROFIT . B) THE CIT VS KERALA STATE CO - OPERATIVE MARKETING FEDERATION [23 4 ITR 201 (KERALA)] CITED BY THE LEARNED ASSESSING OFFICER IS ALSO NOT APPLICABLE TO THE RESPONDENT'S CASE AS IN THAT CASE, THE QUESTION WHICH HAD COME UP FOR CONSIDERATION BEFORE THE APEX COURT WAS AS TO WHETHER THE ASSESSEES WHICH ARE CO - OPERATIVE SOCIET IES, ARE ENTITLED TO DEDUCTION UNDER SECTION 80P(2)(A)(3) OF IT. ACT IN RESPECT OF THE PURCHASES MADE FROM MEMBER SOCIETIES. 6. THE RESPONDENT ASSESSEE STATES THAT THE CBDT HAS CLARIFIED THE ADMISSIBILITY OF DEDUCTION U/S 80P(2)(A)(I) OF IT. ACT, 1961 IN ITS CIRCULAR NO.133/2007 DT 9.5.2007. THIS CBDT CIRCULAR CLARIFIES THAT PART V OF BANKING REGULATION ACT, 'CO - OPERATIVE BANK' MEANS A STATE CO - OPERATIVE BANK, A CENTRAL CO - OPERATIVE BANK AND A PRIMARY CO - OPERATIVE BANK. AS PER THE AFORESAID CBDT CIRCULAR, IN THE CASE OF A CO - OPERATIVE SOCIETY REGISTERED UNDER THE STATE CO - OPERATIVE SOCIETIES ACT NOT BEING A CO - OPERATIVE BANK, SECTION 80P(4) OF THE ACT WOULD NOT APPLY. IN C I T VS JAFARL MOMIN VIKAS CO - OP CREDIT SOCIETY LTD (2014) 362 ITR 331(GUJ) THE CBDT CI RCULAR NO.133/2007 DT 9.5.2007 HAS BEEN CONSIDERED IN DETAIL BY THE GUJARAT HIGH COURT. THE ITAT 'B' BENCH BANGALORE IN ITA NO.1214/BANG/ 2015 HAS ALSO DISCUSSED IN DETAIL AND CONSIDERED THE CBDT CIRCULAR NO.133/2007 DT 9.5.2007 WHILE DISPOSING OF THE APPEA L PENDING BEFORE IT IN ITO VS M/S MERCHANTS CREDIT CO - OPERATIVE SOCIETY LTD. BANGALORE DIST. 7. FOR THESE AND OTHER GROUNDS THAT MAY BE ADVANCED AT THE TIME OF HEARING, IF PERMITTED, THE RESPONDENT ASSESSEE PRAYS THAT THE ORDER OF THE COMMISSIONER C.O. NO . 32 /COCH/201 9 4 OF INCO ME TAX (APPEALS) TRIVANDRUM MAY KINDLY BE UPHELD AND THE APPEAL FILED BY THE REVENUE DISMISSED. 4 . WE HAVE HEARD THE LD. DR. THE ASSESSEE FILED THE CROSS OBJECTION ON 04/07/2019. HOWEVER, BY THAT TIME , THE DEPARTMENT APPEAL WAS HEARD ON 26/06/2019 AND THE APPEAL WAS DISPOSED OF BY THE TRIBUNAL IN ITA NO.398/COCH/2019 VIDE ORDER DATED 08/07/2019 WHEREIN IT WAS HELD AS FOLLOWS: 9. WE HAVE HEARD THE LEARNED DR AND PERUSED THE MATERIAL ON RECORD. THE LARGER BENCH OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF THE MAVILAYI SERVICE CO - OPERATIVE BANK LTD. (SUPRA) HELD THAT THE ASSESSING OFFICER HAS TO CONDUCT AN INQUIRY INTO THE FACTUAL SITUATION AS TO THE ACTIVITIES OF THE ASSESSEE SOCIETY TO DETERMINE THE ELIGIBILITY OF DEDUCTION U/S 80P OF THE I. T. ACT. IT WAS HELD BY THE HONBLE HIGH COURT THAT THE ASSESSING OFFICER IS NOT BOUND BY THE REGISTRATION CERTIFICATE ISSUED BY THE REGISTRAR OF KERALA CO - OPERATIVE SOCIETY CLASSIFYING THE ASSESSEE - SOCIETY AS A CO - OPERATIVE SOCIETY. THE HONBLE HIGH COURT HELD THAT EACH ASSESSMENT YEAR IS SEPARATE AND ELIGIBILITY SHALL BE VERIFIED BY THE ASSESSING OFFICER FOR EACH OF THE ASSESSMENT YEARS. THE FINDING OF THE LARGER BENCH OF THE HONBLE HIGH COURT READS AS FOLLOWS: - 33. IN VIEW OF THE LAW LAID DOWN BY THE A PEX COURT IN CITIZEN CO - OPERATIVE SOCIETY [397 ITR 1] IT CANNOT BE CONTENDED THAT, WHILE CONSIDERING THE CLAIM MADE BY AN ASSESSEE SOCIETY FOR DEDUCTION UNDER SECTION 80P OF THE IT ACT, AFTER THE INTRODUCTION OF SUB - SECTION (4) THEREOF, THE ASSESSING OFFIC ER HAS TO EXTEND THE BENEFITS AVAILABLE, MERELY LOOKING AT THE CLASS OF THE SOCIETY AS PER THE CERTIFICATE OF REGISTRATION ISSUED UNDER THE CENTRAL OR STATE CO - OPERATIVE SOCIETIES ACT AND THE RULES MADE THEREUNDER. ON SUCH A CLAIM FOR DEDUCTION UNDER SECTI ON 80P OF THE IT ACT, THE ASSESSING OFFICER HAS TO CONDUCT AN ENQUIRY INTO THE FACTUAL SITUATION AS TO THE ACTIVITIES OF THE ASSESSEE SOCIETY AND ARRIVE AT A CONCLUSION WHETHER BENEFITS CAN BE EXTENDED OR NOT IN THE LIGHT OF THE PROVISIONS UNDER SUB - SECTIO N (4) OF SECTION 80P. 33.IN CHIRAKKAL [384 ITR 490] THE DIVISION BENCH HELD THAT THE APPELLANT SOCIETIES HAVING BEEN CLASSIFIED AS PRIMARY AGRICULTURAL CREDIT SOCIETIES BY THE COMPETENT AUTHORITY UNDER THE KCS ACT, IT HAS NECESSARILY TO BE HELD THAT THE P RINCIPAL OBJECT OF SUCH SOCIETIES IS TO UNDERTAKE AGRICULTURAL 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 TO BE FIXED BY THE REGISTRAR OF CO - OPERATIVE SOC IETIES UNDER THE KCS C.O. NO . 32 /COCH/201 9 5 ACT AND HAVING ITS AREA OF OPERATION CONFINED TO A VILLAGE, PANCHAYAT OR A MUNICIPALITY AND AS SUCH, THEY ARE ENTITLED FOR THE BENEFIT OF SUB - SECTION (4) OF SECTION 80P OF THE IT ACT TO EASE THEMSELVES OUT FROM THE COVERAGE OF SECTION 80P AND THAT, THE AUTHORITIES UNDER THE IT ACT CANNOT PROBE INTO ANY ISSUES OR SUCH MATTERS RELATING TO SUCH SOCIETIES AND THAT, PRIMARY AGRICULTURAL CREDIT SOCIETIES REGISTERED AS SUCH UNDER THE KCS ACT AND CLASSIFIED SO, UNDER THE ACT, INCLUDING THE APPE LLANTS ARE ENTITLED TO SUCH EXEMPTION. 34. IN CHIRAKKAL [384 ITR 490] THE DIVISION BENCH EXPRESSED A DIVERGENT OPINION, WITHOUT NOTICING THE LAW LAID DOWN IN ANTONY PATTUKULANGARA [2012 (3) KHC 726] AND PERINTHALMANNA [363 ITR 268]. MOREOVER, THE LAW LAID DOWN BY THE DIVISION BENCH IN CHIRAKKAL [384 ITR 490] IS NOT GOOD LAW, SINCE, IN VIEW OF THE LAW LAID DOWN BY THE APEX COURT IN CITIZEN CO - OPERATIVE SOCIETY [397 ITR 1], ON A CLAIM FOR DEDUCTION UNDER SECTION 80P OF THE INCOME TAX ACT, BY REASON OF SUB - SE CTION (4) THEREOF, THE ASSESSING OFFICER HAS TO CONDUCT AN ENQUIRY INTO THE FACTUAL SITUATION AS TO THE ACTIVITIES OF THE ASSESSEE SOCIETY AND ARRIVE AT A CONCLUSION WHETHER BENEFITS CAN BE EXTENDED OR NOT IN THE LIGHT OF THE PROVISIONS UNDER SUB - SECTION ( 4) OF SECTION 80P OF THE IT ACT. IN VIEW OF THE LAW LAID DOWN BY THE APEX COURT IN CITIZEN CO - OPERATIVE SOCIETY [397 ITR 1] THE LAW LAID DOWN BY THE DIVISION BENCH PERINTHALMANNA [363 ITR 268] HAS TO BE AFFIRMED AND WE DO SO. 35.IN VIEW OF THE LAW LAID DO WN BY THE APEX COURT IN ACE MULTI AXES SYSTEMS CASE (SUPRA), SINCE EACH ASSESSMENT YEAR IS A SEPARATE UNIT, THE INTENTION OF THE LEGISLATURE IS IN NO MANNER DEFEATED BY NOT ALLOWING DEDUCTION UNDER SECTION 80P OF THE IT ACT, BY REASON OF SUB - SECTION (4) T HEREOF, IF THE ASSESSEE SOCIETY CEASES TO BE THE SPECIFIED CLASS OF SOCIETIES FOR WHICH THE DEDUCTION IS PROVIDED, EVEN IF IT WAS ELIGIBLE IN THE INITIAL YEARS. 9.1 IN VIEW OF THE DICTUM LAID DOWN BY THE FULL BENCH OF THE HONBLE HIGH COURT, THE ISSUE OF DEDUCTION U/S 80P(2)(A)(I) IS RESTORED TO THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL EXAMINE THE ACTIVITIES OF THE ASSESSEES AND DETERMINE WHETHER THEIR ACTIVITIES ARE IN COMPLIANCE WITH THE ACTIVITIES OF A CO - OPERATIVE SOCIETY FUNCTIONING UNDER T HE KERALA CO - OPERATIVE SOCIETIES ACT, 1969 AND GRANT DEDUCTION U/S 80P(2) IN ACCORDANCE WITH LAW. IT IS ORDERED ACCORDINGLY. 10. IN THE RESULT, THE APPEALS FILED BY THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. C.O. NO . 32 /COCH/201 9 6 5 . SINCE THE ISSUE RAISED BY THE ASSESSEE IN ITS CROSS OBJECTION IS SUPPORTIVE OF THE ORDER OF THE CIT(A), IT DOES NOT REQUIRE SEPARATE ADJUDICATION AND THE APPEAL OF THE REVENUE IN ITA NO.398/COCH/2019 HAS ALREADY BEEN REMITTED TO THE FILE OF THE ASSESSING OFFICER AS DISCUSSED ABOVE, THE CROSS OBJECTION FILED BY THE ASSESSEE IN C.O. NO. 32/COCH/2019 HAS BECOME INFRUCTUOUS AND IS DISMISSED AS SAME. 6 . IN THE RESULT, THE CROSS OBJECTION O F THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 22 ND JULY , 2019 SD/ - SD/ - (GEORGE GEORGE K.) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 22 ND JULY, 2019 GJ COPY TO: 1 . M/S. VILAPPIL SERVICE CO - OPERATIVE BANK LTD., VP/V/209, PEYAD P.O., PEYAD JUNCTION, THIRUVANANTHAPURAM - 695 573. 2. THE INCOME TAX OFFICER, WARD - 2(4),R ANGE - 2, THIRUVANANTHAPURAM. 3 . THE COMMISSIONER OF INCOME - TAX (AP P EALS) , TRIVANDRUM. 4. THE PR. COMMISSIONER OF INCOME - TAX, TRIVANDRUM . 5 . D. R., I.T.A.T., COCHIN BENCH, COCHIN. 6 . GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., COCHIN C.O. NO . 32 /COCH/201 9 7