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

CO 35/COCH/2016

• Counselvise Citation: [2017] 123 COUNSELVISE.COM (IT) 3048 (ITAT-COCHIN)
• Duration Of Justice: 7 month(s) 5 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 24-07-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• 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: 143(3); 148; 263; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI ABRAHAM P. GEORGE, AM & GEORGE GEORGE K., JM I. T.A. NO S . 430 TO 432/ COCH/201 6 ASSESSMENT YEAR S : 2009 - 10 TO 2011 - 12 INCOME TAX OFFICER, WARD-3, TIRUR VS. EDARIKODE SERVICE CO - OPERATIVE BANK LTD., NO. 10739, EDARIKODE P.O., MALAPPURAM. ( REVENUE - APPELLANT) ( ASSESSEE - RESPONDENT) C.O. NOS. 33 TO 35/COCH/16 (ARSG. OUT OF I.T.A. NOS. 430 TO 432/COCH/2016) ASSESSMENT YEARS : 2009 - 10 TO 2011 - 12 EDARIKODE SERVICE CO - OPERATIVE BANK LTD., NO. 10739, EDARIKODE P.O., MALAPPURAM. [PAN: AAAAE 4866B] VS. INCOME TAX OFF ICER, WARD-3, TIRUR (ASSESSEE - APPELLANT) (REVENUE - RESPONDENT) REVENU E BY SHRI A. DHANARAJ, SR. DR ASSESSEE BY SHRI C. A. JOJO, D ATE OF HEARING 2 4 / 0 7 / 201 7 DATE OF PRONOUNCEMENT 24 / 0 7 /201 7 O R D E R PER BENCH: THESE APPEALS AT THE INSTANCE OF THE REVENU E AND THE CROSS OBJECTIONS PREFERRED BY THE ASSESSEE ARE DIRECTED AGAINST THE CONSOLIDATED ORDER OF THE I.T.A. NOS. 430-432/COCH/2016 & C.O. NOS. 33-35/COCH/2016 2 CIT(A)-III, KOCHI DATED 23/06/2016. THE RELEVANT A SSESSMENT YEAR ARE 2009-10 TO 2011-12. 2. SINCE COMMON ISSUE IS RAISED IN THESE APPEALS AND THEY PERTAIN TO THE SAME ASSESSEE, THESE APPEALS AND CROSS OBJECTIONS WERE H EARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. 3. WE SHALL FIRST TAKE UP FOR ADJUDICATION REVEN UES APPEALS. IN THE REVENUES APPEALS, IDENTICAL GROUNDS ARE RAISED 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 CIRCUMSTANCES OF THE CASE, THE COMMISSIONER OF INCOME TAX (APPEALS) IS RIGHT IN LA W IN HOLDING THAT THE ASSESSEE IS ELIGIBLE FOR CLAIMING DEDUCTION U/S. 80 P OF THE INCOME TAX ACT WHEN THE ASSESSEE FAILED TO FULFIL THE PRINCIPAL OB JECTIVE OF PROVIDING AGRICULTURAL CREDITS TO MEMBERS? 3. THE KERALA CO-OPERATIVE SOCIETIES ACT (AMENDMEN T) ACT, 2010, ACT 7 OF 2010 STIPULATES THAT IF THE PRINCIPAL OBJECTIVE OF PROVIDING AGRICULTURAL CREDITS TO MEMBERS IS NOT FULFILLED, SUCH SOCIETY S HALL 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 HONBLE HIGH COURT OF KERALA HAD IN THE CASE OF M/S, PERINTHALMANNA SERVICE CO-OPERATIVE BANK VS CIT IN I.T.A. NO. 4 OF 2014 HELD THAT AN ENQUIRY HAS TO BE CONDUCTED INTO THE FACTUAL SITUATION WHETHER CO-OPERATIVE BANK IS CONDUCTING THE BUSINES S AS PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO-OPERATI VE AGRICULTURAL AND RURAL DEVELOPMENT BANK AND DEPENDING UPON THE TRANSACTION S, THE ASSESSING OFFICER HAS TO EXTEND THE BENEFITS AVAILABLE AND NO T MERELY LOOKING AT THE REGISTRATION CERTIFICATE BY THE KERALA CO-OPERATIVE SOCIETIES ACT OR THE NOMENCLATURE. I.T.A. NOS. 430-432/COCH/2016 & C.O. NOS. 33-35/COCH/2016 3 5. IN VIEW OF THE ABOVE, THE RELIANCE PLACED BY T HE CIT(A) IN THE DECISION OF THE HONBLE HIGH COURT OF KERALA IN THE CASE OF M/S. CHIRAKKAL SERVICE CO-OPERATIVE BANK AND OTHERS IN I.T.A. NO. 212 OF 2 013 IS NOT CORRECT, ESPECIALLY WHEN A CONTRARY VIEW WAS TAKEN BY ANOTHE R DIVISION BENCH OF THE HIGH COURT IN THE CASE OF M/S. PERINTHALMANNA S ERVICE CO-OPERATIVE BANK IN I.T.A. NO. 4 OF 2014. 6. THE DECISION OF THE HONBLE HIGH COURT OF KERAL A IN THE CASE OF M/S. CHIRAKKAL SERVICE CO-OPERATIVE BANKI AND OTHERS IN I.T.A. NO. 212 OF 2013, RELIED ON BY THE COMMISSIONER OF INCOME-TAX(APPEALS ) HAS NOT BECOME 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 A T THE TIME OF HEARING, IT IS REQUESTED THAT THE ORDER OF THE CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 4. BRIEFLY STATED, THE FACTS IN RELATION TO THE REVENUES APPEALS ARE AS FOLLOWS: THE ASSESSEE IS A CO-OPERATIVE SOCIETY REGIS TERED UNDER THE KERALA CO- OPERATIVE SOCIETIES ACT, 1969. IT IS ENGAGED IN PR OVIDING CREDIT FACILITIES TO ITS MEMBERS. FOR THE ASSESSMENT YEARS 2009-10 TO 2011- 12, NO RETURNS OF INCOME WERE FILED BY THE ASSESSEE. THE ASSESSING OFFICER ISSUED NOTICES U/S. 148 OF THE I.T. ACT FOR THE ABOVE MENTIONED ASSESSMENT YEARS O N 16/07/2013. PURSUANT TO THE NOTICES ISSUED U/S. 148 OF THE ACT, THE ASSESSE E FILED ITS RETURNS OF INCOME, DECLARING INCOME OF RS.1,77,550, 2,53,760/- AND RS. 82,650/- FOR THE ASSESSMENT YEARS 2009-10 TO 2011-12 RESPECTIVELY. THE ASSESSM ENTS WERE COMPLETED U/S. 143(3) R.W.S. 147 OF THE I.T. ACT FOR THE ABOVE MEN TIONED ASSESSMENT YEARS, BY DENYING THE CLAIM OF DEDUCTION U/S. 80P(2) OF THE I .T. ACT. THE REASON FOR THE ASSESSING OFFICER TO DENY THE BENEFIT OF DEDUCTION U/S. 80P(2) OF THE ACT WAS THAT I.T.A. NOS. 430-432/COCH/2016 & C.O. NOS. 33-35/COCH/2016 4 THE ASSESSEE WAS PRIMARILY ENGAGED IN THE BUSINESS OF BANKING AND IN VIEW OF THE PROVISIONS OF SECTION 80P(4), THE CO-OPERATIVE SOCIETY DOING BUSINESS OF BANKING IS NOT ENTITLED TO THE BENEFIT OF DEDUCTION U/S. 80P(2) OF THE ACT. 5. AGGRIEVED BY THE ACTION OF THE ASSESSING OFFIC ER IN DENYING THE CLAIM OF DEDUCTION U/S. 80P(2) FOR THE ASSESSMENT YEARS 2009 -10 TO 2011-12, THE ASSESSEE FILED THE APPEALS BEFORE THE FIRST APPELLA TE AUTHORITY. THE CIT(A) PARTLY ALLOWED THE APPEALS OF THE ASSESSEE. THE CIT(A) D IRECTED THE ASSESSING OFFICER TO GRANT DEDUCTION U/S. 80P(2) OF THE ACT FOR THE A SSESSMENT YEARS 2009-10 TO 2011-12. THE CIT(A), IN TAKING THE ABOVE VIEW, RE LIED ON THE JUDGMENT OF THE HONBLE KERALA HIGH COURT IN THE CASE OF CHIRAKKAL SERVICE CO-OPERATIVE BANK LIMITED VS. CIT REPORTED IN 284 ITR 490. AS REGAR DS THE ASSESSEES CHALLENGE TO THE RE-OPENING OF THE ASSESSMENTS BY ISSUANCE OF NO TICES U/S. 148 OF THE ACT, THE CIT(A) CONFIRMED THE VALIDITY OF THE OPENING OF THE ASSESSMENTS. 6. AGGRIEVED BY THE ORDER OF THE CIT(A) IN GRANT ING THE BENEFIT OF DEDUCTION U/S. 80P(2) OF THE ACT, THE REVENUE HAS FILED THE P RESENT APPEALS BEFORE THE TRIBUNAL. THE LD. DR APART FROM RELYING ON THE GRO UNDS OF APPEAL, HAS FILED A BRIEF ARGUMENT NOTE. THE ARGUMENT NOTE SUBMITTED BY THE LD. DR READS AS FOLLOWS: IN THE CASE OF ESCB LTD., OUT OF THE TOTAL LOAN SAN CTIONED, ONLY NEGLIGIBLE PERCENTAGE GIVEN FOR AGRICULTURAL PURPOSE. I.T.A. NOS. 430-432/COCH/2016 & C.O. NOS. 33-35/COCH/2016 5 RETURN FILED AY PERCENTAGE 11 - 10 - 2013 (IN RESPONSE TO 148) 2009 - 10 0.56% 11 - 10 - 2013 - DO - 2010 - 11 1.25% 11 - 10 - 2013 - DO - 2011 - 12 1.69% HENCE THE ASSESSING OFFICER DENIED THE EXEMPTIO N CLAIMED U/S. 80P. THE CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE R ELYING ON THE KERALA HIGH COURT DECISION IN THE CASE OF M/S. CHIRACKKAL CO-OP BANK LTD VS. CIT IN I.T.A. NO. 212/COCH/2013 DATED 15-02-2016. THE SLP IS BEING FILED BY THE DEPARTMENT BEFORE THE HON. SUPREME COURT. FURTHER RELIANCE IS PLACE ON THE HON. SUPREME COU RT JUDGMENT REPORTED IN 203 ITR 1027 CASE OF SABARKANTHE ZILLA KHARID VECHAN SANGH VS. CIT (HELD WHAT WAS DEDUCTIBLE U/S. 80P(1) WAS ONLY TH AT PORTION OF SAID AMOUNT AS CAN BE CALLED TOTAL INCOME ATTRIBUTABLE T O ACTIVITIES DEFINED IN CLAUSE (5) OF 80B I.E. DEDUCTION FROM TAX AVAILABLE ONLY IN RELATION TO NET PROFIT AND NOT GROSS PROFIT). 2. FURTHER IN VIEW OF THE PROVISIONS OF 80P(4) OF THE I.T. ACT AND AMENDMENT MADE TO S-2(V) IN THE KERALA CO-OP SOCIET IES ACT (AMENDMENT) ACT 2010, ACT 7 OF 2010, ORDER OF AO & CIT(A) BE UPHELD AND APPEAL FILED BY ASSESSEE BE DISMISSED. 3. AS MAY BE SEEN FROM PARA 1 ABOVE, APPELLANT ASS ESSEE HAS FILED RETURN OF INCOME FOR THE AY 2007-08 TO 2010-11 BEYOND LIMI T GIVEN U/S. 139(1). IN VIEW OF THE JUDGMENT REPORTED IN 266 ITR 1 (SC) PRAKASHNATH KHANNA & ANOTHER VS. CIT, ORDER OF THE AO & CIT(A) BE UPH ELD. 7. THE LD. AR ON THE OTHER HAND SUPPORTED THE FI NDINGS/CONCLUSIONS OF THE CIT(A) AS REGARDS GRANT OF DEDUCTION U/S. 80P(2) OF THE ACT. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED THE MATERIAL ON RECORD. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE O F THE CHIRAKKAL SERVICE I.T.A. NOS. 430-432/COCH/2016 & C.O. NOS. 33-35/COCH/2016 6 COOPERATIVE BANK LTD & OTHERS (SUPRA) HAS HELD THAT THE PRIMARY AGRICULTURAL CREDIT SOCIETY REGISTERED UNDER THE KERALA COOPERAT IVE SOCIETIES ACT, 1969, IS ENTITLED TO THE BENEFIT OF DEDUCTION U/S 80P(2). T HE HONBLE HIGH COURT WAS CONSIDERING THE FOLLOWING SUBSTANTIAL QUESTION OF L AW: A) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE UNDER CONSIDERATION, THE TRIBUNAL IS CORRECT IN LAW IN DE CIDING AGAINST THE ASSESSEE, THE ISSUE REGARDING ENTITLEMENT FOR EXEMP TION UNDER SECTION 80P, IGNORING THE FACT THAT THE ASSESSEE IS A PRIMA RY AGRICULTURAL CREDIT SOCIETY? 8.1 IN CONSIDERING THE ABOVE QUESTION OF LAW, THE H ONBLE HIGH COURT RENDERED THE FOLLOWING FINDINGS: 15. APPELLANTS IN THESE DIFFERENT APPEALS ARE INDI SPUTABLY SOCIETIES 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 TH E PAPER BOOKS, CLEARLY SHOW THAT THEY HAVE BEEN CLASSIFIED AS PRIMARY AGRICULTURAL CREDIT SOCI ETIES BY THE COMPETENT AUTHORITY UNDER THE PROVISIONS OF THAT ACT. THE PARLIAMENT, H AVING DEFINED THE TERM 'CO-OPERATI VE SOCIETY' FOR THE PURPOSES OF THE BR ACT WI TH REFERENCE TO, AMONG OTHER THINGS, THE REGISTRATION OF A SOCIETY U N DER ANY STATE LAW RELATING TO CO-OPERATIVE SOCIETIE S FOR THE TIME BEING; IT CANNOT BUT BE TAKEN THAT THE PURPOSE OF T HE 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 AGRICULTURAL 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 SOCI ETIES IS TO UNDERTAKE AGR I CULTURAL CREDIT ACTIVITIES AND TO PROVIDE LOANS AN D 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 C ONSEQUENCE OF THE DEFINITION CLAUSE IN SECTION 2(OAA) OF THE KCS ACT. THE AUTHORITIES I.T.A. NOS. 430-432/COCH/2016 & C.O. NOS. 33-35/COCH/2016 7 UNDER THE IT ACT CANNOT PROBE INTO ANY ISSUE OR SUCH MATTER RELA TING TO SUCH APPLICANTS. 16. THE POSITION OF 1 AW BEING AS ABOVE WITH REFERENCE TO THE STATUTORY PROVISIONS, THE APPELLANTS HAD SHOWN TO T HE 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 THE MATERIALS ON RECORD THAT THE BY E-LAWS OF EACH OF THE APPELLANTS DO . NOT PERMIT ADMISSION OF ANY OTHER CO-OPERATIVE SOCIETY AS MEMBER, EXCEPT MAY BE, IN ACCORDANCE WIT H 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 D O NOT CONTAIN ANY FINDING OF FACT TO THE EFFECT THAT THE BYE- 1AW S 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 A BOVE. FOR THIS REASON, IT CANNOT BUT BE HELD THAT THE APPELLANTS A RE ENTITLED TO EXEMPTION FROM THE PROVISIONS OF SECTION 80P OF THE IT ACT BY VIRTUE O F SUB- SECTION 4 OF THAT SECT; ON. IN THIS VIEW OF THE MATTER, THE APPEALS SUCCEED. 17. IN THE LIGHT OF THE AFORESAID, WE ANSWER SUBSTAN TIA 1 QUESTION 'A' IN FAVOUR OF THE APPELLANTS AND HOLD THAT THE TRIBUNAL ERRED IN LAW I N DECIDING THE ISSUE REGARDING THE ENTITLEMENT OF EXEMPTION UNDER SECTION 80P AGAINST THE APPELLANTS. WE HOLD T HAT THE PRIMARY AGRICULTURAL CREDIT SOCIETIES, REGISTERED A S SUCH UNDER THE KCS ACT; AND CLASSIFIED SO, UNDER THAT ACT, INCLUDING THE APPELLANTS ARE ENTITL ED TO SUCH EXEMPTION. 8.2 IN THE INSTANT CASE, ADMITTEDLY, THE ASSESSEE HAS PRODUCED A CERTIFICATE SHOWING THAT IT IS REGISTERED AS A PRIMARY AGRICULT URAL CREDIT SOCIETY UNDER THE PROVISIONS OF THE KERALA CO-OPERATIVE SOCIETIES ACT , 1969. SINCE THE HONBLE KERALA HIGH COURT HAS CATEGORICALLY HELD THAT A PRI MARY AGRICULTURAL CREDIT SOCIETY REGISTERED UNDER THE KERALA CO-OPERATIVE SOCIETIES ACT, 1969 IS ENTITLED TO THE BENEFIT OF DEDUCTION U/S. 80P(2) OF THE ACT, WE ARE OF THE VIEW THAT THE CIT(A) IS I.T.A. NOS. 430-432/COCH/2016 & C.O. NOS. 33-35/COCH/2016 8 JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO GRA NT THE BENEFIT OF DEDUCTION U/S. 80P(2) OF THE ACT. 8.3 AS FOR THE JUDGMENT OF THE HONBLE JURISDICTI ONAL HIGH COURT IN THE CASE OF PERINTHALMANNA SERVICE CO-OPERATIVE BANK VS. ITO (3 63 ITR 268), RELIED ON BY LD. DR, THIS WAS PRONOUNCED ON 31 ST JANUARY, 2014 PRIOR TO THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CH IRAKKAL SERVICE CO-OPERATIVE BANK LTD. VS.CIT (SUPRA) WHICH CAME ON 15 TH FEBRUARY, 2016. FURTHER THE SAID CASE DEALT WITH THE REVISIONARY POWERS OF THE CIT U /S. 263 OF THE ACT WHEN THE ASSESSING OFFICER HAD FAILED TO MAKE NECESSARY ENQU IRIES. UNDER SUCH CIRCUMSTANCES, WE DO NOT FIND ANY REASON TO INTERFE RE WITH THE ORDER OF THE CIT(A). HENCE THE APPEALS FILED BY THE REVENUE ARE DISMISSED. CROSS OBJECTION NOS. 33 TO 35/COCH/2016 (BY THE ASS ESSEE) 9. THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE SUPPORTING THE ORDER OF THE CIT(A). SINCE WE HAVE DISMISSED THE APPEALS FILED BY THE REVENUE, THE CROSS OBJECTIONS FILED BY THE ASSESSEE HAVE BECOME INFRUC TUOUS AND THE SAME ARE DISMISSED. I.T.A. NOS. 430-432/COCH/2016 & C.O. NOS. 33-35/COCH/2016 9 10. TO SUM-UP, THE APPEALS FILED BY THE REVENUE AND THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 24-07-2017. SD/- SD/- (ABRAHAM P.GEORGE) ( GEORGE GEORGE K.) ACCOUNTANT MEMBER JUDICIAL MEMBER PLACE: KOCHI DATED: 24 TH JULY, 2017 GJ COPY TO: 1. EDARIKODE SERVICE CO-OPERATIVE BANK LTD., NO. 107 39, EDARIKODE P.O., MALAPPURAM. 2. INCOME TAX OFFICER, WARD-3,TIRUR. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS)-III, KOC HI. 4. THE PR. COMMISSIONER OF INCOME-TAX, CALICUT. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T. , COCHIN